Document:

WARRANT

     

    NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS.

     

    COMMON
STOCK PURCHASE WARRANTS

     

    To
Purchase 400,000 Shares of Common Stock of

     

    JINTAI
MINING GROUP, INC.

     

    
      
        	
                No.
      2010- 00__

              	
                November
      26, 2010

              

      

    

    

    THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) CERTIFIES that, for value
received, Haibin Zhong  (the “Holder”), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date of this
Warrant, and on or prior to the first anniversary of the date of this Warrant
(the “Termination Date”), but not thereafter, to subscribe for and purchase from
Jintai Mining Group, Inc., a Delaware corporation (the “Company”), up to 400,000
shares (the “Warrant Shares”) of the Common Stock, par value $0.0001 per share,
of the Company (the “Common Stock”).  The exercise price per share of
Common Stock shall be equal to 110% of the offering price of the Company’s
Common Stock during the anticipated initial public offering (the “IPO”) to be
conducted by the Company (the “Exercise Price”).  The Exercise Price
and the number of Warrant Shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein.  Capitalized terms used and
not otherwise defined herein shall have the meanings set forth in that certain
Subscription Agreement (the “Subscription Agreement”), between the Company and
the Holder (the date of such Agreement, the “Closing Date”).  This
Warrant is being issued to the Holder, as more fully described in the
Subscription Agreement.

     

    1.           Title to
Warrant.  Prior to the Termination Date and subject to
compliance with applicable laws, including transfer restrictions imposed by
applicable securities laws and Section 7 of this Warrant, this Warrant and all
rights hereunder are transferable, in whole or in part, at the office or agency
of the Company by the Holder in person or by duly authorized attorney, upon
surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.  The transferee shall sign an investment letter in
form and substance reasonably satisfactory to the Company.

     

    2.           Authorization of
Shares.  Except as provided in the Subscription Agreement, the
Company covenants that all Warrant Shares which may be issued from time to time
upon the exercise of this Warrant, will, upon exercise of this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens, and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such
issue).

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    3.           Exercise of
Warrant.

     

    (a)           Subject
to Section 3(c), exercise of the purchase rights represented by this Warrant may
be made within five (5) years from the its issuance, at any time on or before 5
p.m., New York City time, by delivery to the Company (or such other office or
agency of the Company as it may designate by notice in writing to the registered
Holder at the address of such Holder appearing on the books of the Company) of a
duly executed Notice of Exercise Form annexed hereto, and surrender of this
Warrant, together with payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States
bank in immediately available funds.

     

    Certificates
for Warrant Shares purchased hereunder shall be delivered to the Holder within
three (3) days from the delivery to the Company of the Notice of Exercise Form,
surrender of this Warrant, and payment of the aggregate Exercise Price as set
forth above (“Warrant Share Delivery Date”).  This Warrant shall be
deemed to have been exercised on the later of (i) the date the Notice of
Exercise is delivered to the Company; and (ii) the date the Exercise Price is
received by the Company.  The Warrant Shares shall be deemed to have
been issued, and Holder or any other person so designated to be named therein,
shall be deemed to have become a holder of record of such Warrant Shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price and all taxes required to be paid by the Holder,
if any, pursuant to Section 5 hereof, have been paid.  If the Company
shall fail for any reason, or for no reason, to issue to the Holder a
certificate for the Warrant Shares to which the Holder is entitled within three
(3) days of receipt of the Notice of Exercise and the Exercise Price, the Holder
(or a broker for the Holder) may purchase (in an open market transaction or
otherwise), shares of Common Stock as replacement for the Warrant Shares and the
Company shall then pay in cash to the Holder the amount by which the Holder’s
total purchase price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds the aggregate Exercise Price for the Warrant Shares
required to have been delivered to the Holder.  Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates representing the Warrant Shares upon exercise of the
Warrant, as required pursuant to the terms hereof.

     

    (b)           If
this Warrant shall have been exercised in part, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
un-purchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.

     

    4.           No Fractional Shares or
Scrip.  No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Exercise
Price.

     

    5.           Charges, Taxes, and
Expenses.  Issuance of certificates for Warrant Shares shall be
made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder provided, however, that in the event certificates for Warrant Shares
are to be issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto, duly executed by the Holder, in which instance the Company may require,
as a condition thereto, the payment by the Holder or such assignee of a sum
sufficient to reimburse it for any transfer tax incidental
thereto.

    
      
         

      

      
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    6.           Closing of
Books.  The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.

     

    7.           Transfer, Division and
Combination.

     

    (a)           Subject
to compliance with any applicable securities laws and the conditions set forth
in Sections 1 and 7(e) hereof and to the provisions of the Subscription
Agreement, this Warrant and all rights hereunder are transferable, in whole or
in part, upon surrender of this Warrant at the principal office of the Company,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney, and funds
sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees, in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled.  A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.  Notwithstanding the foregoing, the Holder will
not voluntarily and knowingly assign or transfer this Warrant or the Warrant
Shares to any direct competitor of the Company without the Company’s prior
written consent.

     

    (b)           This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney.  Subject to compliance with Section
7(a) as to any transfer which may be involved in such division or combination,
the Company shall execute and deliver a new Warrant or Warrants in exchange for
the Warrant or Warrants to be divided or combined in accordance with such
notice.

     

    (c)           The
Company shall prepare, issue and deliver at its own expense (other than transfer
taxes) the new Warrant or Warrants under this Section 7.

     

    (d)           The
Company agrees to maintain, at its aforesaid office, books for the registration
and the registration of transfer of the Warrants.

     

    (e)           The
Company may require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel reasonably acceptable to the Company (which opinion
shall be in form, substance, and scope customary for opinions of counsel in
comparable transactions) to the effect that such transfer may be made without
registration under the Securities Act and under applicable state securities or
blue sky laws, (ii) that the holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the Company,
and (iii) that the transferee be an “accredited investor” as defined in Rule
501(a) promulgated under the Securities Act or a qualified institutional buyer
as defined in Rule 144A(a) under the Securities Act.

     

    8.           No Rights as Shareholder
until Exercise.  This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof.  Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be
deemed to be issued to the Holder as the record owner of such shares as of the
close of business on the later of the date of such surrender or
payment.

    
      
         

      

      
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    9.           Loss, Theft, Destruction or
Mutilation of Warrant.  The Company covenants that upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction, or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, receipt by the
Company of indemnity or security reasonably satisfactory to it (which, in the
case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.

     

    10.         Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall be a
Saturday, Sunday or a legal holiday, then such action may be taken, or such
right may be exercised, on the next succeeding day not a Saturday, Sunday or
legal holiday.

     

    11.         Adjustments of Exercise
Price.  In the event that the Company issues additional
securities (the “Dilutive Event”), other than (i) shares to be issued pursuant
to the initial public offering of the Company’s Common Stock; (ii) shares of
Common Stock or options to purchase such shares issued to employees,
consultants, officers or directors in accordance with stock plans or stock
options plans approved by the Company’s board of directors and existing on the
date hereof; and (iii) shares of Common Stock issuable under employment,
consulting agreements or loan agreements that are outstanding as of the date
hereof, then the Exercise Price shall be adjusted (but only if such adjustment
results in a lower exercise price) to an amount equal to the amount received or
deemed to be received by the Company pursuant to such Dilutive
Event.

     

    12.         Reorganization,
Reclassification, Merger, Consolidation or Disposition of
Assets.  In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of its property, assets or business to
another corporation and, pursuant to the terms of such reorganization,
reclassification, merger, consolidation or disposition of assets, shares of
common stock of the successor or acquiring corporation, or any cash, shares of
stock or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation (“Other Property”), are
to be received by or distributed to the holders of Common Stock of the Company,
then, from and after the consummation of such transaction or event, the Holder
shall have the right thereafter to receive, instead of the Warrant Shares, at
the option of the Holder, (a) upon exercise of this Warrant, the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable upon
or as a result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a Holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event, or (b) if the
Company is acquired in an all cash transaction, cash equal to the value of this
Warrant as determined in accordance with the Black-Scholes option pricing
formula.  For purposes of this Section 12, “common stock of the
successor or acquiring corporation” shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock, or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock.  The foregoing provisions of this Section 12 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.

     

    
      
         

      

      
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    13.         Notice of
Adjustment.  Whenever the number of Warrant Shares, or the
number or kind of securities or other property purchasable upon the exercise of
this Warrant, or the Exercise Price is adjusted, as herein provided, the Company
shall give notice thereof to the Holder, which notice shall state the number of
Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other
securities or property) after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made.

     

    14.         Other
Adjustments.  If any event occurs of the type contemplated by
the provisions of Sections 11 or 12 above but not expressly provided for by such
provisions, (including, without limitation, the granting of stock appreciation
rights, phantom stock rights, or other rights with equity features), then the
Company’s Board of Directors will make an appropriate adjustment in the Exercise
Price and/or the number of Warrant Shares and other securities or property to be
issued to the Holder upon exercise of the Warrant so as to protect the rights of
the Holder, provided that no such adjustment pursuant to Sections 11 or 12 will
increase the Exercise Price or decrease the number or amount of securities or
other property issuable or deliverable to the Holder as otherwise determined
pursuant to Sections 11 and/or 12.

     

    15.         Notice of Corporate
Action.  If at any time:

     

    (a)           the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or other distribution, or

     

    (b)           there
shall be any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, or any consolidation or
merger of the Company with, or any sale, transfer or other disposition of all or
substantially all the property, assets or business of the Company to, another
corporation, or

     

    (c)           there
shall be a voluntary or involuntary dissolution, liquidation, or winding up of
the Company; then, in any one or more of such cases,

     

    the
Company shall give to Holder (i) prior written notice of the date on which a
record date shall be selected for such dividend or distribution or for
determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
liquidation, or winding up, and (ii) in the case of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation, or winding up, prior written notice of the date when
the same shall take place.  Such notice in accordance with the
foregoing clause also shall specify (i) the date on which the holders of Common
Stock shall be entitled to any such dividend or distribution, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation, or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding
up.  Each such written notice shall be sufficiently given if addressed
to Holder at the last address of Holder appearing on the books of the Company
and delivered in accordance with Section 17(d).

    
      
         

      

      
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    16.         Authorized
Shares.  Except as provided in the Subscription Agreement, the
Company covenants that during the period the Warrant is outstanding, it will
take all reasonable action to ensure that the Company is authorized to issue a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of this Warrant.  The Company shall also reserve
from its authorized and unissued Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the exercise of this
Warrant.  The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of this
Warrant.  The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements of
the trading market upon which the Common Stock may be or may become
listed.

     

    Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its certificate of
incorporation or bylaws, or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment.  Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant Shares
above the amount payable therefore upon such exercise immediately prior to such
increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable Warrant Shares upon the exercise of this Warrant, and (c) use
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this
Warrant.

     

    Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable, or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary, from any public regulatory body or bodies having
jurisdiction thereof.

     

    17.         Miscellaneous.

     

    (a)           Jurisdiction.  All
questions concerning the construction, validity, enforcement, and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Subscription Agreement relating to the same.

     

    (b)           Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered for resale, will have restrictions upon resale
imposed by state and federal securities laws.

     

    (c)           Nonwaiver and
Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers, or remedies,
notwithstanding all rights hereunder terminate on the Termination
Date.  If the Company willfully and knowingly fails to comply with any
provision of this Warrant which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses, including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto, or in otherwise enforcing any of its rights,
powers, or remedies hereunder.

    
      
         

      

      
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    (d)           Notices.  Any
notice, request, or other document required or permitted to be given or
delivered to the Holder by the Company shall be delivered in accordance with the
notice provisions of the Subscription Agreement.

     

    (e)           Limitation of
Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder,
shall give rise to any liability of the Holder for the purchase price of any
Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

     

    (f)           Successors and
Assigns.  Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of,
and be binding upon, the successors of the Company and the successors and
permitted assigns of Holder.  The provisions of this Warrant are
intended to be for the benefit of all Holders, from time to time, of this
Warrant and shall be enforceable by any such Holder or holder of Warrant
Shares.

     

    (g)           Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.

     

    (h)           Severability.  Wherever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by, or be invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.

     

    (i)           Headings.  The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.

     

    (j)           Disputes.  In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the securities or other property, the Company shall
promptly issue and deliver to the Holder the securities or other property that
are not disputed.

     

    (k)           Remedies.  The
Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under Section 3 of this Warrant.  The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of Section 3 of this Warrant and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.

     

    [Remainder
of Page Intentionally Left Blank]
 

    
      
         

      

      
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    IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.

     

    
      
        
          
            
              	
                      Dated:
      November 26, 2010

                    	 
	 
      	 
	
                      JINTAI
      MINING GROUP, INC.

                    	 
	 
      	 
	
                      By:

                    	/s/
      Yuan Lin	 
	
                      Name: Yuan
      Lin

                    	 
	
                      Title:  Chief
      Executive Officer

                    	 

            

          

        

      

    

    
      
         

      

      
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    NOTICE
OF EXERCISE

     

    To:           Jintai
Mining Group, Inc.

     

    (1)          The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the exercise price in full, together with all applicable transfer taxes, if
any.

     

    (2)          Payment
shall be made by wire transfer or cashier’s check drawn on a United States bank
in immediately available funds.

     

    (3)          Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below:

     

      
        

      

    

     

    The
Warrant Shares shall be delivered to the following:

     

    
      
        	
                  

              
	
                  

              
	
                  

              
	
                  

              
	
                  

              
	
                  

              
	
                  

              

      

    

     

    (4)          Accredited
Investor.  The undersigned is an “accredited investor” as
defined in Regulation D under the Securities Act of 1933, as
amended.

     

    
      
        
          
            
              
                
                  
                    	 
      	
                            [NAME
      OF HOLDER]

                          
	 
      	 
      	 
      
	 
      	By:	
                              
      

                          	 
       
	 
      	 
      	
                            Name:

                          
	 
      	 
      	
                            Title:

                          
	 
      	 
      	 
      
	 
      	
                            Dated:

                          	 
      

                  

                

              

            

          

        

      

    

    
      
         

      

      
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    ASSIGNMENT
FORM

     

    (To
assign the foregoing warrant, execute this form and supply required
information.  Do not use this form to exercise the
warrant.)

     

    FOR VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to
_______________________________________________________________________ whose
address is
_________________________________________________________.

     

    Dated:
______________, _______

    

    Holder’s
Signature              ____________________________

     

    Holder’s
Address:               ____________________________

    ____________________________

    ____________________________

     

    
      
        
          
            
              
                	
                        Signature Guaranteed:

                      	
                           
      

                      	 
        

              

            

          

        

      

    

     

    NOTE: The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing.
 

    
      
         

      

      
        10Unassociated Document

    ASSET
PURCHASE AGREEMENT

     

    by
and among

     

    Palm
Harbor Homes, Inc., a Florida Corporation

     

    and

     

    The
Other Sellers Listed on the Signature Pages Hereto

     

    and

     

    Palm
Harbor Homes, Inc., a Delaware Corporation

     

    Dated
as of November 29, 2010

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          	 
      	 
      	
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                                                                                  Article
      I

                                                                                	
                                                                                  PURCHASE
      AND SALE

                                                                                	
                                                                                  2

                                                                                
	 	 	 
	
                                                                                  1.1

                                                                                	
                                                                                  Assets
      to Be Transferred

                                                                                	
                                                                                  2

                                                                                
	 	 	 
	
                                                                                  1.2

                                                                                	
                                                                                  Excluded
      Assets

                                                                                	
                                                                                  4

                                                                                
	 	 	 
	
                                                                                  1.3

                                                                                	
                                                                                  Assumed
      Liabilities

                                                                                	
                                                                                  5

                                                                                
	 	 	 
	
                                                                                  1.4

                                                                                	
                                                                                  Cure
      Costs

                                                                                	
                                                                                  5

                                                                                
	 	 	 
	
                                                                                  1.5

                                                                                	
                                                                                  Excluded
      Liabilities

                                                                                	
                                                                                  5

                                                                                
	 	 	 
	
                                                                                  1.6

                                                                                	
                                                                                  Purchase
      Price

                                                                                	
                                                                                  7

                                                                                
	 	 	 
	
                                                                                  1.7

                                                                                	
                                                                                  Closing

                                                                                	
                                                                                  7

                                                                                
	 	 	 
	
                                                                                  1.8

                                                                                	
                                                                                  Closing
      Deliveries by Sellers

                                                                                	
                                                                                  8

                                                                                
	 	 	 
	
                                                                                  1.9

                                                                                	
                                                                                  Closing
      Deliveries by Purchaser

                                                                                	
                                                                                  8

                                                                                
	 	 	 
	
                                                                                  1.10

                                                                                	
                                                                                  Assignment
      and Assumption of the Assumed Contracts

                                                                                	
                                                                                  9

                                                                                
	 	 	 
	
                                                                                  1.11

                                                                                	
                                                                                  Base
      Price Adjustment

                                                                                	
                                                                                  9

                                                                                
	 	 	 
	
                                                                                  1.12

                                                                                	
                                                                                  Valuation
      and Treatment of Uncollectable Accounts Receivable

                                                                                	
                                                                                  11

                                                                                
	 	 	 
	
                                                                                  1.13

                                                                                	
                                                                                  Allocation
      of Proceeds

                                                                                	
                                                                                  12

                                                                                
	 	 	 
	
                                                                                  Article
      II

                                                                                	
                                                                                  CONVEYANCE
      OF OWNED REAL PROPERTY

                                                                                	
                                                                                  12

                                                                                
	 	 	 
	
                                                                                  2.1

                                                                                	
                                                                                  Real
      Property Escrow

                                                                                	
                                                                                  12

                                                                                
	 	 	 
	
                                                                                  2.2

                                                                                	
                                                                                  Real
      Property Escrow Opening and Closing Dates

                                                                                	
                                                                                  12

                                                                                
	 	 	 
	
                                                                                  2.3

                                                                                	
                                                                                  Seller’s
      Real Property Transfer Documents

                                                                                	
                                                                                  13

                                                                                
	 	 	 
	
                                                                                  2.4

                                                                                	
                                                                                  Purchaser’s
      Real Property Transfer Documents

                                                                                	
                                                                                  13

                                                                                
	 	 	 
	
                                                                                  2.5

                                                                                	
                                                                                  Recording
      of Title

                                                                                	
                                                                                  13

                                                                                
	 	 	 
	
                                                                                  2.6

                                                                                	
                                                                                  Title
      Commitments and Surveys

                                                                                	
                                                                                  14

                                                                                
	 	 	 
	
                                                                                  2.7

                                                                                	
                                                                                  Title
      Policies

                                                                                	
                                                                                  14

                                                                                
	 	 	 
	
                                                                                  2.8

                                                                                	
                                                                                  Real
      Property Escrow Cancellation Charges

                                                                                	
                                                                                  14

                                                                                
	 	 	 
	
                                                                                  2.9

                                                                                	
                                                                                  Closing
      Costs and Recording Fees

                                                                                	
                                                                                  15

                                                                                
	 	 	 
	
                                                                                  2.10

                                                                                	
                                                                                  Apportionments
      for Real Properties

                                                                                	
                                                                                  15

                                                                                
	 	 	 
	
                                                                                  Article
      III

                                                                                	
                                                                                  REPRESENTATIONS
      AND WARRANTIES OF SELLERS

                                                                                	
                                                                                  16

                                                                                
	 	 	 
	
                                                                                  3.1

                                                                                	
                                                                                  Due
      Incorporation and Authority

                                                                                	
                                                                                  16

                                                                                
	 	 	 
	
                                                                                  3.2

                                                                                	
                                                                                  No
      Conflicts

                                                                                	
                                                                                  16

                                                                                
	 	 	 
	
                                                                                  3.3

                                                                                	
                                                                                  Organizational
      Documents; Meeting Minutes

                                                                                	
                                                                                  17

                                                                                
	 	 	 
	
                                                                                  3.4

                                                                                	
                                                                                  Capitalization
      of Transferred Subsidiaries

                                                                                	
                                                                                  17

                                                                                

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
        -i-

        
          

        

      

      
         

      

    

     

    TABLE OF
CONTENTS

     

    (continued)

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    	 
      	 
      	
                                                                            Page

                                                                          
	 
      	 
      	 
      
	
                                                                            3.5

                                                                          	
                                                                            Transferred
      Subsidiary Financial Statements

                                                                          	
                                                                            18

                                                                          
	 	 	 
	
                                                                            3.6

                                                                          	
                                                                            Transferred
      Subsidiary Undisclosed Liabilities; Guaranties

                                                                          	
                                                                            18

                                                                          
	 	 	 
	
                                                                            3.7

                                                                          	
                                                                            Accounts
      Receivable

                                                                          	
                                                                            19

                                                                          
	 	 	 
	
                                                                            3.8

                                                                          	
                                                                            Compliance
      with Laws

                                                                          	
                                                                            19

                                                                          
	 	 	 
	
                                                                            3.9

                                                                          	
                                                                            Permits

                                                                          	
                                                                            20

                                                                          
	 	 	 
	
                                                                            3.10

                                                                          	
                                                                            Contracts

                                                                          	
                                                                            21

                                                                          
	 	 	 
	
                                                                            3.11

                                                                          	
                                                                            Insurance
      Business

                                                                          	
                                                                            23

                                                                          
	 	 	 
	
                                                                            3.12

                                                                          	
                                                                            Real
      Property

                                                                          	
                                                                            24

                                                                          
	 	 	 
	
                                                                            3.13

                                                                          	
                                                                            Environmental
      Matters

                                                                          	
                                                                            26

                                                                          
	 	 	 
	
                                                                            3.14

                                                                          	
                                                                            Intellectual
      Property

                                                                          	
                                                                            26

                                                                          
	 	 	 
	
                                                                            3.15

                                                                          	
                                                                            Litigation
      and Other Claims

                                                                          	
                                                                            27

                                                                          
	 	 	 
	
                                                                            3.16

                                                                          	
                                                                            Condition
      of Tangible Personal Property

                                                                          	
                                                                            27

                                                                          
	 	 	 
	
                                                                            3.17

                                                                          	
                                                                            Title
      to Assets; Possession

                                                                          	
                                                                            28

                                                                          
	 	 	 
	
                                                                            3.18

                                                                          	
                                                                            Sufficiency
      of Assets

                                                                          	
                                                                            28

                                                                          
	 	 	 
	
                                                                            3.19

                                                                          	
                                                                            Inventory

                                                                          	
                                                                            28

                                                                          
	 	 	 
	
                                                                            3.20

                                                                          	
                                                                            Employees

                                                                          	
                                                                            28

                                                                          
	 	 	 
	
                                                                            3.21

                                                                          	
                                                                            Employee
      Benefits

                                                                          	
                                                                            29

                                                                          
	 	 	 
	
                                                                            3.22

                                                                          	
                                                                            Tax
      Matters

                                                                          	
                                                                            31

                                                                          
	 	 	 
	
                                                                            3.23

                                                                          	
                                                                            Affiliated
      Transactions

                                                                          	
                                                                            33

                                                                          
	 	 	 
	
                                                                            3.24

                                                                          	
                                                                            Product
      Liability; Product Warranties

                                                                          	
                                                                            34

                                                                          
	 	 	 
	
                                                                            3.25

                                                                          	
                                                                            Insurance

                                                                          	
                                                                            34

                                                                          
	 	 	 
	
                                                                            3.26

                                                                          	
                                                                            Absence
      of Certain Developments

                                                                          	
                                                                            34

                                                                          
	 	 	 
	
                                                                            3.27

                                                                          	
                                                                            Prohibited
      Payments

                                                                          	
                                                                            36

                                                                          
	 	 	 
	
                                                                            3.28

                                                                          	
                                                                            Bank
      Accounts; Lock Boxes; Powers of Attorney

                                                                          	
                                                                            36

                                                                          
	 	 	 
	
                                                                            3.29

                                                                          	
                                                                            Brokers

                                                                          	
                                                                            36

                                                                          
	 	 	 
	
                                                                            3.30

                                                                          	
                                                                            Disclaimer

                                                                          	
                                                                            36

                                                                          
	 	 	 
	
                                                                            Article
      IV

                                                                          	
                                                                            REPRESENTATIONS
      AND WARRANTIES OF PURCHASER

                                                                          	
                                                                            37

                                                                          
	 	 	 
	
                                                                            4.1

                                                                          	
                                                                            Due
      Incorporation and Authority

                                                                          	
                                                                            37

                                                                          
	 	 	 
	
                                                                            4.2

                                                                          	
                                                                            No
      Conflicts

                                                                          	
                                                                            37

                                                                          

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
        -ii-

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

     

    (continued)

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        	 
      	 
      	
                                                                                Page

                                                                              
	 
      	 
      	 
      
	
                                                                                4.3

                                                                              	
                                                                                Litigation

                                                                              	
                                                                                37

                                                                              
	 	 	 
	
                                                                                4.4

                                                                              	
                                                                                Purchaser’s
      Financial Capability

                                                                              	
                                                                                37

                                                                              
	 	 	 
	
                                                                                4.5

                                                                              	
                                                                                Brokers

                                                                              	
                                                                                38

                                                                              
	 	 	 
	
                                                                                4.6

                                                                              	
                                                                                Acknowledgement
      of Sellers’ Disclaimer

                                                                              	
                                                                                38

                                                                              
	 	 	 
	
                                                                                4.7

                                                                              	
                                                                                Purchaser
      Disclaimer

                                                                              	
                                                                                38

                                                                              
	 	 	 
	
                                                                                Article
      V

                                                                              	
                                                                                COVENANTS
      AND AGREEMENTS

                                                                              	
                                                                                38

                                                                              
	 	 	 
	
                                                                                5.1

                                                                              	
                                                                                Operation
      of the Business

                                                                              	
                                                                                38

                                                                              
	 	 	 
	
                                                                                5.2

                                                                              	
                                                                                Confidentiality

                                                                              	
                                                                                39

                                                                              
	 	 	 
	
                                                                                5.3

                                                                              	
                                                                                Expenses

                                                                              	
                                                                                40

                                                                              
	 	 	 
	
                                                                                5.4

                                                                              	
                                                                                Access
      to Information; Preservation of Records; Litigation
Support

                                                                              	
                                                                                40

                                                                              
	 	 	 
	
                                                                                5.5

                                                                              	
                                                                                Regulatory
      and Other Authorizations; Consents

                                                                              	
                                                                                41

                                                                              
	 	 	 
	
                                                                                5.6

                                                                              	
                                                                                Further
      Actions

                                                                              	
                                                                                41

                                                                              
	 	 	 
	
                                                                                5.7

                                                                              	
                                                                                Bankruptcy
      Court Approval

                                                                              	
                                                                                41

                                                                              
	 	 	 
	
                                                                                5.8

                                                                              	
                                                                                Books
      and Records

                                                                              	
                                                                                43

                                                                              
	 	 	 
	
                                                                                5.9

                                                                              	
                                                                                Tax
      Matters

                                                                              	
                                                                                43

                                                                              
	 	 	 
	
                                                                                5.10

                                                                              	
                                                                                Notification
      of Certain Matters

                                                                              	
                                                                                44

                                                                              
	 	 	 
	
                                                                                5.11

                                                                              	
                                                                                Knowledge
      of Breach

                                                                              	
                                                                                44

                                                                              
	 	 	 
	
                                                                                5.12

                                                                              	
                                                                                Employment
      Arrangements

                                                                              	
                                                                                45

                                                                              
	 	 	 
	
                                                                                5.13

                                                                              	
                                                                                Insurance

                                                                              	
                                                                                46

                                                                              
	 	 	 
	
                                                                                5.14

                                                                              	
                                                                                Licensed
      Computer Software; Consents

                                                                              	
                                                                                47

                                                                              
	 	 	 
	
                                                                                5.15

                                                                              	
                                                                                Seller
      Release of Claims Against Transferred Subsidiaries

                                                                              	
                                                                                47

                                                                              
	 	 	 
	
                                                                                5.16

                                                                              	
                                                                                Change
      of Purchaser’s Name; Dissolution

                                                                              	
                                                                                47

                                                                              
	 	 	 
	
                                                                                Article
      VI

                                                                              	
                                                                                PURCHASER’S
      CLOSING CONDITIONS

                                                                              	
                                                                                47

                                                                              
	 	 	 
	
                                                                                6.1

                                                                              	
                                                                                Representations
      and Warranties; Covenants

                                                                              	
                                                                                48

                                                                              
	 	 	 
	
                                                                                6.2

                                                                              	
                                                                                No
      Intervening Law

                                                                              	
                                                                                48

                                                                              
	 	 	 
	
                                                                                6.3

                                                                              	
                                                                                No
      Legal Proceedings

                                                                              	
                                                                                48

                                                                              
	 	 	 
	
                                                                                6.4

                                                                              	
                                                                                Bankruptcy
      Filing

                                                                              	
                                                                                48

                                                                              
	 	 	 
	
                                                                                6.5

                                                                              	
                                                                                Final
      Orders

                                                                              	
                                                                                48

                                                                              
	 	 	 
	
                                                                                6.6

                                                                              	
                                                                                Regulatory
      Approvals

                                                                              	
                                                                                48

                                                                              

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
        -iii-

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

     

    (continued)

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      	 
      	 
      	
                                                                              Page

                                                                            
	 
      	 
      	 
      
	
                                                                              6.7

                                                                            	
                                                                              Closing
      Documents

                                                                            	
                                                                              48

                                                                            
	 	 	 
	
                                                                              6.8

                                                                            	
                                                                              No
      Purchaser Objection to Initial Price Adjustment

                                                                            	
                                                                              48

                                                                            
	 	 	 
	
                                                                              6.9

                                                                            	
                                                                              No
      Material Adverse Effect

                                                                            	
                                                                              49

                                                                            
	 	 	 
	
                                                                              Article
      VII

                                                                            	
                                                                              SELLERS’
      CLOSING CONDITIONS

                                                                            	
                                                                              49

                                                                            
	 	 	 
	
                                                                              7.1

                                                                            	
                                                                              Representations
      and Warranties; Covenants

                                                                            	
                                                                              49

                                                                            
	 	 	 
	
                                                                              7.2

                                                                            	
                                                                              No
      Intervening Law

                                                                            	
                                                                              49

                                                                            
	 	 	 
	
                                                                              7.3

                                                                            	
                                                                              Sale
      Approval Order

                                                                            	
                                                                              49

                                                                            
	 	 	 
	
                                                                              7.4

                                                                            	
                                                                              No
      Legal Proceedings

                                                                            	
                                                                              49

                                                                            
	 	 	 
	
                                                                              7.5

                                                                            	
                                                                              Bankruptcy
      Filing

                                                                            	
                                                                              50

                                                                            
	 	 	 
	
                                                                              7.6

                                                                            	
                                                                              Final
      Orders

                                                                            	
                                                                              50

                                                                            
	 	 	 
	
                                                                              7.7

                                                                            	
                                                                              Regulatory
      Approvals

                                                                            	
                                                                              50

                                                                            
	 	 	 
	
                                                                              7.8

                                                                            	
                                                                              Closing
      Documents

                                                                            	
                                                                              50

                                                                            
	 	 	 
	
                                                                              Article
      VIII

                                                                            	
                                                                              TERMINATION
      OF AGREEMENT

                                                                            	
                                                                              50

                                                                            
	 	 	 
	
                                                                              8.1

                                                                            	
                                                                              Termination
      Prior to Closing

                                                                            	
                                                                              50

                                                                            
	 	 	 
	
                                                                              8.2

                                                                            	
                                                                              Break-up
      Fee; Expense Reimbursement

                                                                            	
                                                                              51

                                                                            
	 	 	 
	
                                                                              8.3

                                                                            	
                                                                              Survival
      After Termination

                                                                            	
                                                                              52

                                                                            
	 	 	 
	
                                                                              Article
      IX

                                                                            	
                                                                              MISCELLANEOUS

                                                                            	
                                                                              52

                                                                            
	 	 	 
	
                                                                              9.1

                                                                            	
                                                                              Certain
      Definitions

                                                                            	
                                                                              52

                                                                            
	 	 	 
	
                                                                              9.2

                                                                            	
                                                                              Consent
      to Jurisdiction; Service of Process; Waiver of Jury Trial

                                                                            	
                                                                              62

                                                                            
	 	 	 
	
                                                                              9.3

                                                                            	
                                                                              Notices

                                                                            	
                                                                              63

                                                                            
	 	 	 
	
                                                                              9.4

                                                                            	
                                                                              Entire
      Agreement

                                                                            	
                                                                              64

                                                                            
	 	 	 
	
                                                                              9.5

                                                                            	
                                                                              Non-Survival
      of Representations, Warranties and Covenants

                                                                            	
                                                                              64

                                                                            
	 	 	 
	
                                                                              9.6

                                                                            	
                                                                              Amendments

                                                                            	
                                                                              64

                                                                            
	 	 	 
	
                                                                              9.7

                                                                            	
                                                                              Waiver

                                                                            	
                                                                              64

                                                                            
	 	 	 
	
                                                                              9.8

                                                                            	
                                                                              Governing
      Law

                                                                            	
                                                                              64

                                                                            
	 	 	 
	
                                                                              9.9

                                                                            	
                                                                              Binding
      Effect; Assignment

                                                                            	
                                                                              65

                                                                            
	 	 	 
	
                                                                              9.10

                                                                            	
                                                                              Interpretation;
      Headings

                                                                            	
                                                                              65

                                                                            
	 	 	 
	
                                                                              9.11

                                                                            	
                                                                              Severability
      of Provisions

                                                                            	
                                                                              65

                                                                            
	 	 	 
	
                                                                              9.12

                                                                            	
                                                                              Counterparts

                                                                            	
                                                                              65

                                                                            
	 	 	 
	
                                                                              9.13

                                                                            	
                                                                              No
      Third Party Beneficiaries

                                                                            	
                                                                              66

                                                                            

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
        -iv-

        
          

        

      

      
         

      

    

     

    TABLE OF
CONTENTS

     

    SCHEDULES

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  Schedule
      1.1(c)

                                	
                                  Tangible
      Personal Property

                                
	
                                  Schedule
      1.1(f)

                                	
                                  Assumed
      Contracts

                                
	
                                  Schedule
      1.1(g)

                                	
                                  Licensed
      Computer Software

                                
	
                                  Schedule
      1.1(i)

                                	
                                  Intellectual
      Property

                                
	
                                  Schedule
      1.1(j)

                                	
                                  Transferred
      Permits

                                
	
                                  Schedule
      1.1(l)

                                	
                                  Telephone,
      Fax Numbers and Email Accounts

                                
	
                                  Schedule
      2.6

                                	
                                  Owned
      Real Property Subject to Title Commitments

                                
	
                                  Schedule
      2.7

                                	
                                  Title
      Policy Amounts

                                
	
                                  Schedule
      3.4(a)

                                	
                                  Capitalization of Transferred
      Subsidiaries

                                
	
                                  Schedule
      3.6

                                	
                                  Transferred
      Subsidiary Liabilities

                                
	
                                  Schedule
      3.7

                                	
                                  Accounts
      Receivable

                                
	
                                  Schedule
      3.8

                                	
                                  Compliance
      With Laws

                                
	
                                  Schedule
      3.9(a)

                                	
                                  Permits

                                
	
                                  Schedule
      3.9(b)

                                	
                                  Required
      Consents for Permit Transfers

                                
	
                                  Schedule
      3.10(a)

                                	
                                  Seller
      and Transferred Subsidiary Contracts

                                
	
                                  Schedule
      3.10(b)

                                	
                                  Transferred
      Subsidiary Contracts

                                
	
                                  Schedule
      3.11(e)

                                	
                                  Insurance
      Subsidiary Liabilities

                                
	
                                  Schedule
      3.12(a)

                                	
                                  Owned
      Real Properties

                                
	
                                  Schedule
      3.12(b)

                                	
                                  Leased
      Real Properties

                                
	
                                  Schedule
      3.14(a)

                                	
                                  Intellectual
      Property

                                
	
                                  Schedule
      3.14(b)

                                	
                                  Intellectual
      Property Licenses, Sublicenses or other Arrangements

                                
	
                                  Schedule
      3.14(d)

                                	
                                  Intellectual
      Property Defaults

                                
	
                                  Schedule
      3.15

                                	
                                  Litigation
      and Other Claims

                                
	
                                  Schedule
      3.17

                                	
                                  Assets Possessed by Third
      Parties

                                
	
                                  Schedule
      3.20(b)

                                	
                                  Employee
      Disputes

                                
	
                                  Schedule
      3.20(c)

                                	
                                  Employment
      Agreements or Arrangements

                                
	
                                  Schedule
      3.20(d)

                                	
                                  Severance-Related
      Benefits

                                
	
                                  Schedule
      3.21(a)

                                	
                                  Employee
      Benefit Plan

                                
	
                                  Schedule
      3.21(g)

                                	
                                  Employment
      Contract Exceptions

                                
	
                                  Schedule
      3.22(c)

                                	
                                  Filed
      Tax Returns

                                
	
                                  Schedule
      3.22(j)

                                	
                                  Jurisdiction
      for Tax Returns

                                
	
                                  Schedule 3.23

                                	
                                  Affiliated Transactions

                                
	
                                  Schedule 3.24

                                	
                                  Product Compliance

                                
	
                                  Schedule 3.25

                                	
                                  Insurance

                                
	
                                  Schedule 3.26

                                	
                                  Absence of Certain
    Developments

                                
	
                                  Schedule
      3.28

                                	
                                  Powers
      of Attorney

                                
	
                                  Schedule
      9.1(a)

                                	
                                  Seller
      Plants

                                

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
           

        

        
          -v-

          
            

          

        

        
           

        

      

    

    

    TABLE OF
CONTENTS

     

    (continued)

     

    
      
        
          	
                  EXHIBITS

                	 
      
	 
      	 
      
	
                  EXHIBIT
      A

                	
                  Form
      of Bill of Sale

                
	
                  EXHIBIT
      B

                	
                  Form
      of Assignment and Assumption Agreement

                
	
                  EXHIBIT
      C

                	
                  Form
      of Bidding Procedures Order

                
	
                  EXHIBIT
      D

                	
                  Form
      of Sale Approval Order

                
	
                  EXHIBIT
      E

                	
                  Product
      Warranties

                

        

      

    

     

    
      
        
           

        

        
          -vi-

          
            

          

        

        
           

        

      

    

    

    ASSET
PURCHASE AGREEMENT

     

    THIS
ASSET PURCHASE AGREEMENT (this “Agreement”) is made
and entered into as of November 29, 2010, by and among Palm Harbor Homes, Inc.,
a Florida corporation (“ParentCo” ), and each
of its direct or indirect subsidiaries listed on the signature page(s) hereto
(together with ParentCo, each a “Seller” and
collectively the “Sellers”), and Palm
Harbor Homes, Inc., a Delaware corporation (the “Purchaser”).  Initially
capitalized terms used in this Agreement are defined or cross-referenced in
Section
9.1.

     

    RECITALS

     

    WHEREAS,
Sellers are engaged in the business of the design, production, marketing, sale
and servicing of manufactured and modular homes (the “Home Business”), the
Insurance Subsidiaries are engaged in the business of underwriting, selling and
servicing property and casualty insurance for manufactured and modular homes
(the “Insurance
Business”), and the Finance Subsidiaries are engaged in the business of
providing financing to retail customers for the purchase of site built,
manufactured and modular homes (the “Finance Business”,
and collectively with the Home Business and the Insurance Business, the “Business”);
and

     

    WHEREAS,
ParentCo and certain of its Affiliates intend to file voluntary petitions for
relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”)
with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”),
with ParentCo’s bankruptcy case to be jointly administered with those of its
Affiliates filing chapter 11 bankruptcy cases (ParentCo’s chapter 11 case,
together with all cases so jointly administered, being collectively referred to
herein as the “Bankruptcy Case”);
and

     

    WHEREAS,
in connection with the Bankruptcy Case, Sellers and Purchaser’s sole
stockholder, Fleetwood Homes, Inc., (“Fleetwood”), have
entered into that certain Debtor In Possession Revolving Credit Agreement dated
concurrently herewith (the “DIP Facility”) for
the provision by Fleetwood to Sellers of up to $50,000,000 of
debtor-in-possession debt financing, which amount may be increased to
$55,000,000 with Fleetwood’s consent.

     

    WHEREAS,
Purchaser desires to purchase substantially all of the assets of Sellers and to
assume certain specified Liabilities of Sellers, and Sellers desire to sell such
assets to Purchaser and to have Purchaser assume such specified Liabilities, all
on the terms and conditions set forth in this Agreement and in accordance with
sections 105, 363, 365 and other applicable provisions of the Bankruptcy Code;
and

     

    WHEREAS,
the Transferred Assets shall be sold to Purchaser pursuant to an order of the
Bankruptcy Court approving and authorizing Sellers to enter into and consummate
such sale under section 363 of the Bankruptcy Code, and such sale shall include
the assumption by Seller and concurrent assignment to Purchaser of the Assumed
Contracts under section 365 of the Bankruptcy Code and the terms and conditions
of this Agreement;

     

    WHEREAS,
Sellers desire to sell the Transferred Assets, including assuming and assigning
the Assumed Contracts to Purchaser, to further their reorganization efforts and
to enable them to consummate a plan of reorganization in the Bankruptcy Case;
and

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

     

    NOW,
THEREFORE, in consideration of the foregoing and the representations, warranties
and covenants herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

     

    ARTICLE
I

     

    PURCHASE
AND SALE

     

    1.1          Assets to Be
Transferred.  On the terms and subject to the conditions set
forth in this Agreement, at the Closing, Sellers shall sell, assign, transfer,
convey and deliver (or cause to be sold, assigned, transferred, conveyed and
delivered) to Purchaser (or its specified designee(s)), and Purchaser (or its
specified designee(s)) shall purchase, assume and accept from Sellers, free and
clear of any Encumbrance, other than Permitted Encumbrances, all right, title
and interest in and to all of Sellers’ properties, assets and rights, other than
the Excluded Assets (such rights, title and interests in and to such assets,
properties and rights being collectively referred to herein as the “Transferred Assets”),
in accordance with, and with all of the protections afforded by, sections 363
and 365 of the Bankruptcy Code, including the following:

     

    (a)           all
outstanding shares of capital stock of Standard Casualty Co., a Texas
corporation (the “Standard Casualty
Shares”), and Standard Insurance Agency, Inc., a Texas corporation (the
“Standard Insurance
Shares”);

     

    (b)           all
outstanding shares of capital stock of CountryPlace Acceptance Corp., a Nevada
corporation (the “CountryPlace
Shares”);

     

    (c)           all
machinery, tools, tooling, computer hardware and peripherals, telephony, office
and other equipment, parts, spare parts, vehicles, leasehold improvements, trade
fixtures, signage, furniture, furnishings, appliances, supplies and other
tangible personal property, together with any express or implied warranty (to
the extent transferable) given by any manufacturer or seller of any item or
component part thereof and all maintenance records and other documents relating
thereto), wherever located, including those items listed on Schedule 1.1(c),
except for any such items on Schedule 1.1(c)
disposed of in the ordinary course of business prior to the Closing Date
(collectively, the “Tangible Personal
Property”);

     

    (d)           all
raw materials, work-in-progress, finished goods and semi-finished goods,
supplies, packaging materials and other inventories, wherever located, used or
produced by any Seller, except for any such items disposed of in the ordinary
course of business prior to the Closing Date (the “Inventory”);

     

    (e)           all
Owned Real Properties, together in each case with the applicable Sellers’ right,
title and interest in and to all structures, facilities, fixtures and
improvements located thereon and all easements, licenses, rights and
appurtenances relating to the foregoing;

     

    (f)           all
of the applicable Sellers’ rights under the Contracts listed on Schedule 1.1(f), to
the extent assumed and assigned in accordance with Section 1.10
(collectively, the “Assumed
Contracts”);

    

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

     

    (g)           subject
to Section
5.14, the licensed Computer Software listed or described on Schedule 1.1(g),
solely to the extent assignable;

     

    (h)           all
Purchase Orders existing and outstanding on the Closing Date and any additional
Contracts entered into by any Seller in the Ordinary Course of Business after
the date hereof, as contemplated by clause (iii) of Section
5.1(a);

     

    (i)      
     all Intellectual Property, including those items
listed on Schedule
1.1(i), together with all income, royalties, damages and payments due or
payable to any Seller or Affiliate thereof as of the Closing Date or thereafter
(including damages and payments for past, present or future infringements or
misappropriations thereof, the right to sue and recover for past infringements
or misappropriations thereof, and any and all corresponding rights that, now or
hereafter, may be secured throughout the world) and all copies and tangible
embodiments of any such Intellectual Property in Sellers’ possession or control
(collectively, the “Transferred
IP”);

     

    (j)      
     all Permits and all pending applications therefor
or renewals thereof, including those listed on Schedule 1.1(j), in
each case to the extent assignable or otherwise transferable to Purchaser in
accordance with their respective terms or under applicable Law (the “Transferred
Permits”);

     

    (k)           originals
or copies of all data, databases and records (whether in print, electronic or
other format) related to the operation of the Business or the ownership or use
of the Transferred Assets, including all books of account, general, financial,
accounting, engineering and legal records, unit and house files, invoices,
customers’ and suppliers’ lists and records (including account histories),
mailing lists, e-mail address lists, other distribution lists, inventory and
supply managements records, engineering designs and related approvals of
Governmental Bodies, self-regulatory organizations, and trade associations,
billing records, sales and promotional literature, creative materials, research
and development reports and records, production reports and records, employee
health and safety records, reports and logs for the Real Properties (including
OSHA reports and logs), service and warranty records, product recall or
withdrawal records, equipment logs, operating guides and manuals, correspondence
files (including correspondence with customers, suppliers, landlords, tenants,
licensors, licensees, Governmental Bodies and legal, accounting and other
professional advisors (except, in the case of legal correspondence, any
correspondence constituting privileged communication between any Seller and its
legal counsel)), Transferred Permits, Purchase Orders (both those included in
the Transferred Assets and, to the extent retained by any Seller, historic
Purchase Orders) and Assumed Contracts, but excluding any records of Sellers
described in Section
1.2(f) (the “Books and
Records”);

     

    (l)            the
telephone (landline and mobile) and facsimile numbers and email accounts listed
on Schedule
1.1(l);

     

    (m)          all
credits, rights to deposits paid by any Seller (including security or other
deposits under any Real Property Lease included in the Assumed Contracts),
deposits paid by any customer or other Person to any Seller, prepaid expenses,
claims for refunds, investments and other similar financial assets;

    

    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

     

    (n)           all
Accounts Receivable of Sellers, and all proceeds of the foregoing;

     

    (o)           going
concern value and goodwill with respect to the Transferred Assets and the Home
Business;

     

    (p)           all
insurance policies of Sellers, and all Claims, proceeds and benefits due
thereunder;

     

    (q)           all
interests in and rights to any refund of Taxes and surviving federal and state
loss carrybacks and carryforwards; and

     

    (r)        
   all Claims of Sellers (or any of them) against any Person
relating to the Transferred Assets, the Assumed Liabilities or the
Business;

     

    1.2          Excluded
Assets.  Sellers are not selling, and Purchaser is not
purchasing, any assets other than those specifically set forth in Section 1.1, and without
limiting the generality of the foregoing, the term “Transferred Assets” shall
expressly exclude the following assets of Sellers (including all of Sellers’
right, title and interest therein and thereto), all of which shall be retained
by the applicable Sellers (collectively, the “Excluded
Assets”):

     

    (a)           except
as provided in Section
1.1(m), all cash, bank deposits and cash equivalents;

     

    (b)           all
of Sellers’ bank accounts;

     

    (c)           all
of the Contracts of any Seller, except the Assumed Contracts;

     

    (d)           except
as provided in Section
1.1(r), all Pre-Closing Claims;

     

    (e)           all
rights of Sellers under this Agreement and any other Closing document entered
into or executed by Sellers (or any of them) in connection with the transactions
contemplated hereby;

     

    (f)        
   all corporate books and records, Tax Returns, board minutes
and organizational documents of Sellers, and any other records that any Seller
is required to retain by Law (except that copies of such retained records shall
be provided to Purchaser at Closing if such records would otherwise constitute a
Transferred Asset pursuant to Section 1.1(k)), all
information held by any Seller prohibited from being transferred or disclosed
pursuant to applicable Law, all non-public information primarily related to or
prepared in connection with the Bankruptcy Case, and Sellers’ books and records
relating to any Excluded Assets;

     

    (g)           all
of the rights and claims of Sellers to avoidance actions available to any Seller
under chapter 5 of the Bankruptcy Code, of whatever kind or nature, including
avoidance actions under sections 544, 545, 547, 548, 549 and 553 of the
Bankruptcy Code, and any related claims and actions arising under such sections
by operation of Law or otherwise, including any and all proceeds of the
foregoing;

    

    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

     

    (h)           legal
correspondence constituting privileged communication between any Seller and its
legal counsel; and

     

    (i)      
     the outstanding stock of, or other outstanding
equity interests in, any Seller.

     

    1.3          Assumed
Liabilities.  At the Closing, Purchaser shall assume and in due
course pay, discharge, perform or otherwise fully satisfy in accordance with
their respective terms only the following Liabilities of Sellers (the “Assumed
Liabilities”):

     

    (a)           all
Liabilities of Sellers under the Assumed Contracts, the other Contracts referred
to in Section
1.1(h) and the Transferred Permits (to the extent assigned hereunder) to
be performed on or after, or in respect of periods following, the Closing Date;
provided, however, that such
Liabilities shall not include any Liability based on or relating to any Seller’s
breach or violation of any Assumed Contract, any Contract referred to in Section 1.1(h) or any
Transferred Permit arising, occurring or existing before the Closing Date, other
than the Cure Costs that Purchaser agrees to pay pursuant to Section
1.4;

     

    (b)           the
Assumed Warranty Liabilities; and

     

    (c)           the
COBRA obligations that Purchaser agrees to assume pursuant to Section
5.12(f).

     

    1.4          Cure
Costs.  At
Closing and pursuant to section 365 of the Bankruptcy Code, Sellers shall assume
and assign to Purchaser the Assumed Contracts.  The amounts, as
determined by the Bankruptcy Court, if any (the “Cure
Costs”), necessary to cure all defaults of any Seller, if any, and to pay
all actual or pecuniary losses that have resulted from such defaults under the
Assumed Contracts, shall be paid by Purchaser, on or before Closing, and not by
Sellers and Sellers shall have no Liability therefor.

     

    1.5          Excluded
Liabilities.  Notwithstanding anything in this Agreement to the
contrary, the parties expressly acknowledge and agree that Purchaser shall not
assume or be liable or responsible for any Liability of any Seller other than
the Assumed Liabilities, except as required by applicable Law and not discharged
in the Bankruptcy Case (such Liabilities being collectively referred to herein
as the “Excluded
Liabilities”).  Without limiting the generality of the
foregoing, the Excluded Liabilities shall include:

     

    (a)           any
Liability under any Assumed Contract or any Contract referred to in Section 1.1(h) that
arises from or relates to (i) any breach or violation of any Seller that
occurred on or before the Closing Date, or (ii) any outstanding obligation of
any Seller that was required to have been satisfied or performed by such Seller
on or before the Closing Date, except in either such case for Purchaser’s
obligation to pay Cure Costs;

     

    (b)           any
Liability under any Contract that is not an Assumed Contract or Contract
referred to in Section
1.1(h);

     

    (c)           any
account payable or other amount payable of any Seller;

    

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

     

    (d)           any
Liability of any Seller under any note, loan, borrowing arrangement, debt
financing, credit facility, capital lease (except as included in the Assumed
Contracts), financial or performance guaranty, surety, indemnity or bond, or any
security interest related to any of the foregoing;

     

    (e)           except
as expressly contemplated by this Agreement, any Liability for Taxes payable by
or assessed against any Seller under applicable Law;

     

    (f)        
   any Environmental, Health and Safety Liability, including
arising out of or relating to Sellers’ ownership and operation of the Home
Business on or prior to the Closing Date or the leasing, ownership or operation
of any asset (including any Real Property) by any Seller, whether or not
included in the Transferred Assets, including any Release (existing as of the
Closing Date) of any Hazardous Material;

     

    (g)           any
Liability arising out of or relating to (i) the employment or performance of
services, or termination of employment or services by any Seller of any current
or former employee or director on or before the Closing Date (including, without
limitation, wages or other compensation, and plans, agreements or arrangements
providing for bonus, incentive compensation, vacation, sick days, personal days,
severance benefits or other employee benefits), or (ii) workers’ compensation
Claims against any Seller, irrespective of whether such Claims are made prior
to, on or after the Closing Date, regardless, in either of the foregoing clauses
(i) or (ii), of whether such employee involved with such grievance is a
Transferred Seller Employee;

     

    (h)           any
Liability of any Seller with respect to any of its employees or directors or any
former employees or directors, including any Liability arising under any Benefit
Plan or any other employee program or arrangement at any time maintained,
sponsored or contributed to by any of Sellers or any predecessor or Affiliate
thereof or any ERISA Affiliate, or with respect to which any of Sellers or any
predecessor or Affiliate thereof or any ERISA Affiliate has any
Liability;

     

    (i)      
     except for the Liabilities specifically referred
to in Section
1.3(b), any Liability relating to or arising from any Seller’s
manufacture or sale of any product or performance of any service, including any
Liability for death or injury to any Person or damage to property;

     

    (j)       
    any Liability of any Seller to defend, indemnify, hold
harmless or reimburse any Person, including any present or former employee,
director, customer, vendor, contractor or agent of any Seller, except to the
extent such Liability is expressly included in an Assumed Contract, and then
only to the extent that such Liability arises in connection with acts,
omissions, facts, events or circumstances first existing, accruing or arising on
or after the Closing Date and not based on any breach or violation by any Seller
prior to the Closing Date;

     

    (k)           any
Liability of any Seller arising out of or relating to (i) any past Claim or any
Claim underway or pending as of the Closing Date by or against any Seller, or
(ii) any Claim commenced on or after the Closing Date that relates to any act,
omission, occurrence or event happening, or any fact or circumstance existing,
before the Closing Date, in each case to the extent that the Liability for such
act, omission, occurrence, event, fact or circumstance is not expressly included
in the Assumed Liabilities;

    

    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

     

    (l)        
   any Liability relating to any amount required to be paid or
any action required to be performed by any Seller hereunder; and

     

    (m)          any
Liability of any Seller arising out of or resulting from non-compliance of such
Seller with any applicable Law (including, for the avoidance of doubt, any
requirements and provisions of any “bulk-transfer” Laws of any jurisdiction that
may otherwise be applicable with respect to the sale of any or all of the
Transferred Assets to Purchaser; provided, however, that pursuant to section
363(f) of the Bankruptcy Code, the transfer of the Transferred Assets shall be
free and clear of any Encumbrance arising under any bulk transfer laws, and the
parties shall take such steps as may be necessary or appropriate to so provide
in the Sale Approval Order).

     

    1.6          Purchase
Price.  Subject to the terms and conditions hereof, in full
consideration of the sale and purchase of the Transferred Assets and Sellers’
other covenants and obligations hereunder, at the Closing, Purchaser shall (i)
assume the Assumed Warranty Liabilities, which the parties agree will be
assigned an aggregate value of $6,500,000, the COBRA Liabilities referred to in
Section
5.12(f), which the parties agree will be assigned an aggregate value of
$1,000,000, and the other Assumed Liabilities, and (ii) pay to ParentCo, on
behalf of and for the account of Sellers, the greater of (A) $50,000,000 or (B)
an amount equal to the outstanding balance (including accrued and unpaid
interest) under the DIP Facility as of the time of Closing (the “Base Price”), minus the Accounts
Receivable and Inventory Value Shortfall (if any), and minus the amount of
any Unauthorized Indebtedness, in each case as determined pursuant to Section 1.11 (collectively,
the “Purchase
Price”).  At the Closing, Purchaser shall pay the Base Price,
as adjusted downwards (as applicable) by the Initial Price Adjustment referred
to in Section
1.11(a)
and by the Closing Apportionment payable to or by Sellers (as determined in
accordance with Section 2.10) (the “Closing Payment”) as
follows:

     

    (a)           first,
to the extent of Purchaser’s interest as assignee of Fleetwood under the DIP
Facility, by way of credit and set-off against the outstanding balance of the
DIP Facility as of the time of Closing (provided, that if the Closing Payment is
less than the total outstanding balance of the DIP Facility as of the time of
Closing, such outstanding balance and any subsequent interest accruals thereon
shall remain payable by Sellers in accordance with the provisions of the DIP
Facility); and

     

    (b)           second,
to the extent the Closing Payment exceeds the outstanding balance of the DIP
Facility as of the time of Closing, by wire transfer of immediately available
funds to a bank account designated by written notice from ParentCo to Purchaser,
such notice to be given at least two (2) Business Days prior to the Closing
Date.

     

    1.7          Closing.  Subject
to the terms and conditions of this Agreement and the Sale Approval Order, the
sale and purchase of the Transferred Assets and the assignment and assumption of
the Assumed Liabilities contemplated by this Agreement shall take place at a
closing (the “Closing”) to be held
at the offices of ParentCo, 15303 Dallas Parkway, Suite 800, Addison, Texas
75001 at 9:00 a.m., Central Standard Time, on the first (1st) Business Day
following the satisfaction or waiver of all conditions to the obligations of the
parties set forth in Article VI and Article VII (other
than those conditions which by their nature can only be satisfied at the
Closing), or at such other place or at such other time or on such other date as
ParentCo and Purchaser may mutually agree upon in writing (the day on which the
Closing takes place being the “Closing
Date”).

    

    
      
        
           

        

        
          7

          
            

          

        

        
           

        

      

    

     

    1.8          Closing Deliveries by
Sellers.  At the Closing, unless otherwise waived in writing by
Purchaser, Sellers shall deliver or cause to be delivered to
Purchaser:

     

    (a)           a
duly executed Sellers’ Certificate pursuant to Section
6.1;

     

    (b)           a
duly executed Bill of Sale substantially in the form of Exhibit A
hereto;

     

    (c)           a
duly executed counterpart to the Assignment and Assumption Agreement
substantially in the form of Exhibit B
hereto;

     

    (d)           duly
executed assignments of Sellers’ Marks and other Intellectual Property in form
and substance reasonably acceptable to Purchaser;

     

    (e)           the
stock certificates representing the Standard Casualty Shares and the Standard
Insurance Shares, each with a duly executed stock power, in form and substance
reasonably satisfactory to Purchaser, for the assignment and transfer of same to
Purchaser;

     

    (f)       
    the stock certificate(s) representing all of the
outstanding shares of Palm Harbor Ins. Agency of Texas;

     

    (g)           a
receipt, in form and substance reasonably satisfactory to Purchaser, for the
payment of the Purchase Price;

     

    (h)           a
Tax clearance certificate (or equivalent document) from each state in respect of
which any Transferred Subsidiary is liable for the payment of
Taxes;

     

    (i)       
    the corporate minute books or equivalent record books
(including all contents thereof) for each Transferred Subsidiary;
and

     

    (j)       
    such other duly executed bills of sale, assignments and
other instruments of assignment, transfer or conveyance, in form and substance
reasonably satisfactory to Purchaser, as Purchaser may reasonably request or as
may be otherwise necessary or desirable to evidence and effect the sale,
assignment, transfer, conveyance and delivery of the Transferred Assets to
Purchaser and to put Purchaser in actual possession or control of the
Transferred Assets.

     

    1.9          Closing Deliveries by
Purchaser.  At the Closing, unless otherwise waived in writing
by ParentCo, in addition to the Closing Payment to be made in accordance with
Section 1.6,
Purchaser shall deliver or cause to be delivered to ParentCo or the other
applicable Persons specified herein:

     

    (a)           a
duly executed Purchaser’s Certificate pursuant to Section
7.1;

    

    
      
        
           

        

        
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    (b)           a
duly executed counterpart to the Bill of Sale substantially in the form of Exhibit A
hereto;

     

    (c)           a
duly executed counterpart to the Assignment and Assumption Agreement
substantially in the form of Exhibit B hereto;
and

     

    (d)           such
other duly executed documents and instruments, in form and substance reasonably
satisfactory to ParentCo, as ParentCo may reasonably request or as may be
otherwise necessary or desirable to evidence and effect the assumption by
Purchaser of the Assumed Liabilities.

     

    1.10        Assignment and Assumption of
the Assumed Contracts.  Without limiting Sections 1.1(a) and
1.3(a), (i) at
the Closing, but effective as of the Effective Time, the applicable Seller(s)
shall assume pursuant to section 365(a) of the Bankruptcy Code and concurrently
assign to Purchaser pursuant to sections 363(b), (f) and (m) and section 365(f)
of the Bankruptcy Code each of the Assumed Contracts that may be assumed
pursuant to the Sale Approval Order, and (ii) to the extent contemplated in
Section 1.3(a)
(and subject to Section 1.5(a)),
Purchaser shall assume and thereafter in due course pay, discharge, perform and
satisfy in accordance with their respective terms all of the obligations under
such Assumed Contracts pursuant to section 365 of the Bankruptcy Code from and
after the Closing, and shall pay the Cure Costs so that all applicable Assumed
Contracts may be assigned to Purchaser pursuant to section 365 of the Bankruptcy
Code.

     

    1.11        Base Price
Adjustment.  The adjustment to the Base Price with respect to
the valuation of the Inventory and the Accounts Receivable of Sellers and any
Unauthorized Indebtedness shall be determined in accordance with the following
provisions:

     

    (a)           At
least five (5) Business Days prior to the Closing Date, ParentCo shall deliver
to Purchaser a report setting forth (i) a good faith estimate as of the
Effective Time of the Inventory and the Accounts Receivable of Sellers and any
Unauthorized Indebtedness, based on current information then reasonably
available to Sellers and broken down on a line-item basis, together with
reasonable documentation in support of such estimate (including at a minimum a
complete aging report of all Accounts Receivable of Sellers and a report of all
Inventory, with such Accounts Receivable and Inventory reports being the most
recently available accounts receivable report and inventory report before such
date of delivery by ParentCo) and, based thereon, any downwards adjustment to be
made to the Base Price for purposes of determining the Closing Payment as
contemplated by Section 1.6 (the
“Initial Price
Adjustment”).  The Initial Price Adjustment (or ParentCo’s
determination that no Initial Price Adjustment is required) shall be subject to
the review and approval of Purchaser upon receipt, acting reasonably and in good
faith (which approval shall be for Closing purposes only and shall not
constitute Purchaser’s acceptance of the Initial Price Adjustment (or ParentCo’s
determination that no Initial Price Adjustment is required) as definitive), and
Purchaser shall have two (2) Business Days to submit to ParentCo any objection
to the Initial Price Adjustment (or ParentCo’s determination that no Initial
Price Adjustment is required), provided that such objection must be submitted in
writing setting forth in reasonable detail Purchaser’s objection; and provided
further that such objection may only be based on (i) the failure of
ParentCo to provide adequate back-up information or documentation for the
Initial Price Adjustment, (ii) a deviation from available financial
information on which the Initial Price Adjustment is to be based, (iii) the
failure of the Initial Price Adjustment to be calculated in accordance with the
requirements of this Agreement, (iv) the failure of the Initial Price
Adjustment to be calculated in accordance with GAAP (except as such failure is
expressly permitted or required pursuant to this Agreement), or (v) calculation
error.  During such two (2)-day period, ParentCo shall provide
Purchaser and its Representatives with access to the relevant books, records and
personnel of Sellers and the Transferred Subsidiaries reasonably requested by
Purchaser to assist Purchaser in its review of the Initial Price
Adjustment.

     

    
      
        
           

        

        
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    (b)           Within
ninety (90) days after the Closing Date, Purchaser shall deliver to ParentCo a
report showing (i) Purchaser’s determination, as of the Effective Time, of the
Inventory and Accounts Receivable of Sellers and any Unauthorized Indebtedness
existing as of the Effective Time, which report shall be in reasonable detail
and broken down on a line-item basis, together with reasonable documentation in
support of such determination (including at a minimum a complete aging report of
all Accounts Receivable of Sellers and a report of all Inventory, with such
Accounts Receivable and Inventory reports having been prepared as of the
Effective Time) and, based thereon, any downwards adjustment to be made to the
Base Price for purposes of determining the Purchase Price (the “Post-Closing Price
Adjustment”).  ParentCo shall have ten (10) days after its
receipt of the Post-Closing Price Adjustment to give written notice (an “Objection Notice”) to
Purchaser of any objection to the Post-Closing Price Adjustment.  Any
Objection Notice must specify in reasonable detail the objections of ParentCo
and may only be based on (i) the failure of Purchaser to provide adequate
back-up information or documentation for the Post-Closing Price Adjustment, (ii)
a deviation from available financial information on which the Post-Closing Price
Adjustment is to be based, (iii) the failure of the Post-Closing Price
Adjustment to be calculated in accordance with the requirements of this
Agreement, (iv) the failure of the Post-Closing Price Adjustment to be
calculated in accordance with GAAP (except as such failure is expressly
permitted or required pursuant to this Agreement), or (v) calculation
error.  During such ten (10)-day period, Purchaser shall provide
ParentCo and its Representatives with access to the relevant books, records and
personnel of Purchaser reasonably requested by ParentCo to assist ParentCo in
its review of the Post-Closing Price Adjustment.

     

    (c)           If,
within the ten (10)-day period referred to in Section 1.11(b), an
Objection Notice that meets the requirements of Section 1.11(b) is
delivered by ParentCo to Purchaser, Representatives of ParentCo and Purchaser
shall confer in good faith for up to ten (10) days after the date of Purchaser’s
receipt of the Objection Notice to resolve the objections raised by
ParentCo.  If such Representatives are unable to resolve all such
objections within such period, then at any time thereafter, ParentCo or
Purchaser may require that the objection raised by ParentCo be immediately
submitted to the Bankruptcy Court for resolution, whereupon the parties shall
cooperate reasonably and in good faith to establish fast-track procedures for
presenting their respective positions to the Bankruptcy Court.  Any
determination of the Bankruptcy Court with respect to the matters that are the
subject of ParentCo’s objection shall be final, binding and conclusive on the
parties hereto.

    

    
      
        
           

        

        
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    (d)           Upon
the first to occur of, (i) the written agreement between ParentCo and Purchaser
as to the Post-Closing Price Adjustment, including any amendment to be made
thereto, (ii) the passage of the thirty (30)-day (or more, if mutually
agreed upon by ParentCo and Purchaser) period after ParentCo has received the
Post-Closing Price Adjustment without ParentCo’s delivery of an Objection Notice
(in which case ParentCo shall be deemed to have accepted and agreed to the
Post-Closing Price Adjustment), or (iii) the determination of the Bankruptcy
Court of all matters that are the subject of an Objection Notice, the final
adjustment to be made to the Base Price based on the value, as of the Effective
Time, of the Inventory and Accounts Receivable of Sellers and any Unauthorized
Indebtedness, as finally determined pursuant to one or more of the foregoing
(the “Final Price
Adjustment”) shall be final, binding and conclusive on the parties
hereto.

     

    (e)           If
the amount of the Final Price Adjustment is less than the amount of the Initial
Price Adjustment, then, within five (5) Business Days after the determination of
the Final Price Adjustment Amount, Purchaser shall pay to ParentCo, on behalf of
Sellers, the amount of such excess by wire transfer of immediately available
funds to the bank account referred to in Section 1.6(b); provided, however, that in no
event shall Purchaser be required to pay more than the Base Price as the total
Purchase Price due to Sellers.  If the amount of the Final Price
Adjustment Amount exceeds the amount of the Initial Price Adjustment, then,
within five (5) Business Days after the determination of the Final Price
Adjustment, ParentCo, on behalf of Sellers, shall refund to Purchaser the amount
of such shortfall by wire transfer of immediately available funds to a bank
account specified by Purchaser in writing to ParentCo.

     

    1.12        Valuation and
Treatment of
Uncollectable Accounts Receivable.

     

    (a)           For
purposes of calculating the Initial Price Adjustment, the Post-Closing Price
Adjustment and the Final Price Adjustment, and any adjustment to the Base Price
as contemplated in Section 1.11, the
Accounts Receivable of Sellers shall be valued by the parties in the following
manner:

     

    (i)           subject
to Section
1.12(a)(ii), one hundred percent (100%) of the amount of any Account
Receivable shall be counted if, as of the Effective Time, such Account
Receivable is aged ninety (90) or less days from the earlier of (A) the date of
issuance of the statement or invoice therefor or (B) the date on which such
Account Receivable first became payable; and

     

    (ii)          no
value shall be given to any Account Receivable that, as of the Effective Time,
is aged more than ninety (90) days from the earlier of (A) the date of issuance
of the statement or invoice therefor or (B) the date on which such Account
Receivable first became payable, or any Account Receivable that is owing by an
account debtor that is bankrupt, in receivership or insolvent or has ceased to
conduct business or is disputing such Account Receivable.

     

    (b)           If,
within thirty (30) days after the Closing Date, Purchaser has been unable to
collect any Seller Account Receivable (or portion thereof) referred to in Section 1.12(a)(i),
Purchaser may, prior to or concurrently with its delivery to ParentCo of the
Post-Closing Price Adjustment, assign such uncollected Account Receivable (or
portion thereof) back to the applicable Seller.  The stated amount of
any such uncollectible Account Receivable, to the extent included in the
calculation of the Initial Price Adjustment, shall not be counted in the current
assets included in the calculation of the Post-Closing Price Adjustment and the
Final Price Adjustment.

    

    
      
        
           

        

        
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    1.13          Allocation of
Proceeds.  Purchaser shall within one hundred twenty (120) days
after the Closing Date prepare and deliver to ParentCo a schedule reasonably
allocating the Purchase Price among the Transferred Assets in accordance with
Section 1060 of the Tax Code (such schedule, the “Allocation”).  Purchaser
shall permit ParentCo to review and provide comments on the Allocation and shall
consult with ParentCo with respect to any such comments.  However, the
Allocation shall be finally determined in Purchaser’s sole
discretion.  Purchaser and Sellers shall report and file all Tax
Returns (including amended Tax Returns and claims for refund) in all respects
and for all purposes in a manner consistent with the
Allocation.  Neither Purchaser nor Sellers shall take any position
contrary thereto or inconsistent therewith (including in any audits or
examinations by any Governmental Body or any other proceeding) unless otherwise
required by applicable law; provided, however, that (i)
each party to this Agreement shall notify the other parties in the event that
any Governmental Body takes or proposes to take a position for Tax purposes that
is inconsistent with such Allocation and (ii) ParentCo and its Affiliates
shall not be bound by the Allocation for purposes of allocating the Purchase
Price in connection with proceeds of the sale of the Transferred Assets and any
claims related thereto under the Bankruptcy Case.  Purchaser and
Sellers shall cooperate in the filing of any forms (including Form 8594 under
Section 1060 of the Tax Code) with respect to the Allocation.

     

    ARTICLE
II

     

    CONVEYANCE
OF OWNED REAL PROPERTY

     

    In
addition to the Closing procedures and documentation referred to in Sections 1.7 through
1.10, the
following procedures and requirements set forth in this Section 2 shall apply
to Sellers’ conveyance of the Owned Real Properties to Purchaser on the Closing
Date.

     

    2.1          Real Property
Escrow.  Immediately after the Bankruptcy Court’s entry of the
Sale Approval Order as a Final Order, or at such earlier time as ParentCo and
Purchaser may agree, Sellers and Purchaser shall establish an escrow (the “Real Property
Escrow”) for the sale and purchase of the Owned Real Properties pursuant
to this Agreement with the Title Company.  The provisions of this
Article II
shall constitute escrow instructions to the Title Company, and a copy of this
Agreement shall be deposited with the Title Company for such
purpose.

     

    2.2          Real Property Escrow Opening
and Closing Dates.  The Real Property Escrow shall be deemed
open on the date on which a fully executed original copy of this Agreement shall
have been delivered to the Title Company.  The Closing of the sale and
purchase of the Owned Real Properties and the Real Property Escrow shall occur
on the Closing Date and following the delivery to the Title Company of a copy of
the Sale Approval Order as a Final Order.  At the Closing, the
applicable Sellers shall transfer fee title to, and possession and control of,
the Owned Real Properties to Purchaser, or its specified designee(s), free and
clear of all Encumbrances, other than Permitted Encumbrances.

    

    
      
        
           

        

        
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    2.3          Seller’s Real Property
Transfer Documents.  Subject to the Sale Approval Order
becoming a Final Order, on or before the Closing Date, Sellers shall deposit
into the Real Property Escrow for delivery to Purchaser at the Closing the
following documents and instruments, each of which shall have been duly executed
and, where appropriate, acknowledged:

     

    (a)           an
individual closing statement for each Owned Real Property, prepared by the Title
Company and approved by the parties hereto (collectively, the “Closing
Statements”);

     

    (b)           a
bargain and sale deed for Owned Real Property in Oregon, and special warranty
deeds (or state law equivalent) for each other Owned Real Property
(collectively, the “Deeds”) in form and
substance satisfactory to Purchaser (acting reasonably) for conveyance by the
applicable Seller to Purchaser of such Owned Real Property;

     

    (c)           to
the extent reasonably necessary or required by the Title Company to effectuate
the conveyance of the Owned Real Property to Purchaser, a Tax certificate with
respect to each Owned Real Property obtained by the Title Company;

     

    (d)           to
the extent reasonably necessary or required by the Title Company to effectuate
the conveyance of any Owned Real Property to Purchaser, change of ownership
certificates for such Owned Real Property, as required by applicable
Law;

     

    (e)           a
non-foreign certification or affidavit from each applicable Seller, if and as
required by applicable Law, in form and substance satisfactory to Purchaser
(acting reasonably); and

     

    (f)           such
other documents and instruments as may be necessary or appropriate for the
applicable Sellers to transfer and convey the Owned Real Properties to Purchaser
in accordance with the terms of this Agreement.

     

    2.4          Purchaser’s Real Property
Transfer Documents.  Subject to the Sale Approval Order
becoming a Final Order, on or before the Closing Date, Purchaser shall deposit
into the Real Property Escrow for delivery to the applicable Sellers at Closing
the following documents and instruments, each of which shall have been duly
executed and, where appropriate, acknowledged:

     

    (a)           the
Closing Statements;

     

    (b)           an
affidavit of value for each Owned Real Property, as required by applicable Law;
and

     

    (c)           such
other documents and instruments as may be necessary or appropriate for the
applicable Sellers to transfer and convey the Owned Real Properties to Purchaser
in accordance with the terms of this Agreement.

     

    2.5          Recording of
Title.  At the Closing, the Title Company shall, and Sellers
shall cause the Title Company to, record or file, as applicable, the Special
Warranty Deeds in the office of the County Clerk or other applicable
Governmental Body for each Owned Real Property.

    

    
      
        
           

        

        
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    2.6          Title Commitments and
Surveys.  At least ten (10) days prior to the scheduled Closing
Date, ParentCo shall, at Sellers’ sole cost and expense, for each individual
Owned Real Property listed on Schedule 2.6, cause
to be delivered to Purchaser a commitment for a policy of title insurance (each
a “Title
Commitment” and collectively, the “Title Commitments”),
together with copies of all documents identified in such Title Commitment,
issued by the Title Company.  Purchaser shall also have the option of
ordering a survey (each a “Survey” and
collectively, the “Surveys”) to be
performed at each Owned Real Property listed on Schedule
2.6.  If any such Title Commitment or Survey shows any
Encumbrances on any such Owned Real Property, other than Permitted Encumbrances,
Sellers shall be obligated to cure and or remove of record such Encumbrances at
or prior to the Closing so that Purchaser shall be able to obtain a policy of
title insurance from the Title Company at the Closing insuring title to such
Owned Real Property in the condition required hereunder.  In the event
that the Title Commitment or Survey for any such Owned Real Property reveals any
Encumbrance that is not a Permitted Encumbrance, and it becomes apparent that
Sellers cannot or shall not cure or remove of record such Encumbrance at or
prior to Closing, Purchaser shall have the option to elect to consummate the
transactions contemplated hereby with a downward adjustment to the Purchase
Price in an amount necessary to cure or remove such Encumbrance at the
Closing.

     

    2.7          Title
Policies.  At the Closing, Sellers shall deliver to Purchaser
an owner’s ALTA policy (or applicable state required form) of extended title
insurance issued by the Title Company (or the unconditional commitment of the
Title Company to issue such policy) for each Owned Real Property listed on Schedule 2.6 (i.e.,
one such policy for each such Owned Real Property) effective as of the Closing
Date (collectively, the “Title Policies”),
with each Title Policy being in the amount specified on Schedule 2.7.  The
Title Policies shall insure Purchaser that fee simple interest in and to such
Owned Real Properties is vested in Purchaser, subject only to the printed terms
and provisions of such Title Policies (as such terms and provisions may be
modified by endorsements purchased by Purchaser), the Permitted Encumbrances
expressly set forth on the final commitments for issuance of the Title Policies
and any other matters approved in writing by Purchaser.  Sellers shall
pay the portion of the premium for each Title Policy that would be equal to a
standard owner’s policy of title insurance on each such Owned Real Property
covered by such Title Policy in the same face amount, and Purchaser shall pay
any additional premium for the extended coverage and for any endorsement on such
Title Policy requested by Purchaser.  Purchaser shall be solely
responsible for satisfying, at its cost, any requirement of the Title Company
for any Title Policy endorsement requested by Purchaser.

     

    2.8          Real Property Escrow
Cancellation Charges.  If the Closing does not occur because of
the termination of this Agreement by Sellers (or any of them) pursuant to Section 8.1(c) or
(e), Purchaser
shall be liable for all customary Real Property Escrow cancellation
charges.  If the Closing does not occur because of the termination of
this Agreement by Purchaser pursuant to Section 8.1(c) or
(e), ParentCo
shall be liable for all customary Real Property Escrow cancellation
charges.  If the Close of Escrow does not occur for any other reason,
ParentCo and Purchaser shall each be liable for one-half (1/2) of all customary
Real Property Escrow cancellation charges.

    
      
         

      

      
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    2.9          Closing Costs and Recording
Fees.  Upon the Closing, each of ParentCo and Purchaser agrees
to pay one-half (1/2) of all Real Property Escrow charges and recording fees,
other than with respect to the Title Policies, which shall be paid for as
described in Section
2.7.  On or
before the Closing Date, each of ParentCo and Purchaser shall deposit with the
Title Company cash in an amount sufficient to pay each such party’s share of
Title Policy premiums and other Real Property Escrow-related costs; provided, however that ParentCo
may instruct Purchaser to pay ParentCo’s share of such costs and deduct the same
amount from the Closing Payment.

     

    2.10        Apportionments for Real
Properties.  The following apportionments shall be made between
Sellers and Purchaser as of the Effective Time (the “Closing
Apportionments”) based on the latest available information, and the
amounts derived therefrom shall be (as applicable) added to or deducted from the
Closing Payment in accordance with Section
1.6:

     

    (a)           Taxes and
Assessments.  Real estate Taxes, ad valorem Taxes, personal
property Taxes, transaction privilege Taxes, and other similar Taxes related to
the ownership and/or operation of each Owned Real Property shall be prorated
between the applicable Seller or Transferred Subsidiary and Purchaser and set
forth on (i) the Closing Statement applicable to such Owned Real Property, if
owned by a Seller or (ii) for any Owned Real Property owned by a Transferred
Subsidiary or any Leased Real Property in respect of which the Real Property
Lease is included in the Assumed Contracts (each, an “Acquired Leased Real
Property”), a written statement agreed to by ParentCo and
Purchaser.  Sellers shall be responsible for all Taxes attributable to
the Owned Real Properties and Acquired Leased Real Properties through and
including the Closing Date and Purchaser shall be responsible for such Taxes
attributable to the Owned Real Properties and Acquired Leased Real Properties
beginning the first day after the Closing Date.  If any current
assessments, statements or other necessary information on any such amounts are
not available before the Closing Date, Sellers and Purchaser shall agree upon
reasonable estimates of such amounts based on prior amounts assessed against or
paid by the applicable Sellers.

     

    (b)           Utilities.  Purchaser
and Sellers agree to use their respective reasonable efforts to arrange, before
the Closing Date, for separate billing to the applicable Sellers of all charges
attributable to the period up to and including the Closing Date for electricity,
water, gas and any other utilities servicing the Owned Real Properties and
Acquired Leased Real Properties, and for separate billing to Purchaser for all
such charges attributable to the period beginning on the day after the Closing
Date.  If any such separate billing cannot be arranged by the Closing
Date, such charges shall be equitably prorated on the basis of the most recent
ascertainable invoices or statements for such services.  With respect
to any utilities in place and servicing the Owned Real Properties and Acquired
Leased Real Properties as of the Closing Date, Sellers shall endeavor to have
the respective utility providers read the meters for the utilities such that the
prorations can be made based on such final meter readings.  If such
meter readings cannot be obtained in such manner, charges for utilities shall be
prorated by good faith estimation as of the Closing Date based on the per diem
rate obtained by using the last available billing period and associated bills
for such utilities.  Once all applicable utility billings have been
delivered after the Closing Date and an accurate proration of utility charges
can be determined therefrom, the net amount payable to Sellers or Purchaser (as
applicable) after combining such prorations shall be paid concurrently with the
payment due under Section 1.11(e) after
determining the Final Price Adjustment.

    
      
         

      

      
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    (c)           Form
1099-B.  If applicable to the sale and purchase of the Owned
Real Properties as contemplated herein, the Title Company is hereby authorized
and instructed to file as the “Reporting Person”
Internal Revenue Service Form 1099-B, Proceeds from Real Estate, Broker, and
Barter Exchange Transactions, as required by § 6045(d) of the Tax
Code.

     

    ARTICLE
III

     

    REPRESENTATIONS
AND WARRANTIES OF SELLERS

     

    In order
to induce Purchaser to enter into this Agreement and consummate the transactions
contemplated hereby, Sellers hereby jointly and severally represent and warrant
to Purchaser as follows:

     

    3.1          Due Incorporation and
Authority.  Each Seller is a corporation, limited liability
company or limited partnership duly organized, validly existing and in good
standing under the laws of the state of its organization and has all necessary
corporate, limited liability company or limited partnership power and authority
to own, lease and operate its assets and to carry on the Home Business, the
Insurance Business or the Finance Business (as applicable), as it is now being
conducted.  Subject to the entry of the Sale Approval Order, (i) each
Seller has all requisite corporate, limited liability company or limited
partnership power and authority to enter into this Agreement, carry out its
obligations hereunder and consummate the transactions contemplated hereby and
(ii) the execution and delivery by such Seller of this Agreement, the
performance by such Seller of its respective obligations hereunder and the
consummation by such Seller of the transactions contemplated hereby have been
duly authorized by all requisite corporate, limited liability company or limited
partnership action on the part of such Seller.  This Agreement has
been duly executed and delivered by each Seller, and, upon entry of the Sale
Approval Order and the Sale Approval Order becoming a Final Order (assuming the
due authorization, execution and delivery hereof by Purchaser and satisfaction
of all conditions to the Closing), this Agreement shall constitute the legal,
valid and binding obligation of each Seller, enforceable against each Seller in
accordance with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting creditors
rights generally or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).

     

    3.2          No
Conflicts.  Except as a result of the Bankruptcy Case, and
subject to the entry of the Sale Approval Order and the Sale Approval Order
becoming a Final Order, the execution and delivery by Sellers of this Agreement,
the consummation of the transactions contemplated hereby, and the performance by
Sellers of this Agreement in accordance with its terms shall not:

     

    (a)           violate
the certificate of incorporation or by-laws or comparable organizational
instruments of any Seller or Transferred Subsidiary or contravene any resolution
adopted by the directors, managers, shareholders, members or partners of any
Seller or Transferred Subsidiary;

     

    (b)           to
the Knowledge of Sellers, violate any Law to which any Seller, any Transferred
Subsidiary, any part of the Business, any of the Transferred Assets, or any of
the Transferred Subsidiaries’ assets is bound or subject;

    
      
         

      

      
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    (c)           result
in the imposition or creation of any Encumbrance (other than a Permitted
Encumbrance) on any of the Transferred Assets or any of the assets of any
Transferred Subsidiary; or

     

    (d)           violate,
result in any breach of, constitute a default (or an event that, with notice or
lapse of time or both, would become a default) under, or require any consent of
any Person (including any Governmental Body) pursuant to, any Assumed Contract,
Contract referred to in Section 1.1(h),
Purchase Order included in the Transferred Assets, Transferred Permit, any
Contract to which any Transferred Subsidiary is a party or by which it is bound,
or any Permit held by a Transferred Subsidiary, except for (i) consents,
approvals or authorizations of, or declarations or filings with, the Bankruptcy
Court, (ii) required approvals from insurance regulatory authorities, and (iii)
required approvals from finance regulatory authorities.

     

    3.3          Organizational Documents;
Meeting Minutes.  Sellers have delivered to Purchaser prior to
the date hereof true, accurate and complete copies of the certificate of
incorporation and bylaws, or comparable organizational instruments, of Sellers
and the Transferred Subsidiaries as in effect on the date
hereof.  Sellers have made available to Purchaser prior to the date
hereof copies of all minutes of meetings of directors, shareholders, members,
managers and partners (as applicable) of the Transferred Subsidiaries, including
any actions undertaken or approved by written consent in lieu of any meeting of
such Persons.

     

    3.4          Capitalization of
Transferred Subsidiaries.

     

    (a)           Schedule 3.4(a) sets
forth for each Transferred Subsidiary (i) its authorized capital, (ii) the
number of its shares of capital stock, limited liability company interests,
general partner interests and/or limited partner interests, as applicable, that
are issued and outstanding, and (iii) the record and beneficial owner(s) of such
outstanding shares of capital stock, limited liability company interests,
general partner interests and/or limited partner interests.  All of
such issued and outstanding shares of capital stock, limited liability company
interests, general partner interests and limited partner interests (i) have been
issued in compliance with all applicable Laws and the organizational instruments
of the Transferred Subsidiaries, (ii) are fully-paid and non-assessable,
(iii) are of amounts equal to or exceeding the minimum amounts required under
applicable Laws, and (iv) except as disclosed on Schedule 3.4(a), are
held by their record owners free and clear of any Encumbrance, other than
Permitted Encumbrances.

     

    (b)           There
are no options, rights, warrants, notes, calls or other outstanding securities
convertible into or exercisable or exchangeable for shares of capital stock,
limited liability company interests, general partner interests, limited partner
interests or any other equity interest in any Transferred Subsidiary, nor any
outstanding subscriptions, options, rights, warrants, calls, rights of first
refusal or offer, or other agreements or commitments (contingent or otherwise)
obligating any Transferred Subsidiary to issue or transfer from treasury any
shares of its capital stock, limited liability company interests, general
partner interests, limited partner interests or other equity interests, or to
issue, grant or sell other securities convertible into or exchangeable for
shares of capital stock, limited liability company interests, general partner
interests, limited partner interests or any other equity
interests.  There are no subscriptions, options, warrants, calls,
rights, commitments or agreements of any character to which any Seller or
Transferred Subsidiary is a party or by which it is bound obligating or
permitting any Transferred Subsidiary to purchase or otherwise acquire the
securities of any other Person.

    
      
         

      

      
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    (c)           Except
for Purchaser’s rights as provided in this Agreement, and except for the Virgo
Security Interest and the security interest granted under the Textron Facility,
no Person has any right (including any preemptive right, right of first offer or
right of first refusal) to acquire any interest in any of the outstanding shares
of capital stock, limited liability company interests, general partner interests
or limited partner interests in any Transferred Subsidiary.  The
transactions contemplated hereby shall vest in Purchaser at the Closing all
legal and beneficial right, title and interest in and to the Standard Casualty
Shares, the Standard Insurance Shares and the CountryPlace Shares free and clear
of any Encumbrance other than the Virgo Security Interest, and other than any
security interest granted or agreed to in writing by Purchaser or an Affiliate
thereof.

     

    (d)           All
certificates or other documents evidencing ownership of the CountryPlace Shares
and the other stock or equity interests in the other Finance Subsidiaries have
been delivered by ParentCo to, and to the Knowledge of Sellers, are in the
possession of, Virgo Service Company LLC for purposes of perfection of the Virgo
Security Interest in the CountryPlace Shares and such other stock and equity
interests.

     

    3.5          Transferred Subsidiary
Financial Statements.  To the
extent prepared and maintained by ParentCo or any of the Transferred
Subsidiaries (separate from ParentCo’s consolidated financial statements),
Sellers have provided to Purchaser the following financial statements
with respect to the Transferred Subsidiaries: (i) annual statements filed with
insurance regulatory authorities for the fiscal years ended March 31, 2008, 2009
and 2010, annual reports filed with finance regulatory authorities for the
fiscal years ended March 31, 2008, 2009 and 2010, and audited balance sheets and
related statements of operations, stockholders' equity, and cash flows as of and
for the fiscal years ended March 31, 2008, 2009 and 2010; (ii) unaudited balance
sheets and related statements of operations, stockholders’ equity, and cash flow
as of and for the three (3) and six (6)-month periods ended September 30, 2010,
and (iii) unaudited balance sheets and related statements of operations,
stockholders’ equity, and cash flow as of and for the month ended October 31,
2010 (the “Most Recent
Financial Statements”).  All of such financial statements
(including the notes thereto) have been prepared in accordance with statutory
accounting requirements or GAAP, as applicable, throughout the periods covered
thereby and present fairly, in all material respects, the respective financial
positions of the Transferred Subsidiaries as of such dates and the respective
results of operations of the Transferred Subsidiaries for such periods; provided, however, that the
financial statements referred to in clauses (ii) and (iii) above are subject to
normal year-end adjustments, required schedules and lack footnotes and other
presentation items required by statutory accounting requirements or GAAP, as
applicable.

     

    3.6          Transferred Subsidiary
Undisclosed Liabilities; Guaranties.  No Transferred Subsidiary
has any Liabilities other than those that (i) are reflected or reserved against
in the Most Recent Financial Statements or otherwise set forth in this Agreement
(including any Schedule hereto); (ii) have been incurred in the Ordinary Course
of Business; (iii) are permitted or contemplated by this Agreement; or
(iv) shall have been discharged or paid off as of the date immediately
preceding the Closing Date.  Except as disclosed on Schedule 3.6, no
Transferred Subsidiary is a guarantor or otherwise responsible, whether as a
co-obligor or contingently, for any Liability (including Indebtedness) of any
other Person (including any Seller or other Transferred
Subsidiary).

    
      
         

      

      
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    3.7          Accounts
Receivable.  All Accounts Receivable of Sellers and the
Transferred Subsidiaries are valid receivables arising in the Ordinary Course of
Business.  Except as set forth on Schedule 3.7, there
is no contest, claim, defense or right of setoff with respect to such Accounts
Receivable with any account debtor of an account or note receivable relating to
the amount or validity of such account or note receivable, other than with
respect to returns in the Ordinary Course of Business of Sellers or
cancellations of insurance policies issued or sold by any of the Insurance
Subsidiaries.

     

    3.8          Compliance with
Laws.

     

    (a)           The
Business is and has been within the past five (5) years conducted in all
material respects in compliance with all applicable Laws.  Except for
the Bankruptcy Case and other matters contained in the docket related thereto,
within the past five (5) years, no Claim has been made in writing by any
Governmental Body to any Seller or Transferred Subsidiary to the effect that the
Business, any Transferred Asset or any Transferred Subsidiary has failed to
comply in any material respect with any Law, except as has been resolved to the
satisfaction of such Governmental Body.

     

    (b)           Sellers
have made available for inspection by Purchaser (i) true, complete and correct
copies of all annual reports, other periodic filings, material examination
reports, correspondence, reports of investigations, inquiries and other similar
materials relating to the Transferred Subsidiaries dating back to January 1,
2005 received by or submitted to any Governmental Body, including any insurance
or finance regulatory authority.  Except as described on Schedule 3.8, there
are no examinations, audits, formal inquiries or, to the Knowledge of Sellers,
investigations by any state insurance department examiner or any federal or
state financial services regulatory examiner in progress with respect to any
Transferred Subsidiary, nor, to the Knowledge of Sellers, is any such
examination, audit, formal inquiry or investigation pending or scheduled, except
as may result from Sellers’ commencement of the Bankruptcy Case.

     

    (c)           Except
as described on Schedule 3.8, there
are no Contracts (including settlement agreements), memoranda of understanding,
commitment letters, commissioner’s orders, consent orders or similar
undertakings in effect between any Insurance Subsidiary and any Governmental
Body, other than any such agreement, understandings, commitments, undertakings
or orders of general application to insurers engaged in the property and
casualty insurance business, that (i) specifically limit in any material
respect the ability of any Insurance Subsidiary to issue insurance policies
under its existing Permits, (ii) impose any specific requirements on any
Insurance Subsidiary in respect of risk-based capital requirements that
materially increase or modify the risk-based capital requirements imposed under
applicable insurance Laws, or (iii) specifically relate to the ability of
any Insurance Subsidiary to pay dividends.

    
      
         

      

      
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    (d)           To
the Knowledge of Sellers, since January 1, 2005, each agent, broker or other
representative of any Insurance Subsidiary that wrote or sold an insurance
product for any Insurance Subsidiary (any of which, an “Insurance
Representative”) was at the time such Insurance Representative wrote or
sold such insurance product duly licensed and appointed as required by
applicable insurance Law, in the particular jurisdiction in which such Insurance
Representative wrote or sold insurance products.  To the Knowledge of
Sellers, no Insurance Representative has been since January 1, 2005, or is
currently, in violation (or with or without notice or lapse of time or both,
would be in violation) of any insurance Law applicable to the writing, sale or
production of insurance products for any Insurance Subsidiary, except where such
violations have not had and would not reasonably be expected to have a Material
Adverse Effect.  As of the date of this Agreement, no Insurance
Representative individually accounting for five percent (5%) or more of the
total gross premiums of the insurance business of the Insurance Subsidiaries for
their last completed fiscal year has indicated in writing to any Insurance
Subsidiary that such Insurance Representative shall be unable or unwilling to
continue its relationship as a Producer with such Insurance Subsidiary within
twelve (12) months after the date hereof.

     

    3.9          Permits.

     

    (a)           Schedule 3.9(a) sets
forth a list of all of Sellers’ and the Transferred Subsidiaries’ material
licenses, franchises, permits, variances, exemptions, orders, approvals and
authorizations of Governmental Bodies, including any applications therefor, that
are used for the conduct of the Business (or any part thereof) as currently
conducted (collectively, the “Permits”).  Each
Seller and Transferred Subsidiary is in compliance, in all material respects,
with the terms of all material Permits held by it, and all such material Permits
are valid and in full force and effect.  For any Permit that would
expire within ninety (90) days of the Closing Date, a renewal application has
been prepared and filed with the applicable Governmental Body.

     

    (b)           No
Transferred Subsidiary has transacted business in any jurisdiction requiring it
to have a Permit to transact such business while it did not possess such Permit,
except where the failure to have such Permit would not interfere with the
ability of such Transferred Subsidiary to conduct its business as presently
conducted.  No Seller or Transferred Subsidiary is the subject of any
pending or, to the Knowledge of Sellers, threatened action or proceeding for or
contemplating the suspension, termination, modification, limitation,
cancellation, revocation, nonrenewal or impairment of any of its
Permits.  Except for the filing of the Bankruptcy Case, Sellers have
no Knowledge of any existing fact or circumstance that, individually or in the
aggregate would be reasonably likely to result in the suspension, termination,
modification, limitation, cancellation, revocation, nonrenewal or impairment of
any Permit held by any of the Transferred Subsidiaries, and provided that all
consents described on Schedule 3.9(b) have
been obtained, no Permit held by any Transferred Subsidiary shall be suspended,
terminated, modified, limited, cancelled, revoked, not renewed or impaired or
become suspended, terminated, modified, limited, cancelled, revoked, not renewed
or impaired, in whole or in part, as a result of the execution and delivery of
this Agreement, the commencement of the Bankruptcy Case or the consummation of
the transactions contemplated hereby.

    
      
         

      

      
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    3.10        Contracts.

     

    (a)          Schedule 3.10(a)
contains an accurate and complete list, and Sellers have delivered or made
available to Purchaser accurate and complete copies, of the following
outstanding Contracts (including all amendments and supplements thereto) to
which any Seller or Transferred Subsidiary is a party or by which any Seller or
Transferred Subsidiary is bound:

     

    (i)           each
Contract for the sale of goods or performance of services by any Seller or
Transferred Subsidiary having (or expected to have) an actual or anticipated
value to such Seller of at least $25,000 in any twelve (12)-month period, but
excluding any Contract for the sale of individual manufactured or modular homes
to non-commercial and non-Governmental Body end-use purchasers;

     

    (ii)          each
Contract for the purchase of goods or services by any Seller or Transferred
Subsidiary from any vendor or supplier of the Business having (or expected to
have) an actual or anticipated cost to Sellers or the Transferred Subsidiaries
(or any of them) of at least $25,000 in any twelve (12)-month
period;

     

    (iii)         each
real property lease, sublease, license or other agreement pursuant to which any
Seller or Transferred Subsidiary grants to any other Person any right of
possession or use of, or access to, any Real Property;

     

    (iv)         each
equipment lease, lease-purchase agreement, installment sale contract or other
similar contract or agreement relating to any Tangible Personal Property or any
tangible personal property used by any Transferred Subsidiary;

     

    (v)          each
Contract relating to capital expenditures on any Real Property or with respect
to any other Transferred Asset or any asset of any Transferred Subsidiary under
which any Seller or Transferred Subsidiary has warranty, service or other
similar rights;

     

    (vi)         each
Hedging Contract; and

     

    (vii)        each
management, consulting, advertising, marketing, promotion, technical services,
advisory or other Contract relating to the design, marketing, promotion,
management or operation of the Business, or any part thereof, having (or
expected to have) an actual or anticipated cost to any Seller or Transferred
Subsidiary of at least $25,000 in any twelve (12)-month period.

     

    (b)          Schedule 3.10(b)
contains an accurate and complete list, and Sellers have delivered or made
available to Purchaser accurate and complete copies, of the following
outstanding Contracts (including all amendments and supplements thereto) to
which any Transferred Subsidiary is a party or by which any Transferred
Subsidiary is bound:

     

    (i)           each
Contract restricting in any manner any Transferred Subsidiary’s (i)  right
to compete with any other Person, (ii) right to sell or purchase from any other
Person or otherwise limiting the right of any Transferred Subsidiary to engage
in any line of business in any jurisdiction, (iii) right to solicit any
business, customer, or employee of another Person, other than non-disclosure or
confidentiality agreements entered into in the ordinary course of business or
(iv) restricting the right of any other Person to compete with any
Transferred Subsidiary or to solicit any business, customer or employee of any
Transferred Subsidiary, other than non-disclosure or confidentiality agreements
entered into in the ordinary course of business.

    
      
         

      

      
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    (ii)          each
Contract containing any support, maintenance, service or other material
obligation on the part of any Transferred Subsidiary involving annual revenues
or cost to such Transferred Subsidiary in excess of $25,000 in any twelve
(12)-month period;

     

    (iii)         each
loan or credit agreement, pledge agreement, promissory note, security agreement,
mortgage, debenture, indenture, letter of credit, line of credit whether
revolving or otherwise, and guaranty;

     

    (iv)         each
Contract containing guaranty, surety or indemnification obligations of any
Transferred Subsidiary, including those related to any undertaking of financial
support or contractual performance extended by any Transferred Subsidiary on
behalf of or in support of any other Person (including any
Affiliate);

     

    (v)          each
Contract providing for the indemnification of any past or present employee,
director, consultant or agent of any Transferred Subsidiary;

     

    (vi)         each
Contract with any employee or director of any Transferred Subsidiary, other than
offer letters specifying that employment is on an “at will” basis or otherwise
at such Transferred Subsidiary’s discretion;

     

    (vii)        each
partnership agreement, joint venture agreement, co-development agreement or
other similar agreement involving a sharing of profits, losses, costs (excluding
recovery of costs in the ordinary course of business) or Liabilities with any
other Person;

     

    (viii)       each
Contract to which any Governmental Body is a party or under which any
Governmental Body has any rights or obligations;

     

    (ix)          each
Contract providing for the servicing of loans, including any such Contract with
the Federal National Mortgage Association (i.e., Fannie Mae), the Government
National Mortgage Association (i.e., Ginnie Mae) or any other similar government
sponsored entity;

     

    (x)           each
Contract providing for reinsurance either by any Insurance Subsidiary or by any
third party with respect to insurance policies issued or sold by any Insurance
Subsidiary or for which any Insurance Subsidiary is liable for the payment of
benefits (any of which, a “Reinsurance
Contract”);

     

    (xi)          each
brokerage, agency, managing general agent or other similar Contract for the
marketing and sale of any Transferred Subsidiary’s products or
services;

     

    (xii)         each
other Contract that involves a payment to or from any Transferred Subsidiary in
excess of $50,000 on its face in any individual case.

    
      
         

      

      
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    (c)           Each
Assumed Contract is valid and binding on, and enforceable against, the
applicable Seller and, to the Knowledge of Sellers, the counterparties thereto,
and is in full force and effect, other than exceptions that shall be remedied or
otherwise accounted for pursuant to the Sale Approval Order.  Each
Contract to which any Transferred Subsidiary is a party or by which it is bound
is valid and binding on, and enforceable against, the applicable Transferred
Subsidiary and, to the Knowledge of Sellers, the counterparties thereto, and is
in full force and effect.  No Seller that is party to or bound by an
Assumed Contract and no Transferred Subsidiary that is a party to any Contract
is in material breach of, or default under, any such Assumed Contract or other
Contract and, to the Knowledge of Sellers, there is no valid basis for any claim
of material breach or default by any Seller under any such Assumed Contract or
by any Transferred Subsidiary under any other Contract, except in the case of
any Assumed Contract to the extent that any such breach, default or claim of
breach or default is cured, remedied or otherwise accounted for pursuant to the
Sale Approval Order.

     

    3.11        Insurance
Business.

     

    (a)           Since
January 1, 2005, and except for benefits relating to claims incurred but not yet
reported and reported claims being processed by the Insurance Subsidiaries as of
the date hereof, all benefits due and payable under the insurance Contracts
issued by any of the Insurance Subsidiaries have been paid in accordance, in all
material respects, with the terms of the insurance Contracts under which they
arose, except for such benefits for which an Insurance Subsidiary has reasonably
determined, in the Ordinary Course of Business, that there is or was a
reasonable basis to deny or contest payment.

     

    (b)           All
policies, binders, slips, certificates and Contracts of insurance, in effect as
of the date hereof (including all applications, supplements, endorsements,
riders and ancillary Contracts in connection therewith) that have been issued by
any Insurance Subsidiary or for which any Insurance Subsidiary is liable for the
payment of benefits, and any and all marketing materials, agent Contracts,
broker Contracts or managing general agent Contracts are, to the extent required
under applicable insurance Law, on forms approved by applicable
insurance-related Governmental Bodies or which have been filed and not objected
to by such insurance-related Governmental Bodies within the period provided for
objection, and such forms comply in all material respects with the insurance
Laws applicable thereto and, as to premium rates established by any Insurance
Subsidiary which are required to be filed with or approved by insurance-related
Governmental Bodies, such rates have been so filed or approved, the premiums
charged conform thereto in all respects, and such premiums comply in all
material respects with the insurance Laws applicable thereto.  Sellers
have provided or made available to Purchaser copies of all specimens (including
specimen schedule pages) of all insurance policies and Contracts issued by any
Insurance Subsidiary since January 1, 2005.

     

    (c)           The
reserves carried by the Insurance Subsidiaries are in compliance in all material
respects with the requirements for reserves established by the applicable
Governmental Bodies in the jurisdictions in which the Insurance Subsidiaries
conduct business, have been determined in all material respects in accordance
with GAAP and statutory accounting standards (to the extent applicable) as in
effect at applicable times, consistently applied, and have been computed on the
basis of methodologies consistent in all material respects with those used in
prior periods.

    
      
         

      

      
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    (d)           Since
January 1, 2005, none of the Insurance Subsidiaries has violated in any material
respect its underwriting guidelines in effect from time to time in connection
with its issuance of any insurance Contracts in any way that would adversely
affect any Insurance Subsidiary’s rights under any Reinsurance
Contract.

     

    (e)           Except
as set forth on Schedule 3.11(e),
there are no material accrued and unpaid or unreported Liabilities with respect
to claims or assessments made against any Insurance Subsidiary by any insurance
guaranty association or similar organization in connection with such
association’s or organization’s insurance guaranty fund or similar
program.

     

    (f) 
          There is no Contract
or other arrangement in effect between any Insurance Subsidiary and any third
party reinsurer under a Reinsurance Contract that would under any circumstances
reduce, limit, mitigate or otherwise affect any actual or potential loss to any
party under any such Reinsurance Contract, other than as may be expressly
provided in such Reinsurance Contract.  Neither Parent nor any
Insurance Subsidiary has received any written notice to the effect that
(i) the financial condition of any third party to any Reinsurance Contract
is materially impaired with the result that a default thereunder may reasonably
be anticipated or (ii) there is no dispute with respect to any material amount
recoverable or payable by any Insurance Subsidiary pursuant to any Reinsurance
Contract.

     

    3.12        Real Property.

     

    (a)           Schedule 3.12(a)
lists the street address (and references the legal description in the Title
Commitments) of each parcel of real property owned by any Seller or Transferred
Subsidiary (each, an “Owned Real Property”
and collectively, the “Owned Real
Properties”), but excluding any REO real property purchased by any Seller
or Transferred Subsidiary from the Department of Housing and Urban Development
or any lender and held for resale.  Subject to the entry of the Sale
Approval Order and the Sale Approval Order becoming a Final Order, at the
Closing, the applicable Sellers shall have fee simple title to each Owned Real
Property, which shall be transferred to Purchaser at the Closing free and clear
of all Encumbrances, other than Permitted Encumbrances.  The Owned
Real Property owned by any Transferred Subsidiary is owned by such Transferred
Subsidiary in fee simple, free and clear of any Encumbrance, other than
Permitted Encumbrances.

     

    (b)           Schedule 3.12(b)
lists (i) the street address of each parcel of real property or portion thereof
leased (as lessee) by any Seller or any Transferred Subsidiary (each, a “Leased Real Property”
and collectively, the “Leased Real
Properties”, and together with the Owned Real Properties, the “Real Properties”),
and (ii) a description (including document name, date, parties and any
amendments) of each lease (each a “Real Property Lease”)
in effect with respect to each Leased Real Property.

     

    (c)           Sellers
have delivered to Purchaser complete and accurate copies of all Real Property
Leases, including all addenda, amendments, extensions and supplements thereto
and assignments thereof.  No Seller or Transferred Subsidiary has
entered into any written Contract, arrangement or understanding with any third
party landlord that in any way alters or affects the express terms and
conditions of any Real Property Lease.  Each Real Property Lease is
valid and binding on the applicable Seller or Transferred Subsidiary and, to the
Knowledge of Sellers, the counterparties thereto, and is in full force and
effect.  No Seller or Transferred Subsidiary is in default under any
Real Property Lease, other than a default that shall be remedied or otherwise
accounted for pursuant to the Sale Approval Order, and to the Knowledge of
Sellers, no other counterparty to any Real Property Lease is in default
thereof.

    
      
         

      

      
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    (d)           Sellers’
use of the Real Properties for the various purposes for which they are presently
being used are permitted as of right under all applicable Laws (including zoning
laws), except where any non-permitted use by any Seller would not interfere with
such Seller’s conduct of its business on such Real Property as presently
conducted.

     

    (e)           To
the Knowledge of Sellers, (i) all of the Real Properties, including buildings,
fixtures and other improvements thereon, are in good operating condition and
repair, ordinary wear and tear excepted, and no Owned Real Property is in need
of repair other than as part of routine maintenance in the ordinary course of
business, and (ii) all buildings, structures, improvements and fixtures on each
of the Real Properties are in compliance in all material respects with all
applicable Laws, including Occupational Safety and Health Laws.

     

    (f)           Except
as expressly provided in any Real Property Lease, in any public record or as set
forth on Schedule
3.12(f), no Seller or Transferred Subsidiary has (i) leased, subleased,
licensed or otherwise granted to any Person the current or future right to use
or occupy any of the Real Properties or any portion thereof, (ii) granted to any
Person any option, right of first refusal, offer, or other Contract or right to
purchase, acquire, lease, sublease, assign or dispose of any interest in any of
the Real Properties, or (iii) collaterally assigned or granted any other
Encumbrance in or over any Real Property Lease or any interest
therein.

     

    (g)           The
Real Properties constitute all of the real property currently used by Seller and
the Transferred Subsidiaries in the conduct of the Business.

     

    (h)           There
does not exist any actual or, to the Knowledge of Sellers, overtly threatened or
contemplated condemnation or eminent domain proceeding that affects or could be
reasonably expected to affect any Real Property or any part thereof, and no
Seller or Transferred Subsidiary has received any written notice of the
intention of any Governmental Body to undertake any such proceeding with respect
to any of the Real Properties, or any part thereof.

     

    (i)           Except
as may arise as a result of the Bankruptcy Case, no Transferred Subsidiary has
any ongoing dispute or disagreement with any landlord in respect of any
obligation of such Transferred Subsidiary or such landlord under the terms of
any Real Property Lease or under applicable Law with respect to any Leased Real
Property.

     

    (j)           Except
for the Real Properties of which the Transferred Subsidiaries are identified as
owners or tenants on Schedule 3.12(a), no
Transferred Subsidiary has owned, leased (as tenant), subleased (as subtenant)
or occupied any other real property within the past five (5)
years.

    
      
         

      

      
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    3.13        Environmental
Matters.  Except as disclosed on Schedule 3.13:

     

    (a)           Sellers
and the Transferred Subsidiaries are currently, and since
January 1, 2005 have been, in compliance in all material respects with
all applicable Environmental Laws applicable to the Business, the Transferred
Assets and the assets of the Transferred Subsidiaries.  There are no
Claims pursuant to any Environmental Law pending or, to the Knowledge of
Sellers, threatened in writing against any Seller or Transferred Subsidiary in
connection with the conduct or operation of the Business or the ownership or use
of any of the Transferred Assets or any of the assets of the Transferred
Subsidiaries.  Within the past five (5) years, no Seller or
Transferred Subsidiary has received any actual or threatened order, notice or
other written communication from any Governmental Body or other Person of any
actual or potential violation or failure of any Seller or Transferred Subsidiary
to comply with any Environmental Law or of any actual or threatened obligation
on the part of any Seller or Transferred Subsidiary to undertake or bear the
cost of any Environmental, Health and Safety Liabilities with respect to any of
the Real Properties, any other Transferred Asset or any asset of any of the
Transferred Subsidiaries, except has been adequately resolved to the
satisfaction of such Governmental Body or other Person.

     

    (b)           No
Seller or Transferred Subsidiary is currently required to undertake any
corrective or remedial obligation under any Environmental Law with respect to
the Business, any of the Real Properties, any other Transferred Asset or any
asset of any of the Transferred Subsidiaries.

     

    (c)           Sellers
have made available to Purchaser all Phase I and Phase II, if any, environmental
reports, other engineering reports and any other material documents in Sellers’
possession relating to any environmental or health or safety matters, relating
to the Real Properties, any of the other Transferred Assets or any of the assets
of the Transferred Subsidiaries.  Except to the extent disclosed in
such environmental and engineering reports, to the Knowledge of Sellers, there
are no Hazardous Materials present on or in the Environment at any of the Real
Properties, including any Hazardous Materials contained in barrels, aboveground
or underground storage tanks, landfills, land deposits, dumps, equipment
(whether movable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps, or any other part of any of the
Real Properties, or incorporated into any structure therein or thereon, except
in material compliance with all applicable Environmental Laws.

     

    (d)           No
Seller or Transferred Subsidiary has conducted or knowingly permitted any
Hazardous Activity on or with respect to any of the Real
Properties.

     

    3.14        Intellectual
Property.

     

    (a)           Schedule 3.14(a)
contains a complete and accurate list of the following items of intellectual
property of each Seller and Transferred Subsidiary:  (i) all Patents;
(ii) all Marks; (iii) all registered Copyrights; and (iv) all licenses and
sublicenses held by any Seller or Transferred Subsidiary as licensee pertaining
to Computer Software (excluding mass produced shrink wrap license agreements) or
other Intellectual Property of any other Person, including in the case of such
Patents, Marks and Registered Copyrights, details of registration and/or
application filings with the United States Patent and Trademark Office or
similar Governmental Bodies in other jurisdictions.  No Seller or
Transferred Subsidiary owns any proprietary Computer Software.

    
      
         

      

      
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    (b)           Schedule 3.14(b)
contains a complete and accurate list of all licenses, sublicenses or other
arrangements (written or oral, formal or informal) pursuant to which any Seller
or Transferred Subsidiary is currently granting any right of use of any Computer
Software or other Intellectual Property to any Person, including any other
Seller or Transferred Subsidiary, including in the case of any arrangement that
is not documented under a written agreement, the specific terms of such
arrangement.

     

    (c)           Except
as disclosed on Schedule 3.14(c), to
the Knowledge of Sellers, (i) no item of Intellectual Property used by any
Seller or Transferred Subsidiary is currently being infringed or overtly
challenged or threatened in any way, (ii) none of the products or services sold
or trade secrets used by any Seller or Transferred Subsidiary infringes or has
been alleged in any written notice to any Seller or Transferred Subsidiary to
infringe any intellectual property right of any other Person, (iii) no Mark
included in the Intellectual Property used by any Seller or Transferred
Subsidiary has been or is now involved in any opposition, invalidation or
cancellation Claim, and no such action is threatened with respect to any such
Mark; and (iv) there is no potentially interfering trademark or trademark
application of any other Person in use or pending.

     

    (d)           Each
license, sublicense or other arrangement referred to in Sections 3.14(a) and
(b) is valid
and binding on, and enforceable against, the applicable Seller or Transferred
Subsidiary and, to the Knowledge of Sellers, the counterparties thereto, and is
in full force and effect.  Except as disclosed on Schedule 3.14(d), no
Seller or Transferred Subsidiary is in default of its obligations under any
license, sublicense or other arrangement referred to in Section 3.14(a) or
(b), except
where such default is cured, remedied or otherwise accounted for pursuant to the
Sale Approval Order.

     

    3.15        Litigation and Other
Claims.  Except for the Bankruptcy Case and other matters on
the docket related thereto (including information included in Sellers’ Schedules
of Assets and Liabilities and Statements of Financial Affairs filed with the
Bankruptcy Court), and except as otherwise disclosed on Schedule 3.15, (i)
there are no material Claims (including with respect to product liability
Claims) pending or, to the Knowledge of Sellers, threatened against any Seller
or Transferred Subsidiary with respect to the Business (or any part thereof),
any of the Real Properties, any of the other Transferred Assets or any of the
Assumed Liabilities, and (ii) there are no Claims pending or, to the Knowledge
of Sellers, threatened by or against any Seller or Transferred Subsidiary that
challenge the validity of this Agreement or any of the transactions contemplated
hereby or that, either individually or in the aggregate, would reasonably be
expected to prevent or delay the consummation by Sellers of the transactions
contemplated by this Agreement.

     

    3.16        Condition of Tangible
Personal Property.  The Tangible Personal Property and the
machinery, equipment, and other tangible assets owned or leased by the
Transferred Subsidiaries and necessary to conduct the Business as it is being
conducted on the date hereof are in good operating condition and repair,
ordinary wear and tear excepted.

    
      
         

      

      
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    3.17        Title to Assets;
Possession.  Upon (i) the entry of the Sale Approval Order and
the Sale Approval Order becoming a Final Order, and (ii) the receipt by
Purchaser of all required approvals from insurance-related Governmental Bodies
and finance-related Governmental Bodies applicable to the Transferred
Subsidiaries, at the Closing, Sellers shall have good and marketable title to
the Transferred Assets, which shall be transferred to Purchaser free and clear
of all Encumbrances, other than Permitted Encumbrances.  The
Transferred Subsidiaries now have, and as of the time of Closing shall have,
good and marketable title to all of their assets, free and clear of all
Encumbrances, other than Permitted Encumbrances.  Except for equipment
leased (as lessee) by any Seller or Transferred Subsidiary under a Contract
disclosed in this Agreement, no Seller or Transferred Subsidiary is in
possession of any equipment or other tangible asset that is owned by another
Person.  Except as disclosed on Schedule 3.17, no
asset of any Seller or Transferred Subsidiary having a value of more than
$25,000 is in the possession or under the control of any other
Person.

     

    3.18        Sufficiency of
Assets.  Except for the
Excluded Assets, the Transferred Assets constitute all of the assets, tangible
and intangible, of any nature whatsoever, used by Seller to operate the Home
Business in the manner presently operated by Sellers.

     

    3.19        Inventory.  The
Inventory substantially consists of, and as of the close of business on the day
immediately preceding the Closing Date the Inventory shall substantially consist
of, items which are, subject to inventory reserves set forth in Sellers’ (or
their Affiliate’s consolidated) financial statements, of a quality and quantity
usable and salable in the Ordinary Course of Business. 

     

    3.20        Employees.

     

    (a)           Sellers
have provided to Purchaser a detailed list of all of their and the Transferred
Subsidiaries’ employees, segregated by each Seller and Transferred Subsidiary,
including the following information for each such employee:  (i) name;
(ii) part-time or full-time status; (iii) title and/or job description; (iv)
employment commencement date; (v) annual base salary or hourly wage; (vi)
available bonus or other contingent compensation; (vii) accrued and unused
vacation days; (viii) accrued and unused sick days; and (ix) if on leave, the
status of such leave (including reason for leave and expected return
date).

     

    (b)           Except
as set forth on Schedule 3.20(b),
since January 1, 2008, with respect to the employees of Seller and the
Transferred Subsidiaries, there has not been, there is not presently pending or
existing, and, to the Knowledge of Sellers, there is not threatened in writing
any material charge, grievance proceeding or other claim against or affecting
any Seller (or any director, officer, manager or employee thereof) relating to
the actual or alleged violation of any applicable Law pertaining to labor
relations or employment matters, including any charge or complaint filed by an
employee or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission or any comparable Governmental Body.

     

    (c)           To
the Knowledge of Sellers, all employees of Seller and the Transferred
Subsidiaries are legally qualified to work in the United States by virtue of
being United States citizens, documented resident aliens (i.e., “green card”
holders) or holders of validly issued employment visas or other applicable
Permits.  Except as set forth on Schedule 3.20(c), all
employees of the Transferred Subsidiaries are employed on an “at-will” (or
equivalent) basis such that their employment may be terminated at any time and
for any reason (including no reason) without notice or compensation paid in lieu
thereof.

    
      
         

      

      
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    (d)           Schedule 3.20(d) sets
forth, on a Person-by-Person basis, all severance compensation and benefits,
retention bonus and similar payment obligations of any Transferred Subsidiary to
any of its directors, employees, managers or other equivalent Persons whether
under written Contract or otherwise.

     

    (e)           All
salaries, wages, commissions and other compensation and benefits payable to the
employees of each Transferred Subsidiary have been accrued and paid by the
applicable Transferred Subsidiary when due for all periods through the date
hereof, and shall have been accrued and paid by the applicable Transferred
Subsidiary when due for all periods through the Closing Date, except for stub
period payroll obligations resulting from the Closing Date occurring between
normal paydays, which payroll obligations are or shall have been as of the
Closing Date properly accounted for in the financial records of the Transferred
Subsidiaries.

     

    (f)
           No Seller or
Transferred Subsidiary has been, nor is it now, a party to any collective
bargaining agreement or other labor contract.  Since January 1, 2008,
there has not been, there is not presently pending or existing, and to the
Knowledge of Sellers, there is not threatened, any strike, slowdown, picketing,
work stoppage or employee grievance process involving any Seller or Transferred
Subsidiary.  To the Knowledge of Sellers, there is no organizational
activity or other labor dispute against or affecting any Seller or Transferred
Subsidiary, and no application or petition for an election of or for
certification of a collective bargaining agent is pending.  There is
not currently in effect any lock-out, relating to a labor dispute, by any Seller
or Transferred Subsidiary of any employee (or group thereof), and no such action
is contemplated by any Seller or Transferred Subsidiary.

     

    3.21        Employee
Benefits.

     

    (a) 
        Schedule
3.21(a) lists
each Employee Benefit Plan that any Transferred Subsidiary maintains, to which
it contributes, in which it participates or with respect to which it has any
Liability.  No
Transferred Subsidiary nor any ERISA Affiliate has any commitment to establish
or amend any new or existing Employee Benefit Plan or similar agreement for the
benefit of employees of any Transferred Subsidiary or any ERISA Affiliate except
as otherwise required by applicable Law or to conform with any such Employee
Benefit Plan or similar agreement to any applicable Law.  No
Transferred Subsidiary nor any
ERISA Affiliate has ever maintained, sponsored, participated in, or contributed
to any Employee Pension Benefit Plan that is a “defined benefit plan” as defined
in ERISA §3(35).

     

    (b)           Each
Employee Benefit Plan of any Transferred Subsidiary (and each related trust,
insurance contract, or fund) now and always has been maintained, funded and
administered in accordance with the terms of such Employee Benefit Plan and
complies in form and in operation in all material respects with the applicable
requirements of ERISA and the Tax Code.  There are no pending or, to
the Knowledge of Sellers, threatened audits, investigations or claims involving
any Employee Benefit Plan by any Governmental Body or other Person, other than
routine claims for benefits.

     

    (c)           All
premiums or other payments that are due have been timely paid with respect to
each Employee Benefit Plan of any Transferred Subsidiary that is an Employee
Welfare Benefit Plan.

    
      
         

      

      
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    (d)           Each
Employee Benefit Plan of any Transferred Subsidiary that is intended to meet the
requirements of a ‘‘qualified plan’’ under Tax Code §401(a) and each trust
intended to meet the qualification requirements under Tax Code §501(a) has
timely received a determination letter (or opinion letter in the case of a
prototype plan) from the IRS to the effect that it meets the requirements of Tax
Code §401(a), and no fact exists, including any amendment or failure to amend
any Employee Benefit Plan, that could reasonably be expected to cause the IRS to
revoke such favorable determination letter (or opinion letter).

     

    (e)           With
respect to each Employee Benefit Plan of any Transferred Subsidiary, such
Transferred Subsidiary has made available to Purchaser (i) a copy of each
Employee Benefit Plan (including all amendments thereto), (ii) a copy of
the annual report and actuarial report, if required under ERISA or the Tax Code,
with respect to each Employee Benefit Plan for the last two (2) plan years
ending prior to the date hereof, (iii) if the Employee Benefit Plan is funded
through a trust or any third-party funding vehicle, a copy of the trust or other
funding agreement (including all amendments thereto) and the latest financial
statements with respect to the last reporting period ended immediately prior to
the date thereof, (iv) a copy of the most recent “summary plan description”,
together with each “summary of material modifications”, if required under ERISA,
and (v) the most recent determination letter received from the IRS with respect
to each Benefit Plan that is intended to be qualified under
§401(a).

     

    (f)
           No Transferred
Subsidiary nor any ERISA Affiliate has ever maintained, established, sponsored,
participated in, or contributed to any (i) Employee Benefit Plan which is
subject to Title IV of ERISA or Tax Code §412; (ii) “multiemployer plan” as
defined in ERISA or the Tax Code; (iii) “multiple employer plan” as defined in
ERISA or the Tax Code; or (iv) a “funded welfare plan” within the meaning of Tax
Code §419.

     

    (g)           Except
as may be provided in any written employment Contract currently in effect
between any Transferred Subsidiary and any employee or former employee, all of
which agreements are set forth on Schedule 3.21(g), the
consummation of the transactions contemplated hereby shall not (i) result in any
payment becoming due, or increase the amount of compensation due, to any current
or former employee or current or former director of any Transferred Subsidiary,
(ii) increase any benefits payable under any Employee Benefit Plan, or
(iii) accelerate the time of payment or vesting, or increase the amount of,
or otherwise enhance, any benefit due to any current or former employee or
current or former director of any Transferred Subsidiary.  No such
payment shall result in the loss by reason of Tax Code §280G, of any federal
Income Tax deduction by any Transferred Subsidiary or Purchaser.

     

    (h)           No
Employee Benefit Plan of any Transferred Subsidiary provides benefits, including
death, medical or retiree welfare benefits (whether or not insured), with
respect to current or former employees or current or former directors of any
Transferred Subsidiary after retirement or other termination of service other
than (i) coverage mandated by ERISA §§ 601-608 and Tax Code §4980B(f) or
applicable state Laws, (ii) death benefits or retirement benefits under any
Plan, (iii) benefits the full cost of which is borne by the current or former
employee or current or former director (or his or her personal representatives
or beneficiary), or (iv) severance or deferred compensation benefits
properly accrued as Liabilities on the books of such Transferred Subsidiary or
an ERISA Affiliate.

    
      
         

      

      
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    (i) 
          No Transferred
Subsidiary, and no Seller on behalf of any Transferred Subsidiary, has made any
representation or communication, oral or written, with respect to the
participation, eligibility for benefits, vesting, benefit accrual or coverage
under any Employee Benefit Plan to any of its current or former employees or
directors (or any of their respective personal representatives or beneficiaries)
which is not in accordance with the terms and conditions of such Transferred
Subsidiary’s Employee Benefit Plans.

     

    (j)
           Each
Transferred Subsidiary and ERISA Affiliate has complied in all material respects
with the notice and continuation coverage requirements of Tax Code §4980B and
the regulations thereunder with respect to each Employee Benefit Plan of any
Transferred Subsidiary or any ERISA Affiliate that is, or was during any taxable
year of any Transferred Subsidiary or any ERISA Affiliate for which the statute
of limitations on the assessment of federal income Taxes remains open, by
consent or otherwise, a group health plan within the meaning of Tax Code
§5000(b)(1).

     

    (k)           None
of the Employee Benefit Plans of any Transferred Subsidiary or any ERISA
Affiliate, any trust created thereunder, any Transferred Subsidiary or any ERISA
Affiliate, or any employee or director of any of the foregoing, nor, to the
Knowledge of Sellers, any trustee, administrator or other fiduciary thereof, has
engaged in a “prohibited transaction” (as such term is defined in Tax Code §4975
or §406 of ERISA).  To the Knowledge of Sellers, no sponsor, trustee
or administrator of any Employee Benefit Plan of any Transferred Subsidiary has
engaged in a transaction or has taken or failed to take any action with respect
to such Employee Benefit Plan that would be reasonably expected to subject any
Transferred Subsidiary or an ERISA Affiliate to a civil penalty assessed
pursuant to §502(i) of ERISA or a Tax imposed pursuant to Tax Code §4975 or
4980B.

     

    (l)
           No severance
agreement or arrangement currently in effect between any Transferred Subsidiary
and any current or former employee or director (including the severance amounts
payable thereunder) has been amended since the date of its execution by such
Transferred Subsidiary and the applicable employee or director.

     

    3.22        Tax
Matters.

     

    (a)           Each
Transferred Subsidiary has timely filed all Income Tax Returns and all other
material Tax Returns that it was required to file.  All such Tax
Returns are true, correct and complete in all material respects, were prepared
in substantial compliance with all applicable Laws and, as so filed, disclose
all Taxes required to be paid for the periods covered thereby.  All
Taxes due and owing by any Transferred Subsidiary (whether or not shown on any
Tax Return) have been paid when due, other than Taxes being contested in good
faith and for which adequate reserves have been established in the Most Recent
Financial Statements, and if not yet due, have been properly accrued or
otherwise adequately reserved in such Transferred Subsidiary’s financial records
(all of which have been made available to Purchaser) and shall be accrued on the
books and records of such Transferred Subsidiary in accordance with past custom
and practice through the Closing Date.  Each Transferred Subsidiary
has disclosed on each Tax Return filed by it all positions taken thereon that
could give rise to a substantial understatement penalty of federal Income Taxes
within the meaning of Tax Code §6662 or §6662A or any similar provision of any
other Tax Law.  No Transferred Subsidiary is currently the beneficiary
of any extension of time within which to file any Tax Return.  There
are no Encumbrances for Taxes (other than Permitted Encumbrances) upon any of
the assets of any Transferred Subsidiary.  Each Transferred Subsidiary
has complied in all material respects with all Laws relating to the payment and
withholding of Taxes (including Taxes required to be withheld, collected,
deposited and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder, member, partner or other third
party), and all Forms W-2, 941 and 1099 and any other applicable forms required
with respect thereto have been properly completed and timely
filed.

    
      
         

      

      
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    (b)           There
is no pending or threatened material dispute or claim concerning any Tax
Liability of any Transferred Subsidiary either (i) claimed or raised by any
Governmental Body in writing or (ii) as to which Sellers have Knowledge; and no
adjustment relating to any Tax Return of any Transferred Subsidiary or of any
Seller with respect to matters pertaining to any Transferred Subsidiary has been
proposed in writing which has not been paid, settled or otherwise resolved to
the satisfaction of the applicable Governmental Body.  No Transferred
Subsidiary, and no Seller with respect to any Transferred Subsidiary, has
received from any Governmental Body, informally or in writing, any (x) notice
indicating an intent to open an audit or other review with respect to any
Transferred Subsidiary, (y) request for information relating to Taxes of any
Transferred Subsidiary, or (z) notice of deficiency or proposed adjustment for
any amount of Tax proposed, asserted, or assessed against any Transferred
Subsidiary which in any such case is still outstanding or otherwise
unresolved.

     

    (c)           Sellers
have made available to Purchaser all federal, state, local, and foreign Tax
Returns filed with respect to each Transferred Subsidiary for taxable periods
ended on or after December 31 2005, indicates those Tax Returns that have been
audited or otherwise subject to an action or proceeding, and indicates those Tax
Returns that currently are the subject of audit, action or
proceeding.  No Seller or Transferred Subsidiary has waived any
statute of limitations in respect of Taxes of any Transferred Subsidiary or
agreed to any extension of time with respect to a Tax assessment or deficiency
that remains outstanding.

     

    (d)           No
Transferred Subsidiary is a party to any Contract, arrangement or plan that has
resulted or would result, separately or in the aggregate, in the actual or
deemed payment by such Transferred Subsidiary or Purchaser of any “excess
parachute payment” within the meaning of Tax Code §280G (or any corresponding
provision of state, local, or foreign Tax Law) or of any other payment that
shall not be deductible under Tax Code §162(a), §162(m) or §404, or that could
give rise to any amounts subject to excise Tax under Tax Code §4999, as those
provisions are currently written.  No Transferred Subsidiary has any
obligation to pay compensation subject to Tax Code § 409A pursuant to a deferred
compensation plan that does not comply with the requirements of Tax Code
§409A.  No Transferred Subsidiary has been a United States real
property holding corporation within the meaning of Tax Code §897(c)(2) during
the applicable period specified in Tax Code §897(c)(1)(A)(ii).  No
Transferred Subsidiary is a party to or bound by any Tax allocation or Tax
sharing agreement that will remain in effect with respect to such Transferred
Subsidiary after the Closing Date.  No Transferred Subsidiary
(i) has been a member of an affiliated group filing a consolidated federal
Income Tax Return, other than the consolidated group the common parent of which
was ParentCo, nor (ii) has any Liability for the Taxes of any Person (other
than such Transferred Subsidiary) under Treasury Regulations §1.1502-6 (or any
similar provision of state, local, or non-U.S. Law), as a transferee or
successor, by contract, or otherwise, except with respect to the consolidated
group the common parent of which is ParentCo.

    
      
         

      

      
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    (e)           No
Transferred Subsidiary shall be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (i) change in
method of accounting for a taxable period ending on or prior to the Closing
Date, (ii) “closing agreement” as described in Tax Code §7121 (or any
corresponding or similar provision or agreement of state, local, or foreign
income Tax Law or with any Governmental Body) executed on or prior to the
Closing Date, (iii) intercompany transactions or any excess loss account
described in the Treasury Regulations under Tax Code §1502 (or any corresponding
or similar provision of state, local, or foreign income Tax Law), (iv)
installment sale or open transaction disposition made on or prior to the Closing
Date, (v) prepaid amount received on or prior to the Closing Date, or
(vi) deferral of income pursuant to Tax Code §108(i).

     

    (f)
           No income
under any arrangement or understanding to which any Transferred Subsidiary is a
party or by which it is bound shall be attributed to such Transferred Subsidiary
which is not represented by income to which such Transferred Subsidiary is
legally entitled.

     

    (g)           No
Transferred Subsidiary has distributed stock or other equity ownership interests
of another Person, or had its stock or other equity ownership interests
distributed by another Person, in a transaction that was purported or intended
to be governed in whole or in part by Tax Code §355 or Tax Code
§361.

     

    (h)           No
Transferred Subsidiary is, nor has it been, a party to any “listed transaction”,
as defined in Tax Code §6707A(c)(2) and Treasury Regulations §1.6011-4(b)(2),
and no Transferred Subsidiary is, nor has it been, a party to any “reportable
transaction” as defined in Tax Code §6707A(c)(1) and Treasury Regulations
§1.6011-4(b).

     

    (i)  
         No Transferred Subsidiary
has any election in effect under Tax Code §§ 108, 441, 472, 1017, 1033 or
4797 (or any similar provision of state, local or foreign Tax Law).

     

    (j)   
        Schedule 3.22(j)
lists each jurisdiction in which any Transferred Subsidiary files any Tax
Returns (with each such jurisdiction identified by the applicable Transferred
Subsidiary).  No written notice or inquiry has been received by any
Transferred Subsidiary from any jurisdiction in which Tax Returns have not been
filed by any Transferred Subsidiary to the effect that the filing of Tax Returns
may be required.  The Transferred Subsidiaries have no operations or
permanent establishments outside the United States.

     

    3.23        Affiliated
Transactions.  To the Knowledge of Sellers, except as set forth
on Schedule
3.23, no Insider has any interest in the Transferred Assets or any of the
assets or properties of any of the Transferred Subsidiaries or is a party to any
Contract used in or related to the Business, or any part thereof.  To
the Knowledge of Sellers, no Insider has (i) any economic interest in any Person
which engages in competition with any Seller or Transferred Subsidiary, or (ii)
any economic interest in any Person that purchases from or sells or furnishes to
any Seller or Transferred Subsidiary any services or products.

    
      
         

      

      
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    3.24        Product Liability; Product
Warranties.  Except as set forth on Schedule 3.24, to the
Knowledge of Sellers, the products sold or manufactured by Sellers and the
services provided by Sellers have complied with and are in compliance with, in
all material respects, all applicable (i) Laws, (ii) industry and
self-regulatory organization standards, (iii) contractual commitments, and (iv)
express or implied warranties.  Except as set forth on Schedule 3.24, Since
January 1, 2005, no Seller has initiated or otherwise participated in any
product recall or withdrawal with respect to any product produced, manufactured,
marketed, distributed or sold in connection with the Business, whether voluntary
or required by Law.  To the Knowledge of Sellers, there are not, and
there have not been, any defects or deficiencies in any of their products or
services (including in the Inventory) that could reasonably be expected to give
rise to or serve as a basis for any product recall or withdrawal by any
Seller.

     

    3.25        Insurance.  Schedule 3.25 lists
all insurance policies (including policies providing property, casualty, general
liability, products liability, errors and omissions, workers’ compensation, key
man or other life insurance, bond and surety arrangements and directors and
officers’ liability) with respect to which any Seller or Transferred Subsidiary
is covered as a named or additional insured, or for which it is responsible for
paying all or any portion of the premiums thereof.  With respect to
each such insurance policy: (i) the policy is valid, enforceable, and in full
force and effect in all material respects, and (ii) no Seller or Transferred
Subsidiary is in material breach or default thereof (including with respect to
the payment of premiums or the giving of notices).  Schedule 3.25
describes any material self-insurance arrangements affecting Seller or any
Transferred Subsidiary.  Since January 1, 2005, no Seller or
Transferred Subsidiary has received (i) any notice of refusal of insurance
coverage that was applied for by or on behalf of any Transferred Subsidiary
relating (in whole or in part) to any Transferred Subsidiary, its business or
assets, (ii) any notice of rejection of a claim submitted by or on behalf of any
Seller or Transferred Subsidiary to any of its insurers, or (iii) any notice of
cancellation of any policy of insurance previously issued to or for the benefit
of any Seller or Transferred Subsidiary.  Schedule 3.25 also
sets forth a complete summary description for all applicable periods dating back
to January 1, 2005 of (a) the loss experience with respect to any Seller or
Transferred Subsidiary under each such policy of insurance or any prior existing
policy of insurance, including a statement describing each claim having a value
in excess of $50,000, and (b) the loss experience with respect to any Seller or
Transferred Subsidiary for all claims during such period that were self-insured
by any Seller or Transferred Subsidiary, including the number and aggregate cost
of such claims.

     

    3.26        Absence of Certain
Developments.  Except as set forth on Schedule 3.26 and
except as expressly contemplated by this Agreement, since March 31,
2010:

     

    (a)           no
Seller or Transferred Subsidiary has suffered any theft, damage, destruction or
casualty loss in excess of $100,000 to any property or asset, whether or not
covered by insurance, or suffered any material damage to or destruction of its
Books and Records;

     

    
      
         

      

      
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    (b)           no
Seller or Transferred Subsidiary has sold, leased, licensed, assigned or
transferred to any Person any property or asset, except for sales of Inventory
in the Ordinary Course of Business, or canceled without fair consideration any
material debts or claims owing to or held by it, and no Seller or Transferred
Subsidiary has committed to do any of the foregoing;

     

    (c)           there
has been no change in reserve, underwriting or claims handling policies or
procedures with respect to any of the Insurance Subsidiaries;

     

    (d)           no
Insurance Subsidiary has effected or consented to a recapture under any
Reinsurance Contract;

     

    (e)           no
Transferred Subsidiary has implemented any employee layoff requiring notice
under the Worker Adjustment and Retraining Notification Act of 1988, as amended
(the “WARN
Act”), or any similar state or local Law;

     

    (f)     
      no Seller or Transferred Subsidiary has
declared, set aside or paid any dividend or other distribution of cash or other
assets;

     

    (g)           no
Seller or Transferred Subsidiary has repurchased, redeemed or otherwise acquired
any of its outstanding stock or other equity interests;

     

    (h)           except
to the extent necessary to comply with GAAP, no Seller or Transferred Subsidiary
has made any material change in (i) any method of accounting or any of its
accounting policies or practices, or (ii) any Tax reporting policies,
principles, methods or periods;

     

    (i)       
    no Seller or Transferred Subsidiary has waived,
compromised or cancelled any account, debt, right or claim having a value to any
Seller or Transferred Subsidiary of more than $50,000, other than in the
Ordinary Course of Business consistent with past practice;

     

    (j)  
         no Seller or Transferred
Subsidiary has instituted, been named as a defendant in, or settled any material
litigation;

     

    (k)           no
Seller or Transferred Subsidiary has issued, created, incurred, assumed or
guaranteed any Indebtedness, other than (i) the Virgo Indebtedness, (ii)
Indebtedness arising under the Textron Facility, (iii) construction lending
facilities entered into in the Ordinary Course of Business by CountryPlace
Mortgage, Ltd. with third party lenders, and (iv) Indebtedness arising
under the DIP Facility;

     

    (l) 
          the Transferred
Subsidiaries have not made or undertaken any capital expenditure in excess of
$100,000 individually or $300,000 in the aggregate; and

     

    (m)          no
Seller or Transferred Subsidiary has entered into any Contract or made any
binding commitment for any of the above-noted events to occur after the date of
this Agreement.

     

    
      
         

      

      
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    3.27        Prohibited
Payments.  To the Knowledge of Sellers, no Transferred
Subsidiary nor any of its directors, employees or agents, in each case, acting
on behalf, for or associated with such Transferred Subsidiary, has directly or
indirectly (i) made any contribution gift, bribe, rebate, payoff, influence
payment, kickback or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (A) to obtain favorable
treatment in securing business, (B) to pay for favorable treatment for business
secured, (C) to obtain special concessions or for special concessions already
obtained, for or in respect of such Transferred Subsidiary, or (D) in violation
of any Law, or (ii) established or maintained any fund or asset that has not
been recorded in the books and records of such Transferred
Subsidiary.

     

    3.28        Bank Accounts; Lock Boxes;
Powers of Attorney.  Sellers have delivered to Purchaser a
complete and accurate list of all bank and other financial institution accounts
and lock boxes maintained by any Transferred Subsidiary, each identified by name
and address of the applicable bank or financial institution and account number,
a list of Persons authorized to sign or transact business on behalf of each
Transferred Subsidiary with respect to each such account or lock box and a list
of Persons with authorized access to each such lock box.  Schedule 3.28 sets
forth a complete and accurate list of each Person who is currently the holder of
a power of attorney given by any Transferred Subsidiary.

     

    3.29        Brokers.  Except
for the fees payable by Sellers to Raymond James & Associates, Inc. (whose
fees shall be payable solely by Sellers), Sellers have not paid or agreed to
pay, or received any Claim with respect to, any brokerage commissions, finders’
fees or similar compensation in connection with the transactions contemplated
hereby.

     

    3.30        Disclaimer.  THE
REPRESENTATIONS AND WARRANTIES MADE BY SELLERS IN THIS AGREEMENT (INCLUDING THE
DISCLOSURE SCHEDULES) AND IN ANY AGREEMENT, DOCUMENT OR INSTRUMENT TO BE
EXECUTED AND DELIVERED BY SELLERS (OR ANY OF THEM) AT THE CLOSING ARE THE
EXCLUSIVE REPRESENTATIONS AND WARRANTIES MADE BY SELLERS.  SELLERS
HEREBY DISCLAIM ANY OTHER EXPRESS OR IMPLIED REPRESENTATIONS AND
WARRANTIES.  SELLERS DO NOT MAKE, AND HEREBY DISCLAIM, ANY
REPRESENTATIONS OR WARRANTIES REGARDING PRO-FORMA FINANCIAL INFORMATION,
FINANCIAL PROJECTIONS OR OTHER FORWARD-LOOKING STATEMENTS OF THE BUSINESS,
EXCEPT FOR ANY PRO-FORMA FINANCIAL STATEMENTS FILED WITH INSURANCE-RELATED
GOVERNMENTAL BODIES OR FINANCE-RELATED GOVERNMENTAL BODIES.  EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT (INCLUDING THE DISCLOSURE SCHEDULES) OR IN
ANY AGREEMENT, DOCUMENT OR INSTRUMENT TO BE EXECUTED AND DELIVERED BY THE
SELLERS (OR ANY OF THEM) AT THE CLOSING, (A) SELLERS ARE SELLING THE TRANSFERRED
ASSETS HEREUNDER ON AN “AS IS, WHERE IS, WITH ALL FAULTS” BASIS, AND (B) THE
SELLERS MAKE NO REPRESENTATIONS OR EXPRESS OR IMPLIED WARRANTIES AS TO THE
BUSINESS, THE TRANSFERRED ASSETS OR THE ASSUMED LIABILITIES, INCLUDING AS TO
THEIR PHYSICAL CONDITION, USABILITY, MERCHANTABILITY, PROFITABILITY OR FITNESS
FOR ANY PURPOSE.

    
      
         

      

      
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    ARTICLE
IV

     

    REPRESENTATIONS
AND WARRANTIES OF PURCHASER

     

    In order
to induce Sellers to enter into this Agreement and consummate the transactions
contemplated hereby, Purchaser hereby represents and warrants to Sellers as
follows:

     

    4.1          Due Incorporation and
Authority.  Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all necessary corporate power and authority to own, lease and operate its
properties and to carry on its business as now being
conducted.  Purchaser has all requisite corporate power and authority
to enter into this Agreement, carry out its obligations hereunder and consummate
the transactions contemplated hereby.  The execution and delivery by
Purchaser of this Agreement, the performance by Purchaser of its obligations
hereunder and the consummation by Purchaser of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of Purchaser.  This Agreement has been duly executed and delivered by
Purchaser, and, assuming the due authorization, execution and delivery hereof by
Sellers, this Agreement constitutes the legal, valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms, except to
the extent enforceability may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting creditors rights generally or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).

     

    4.2          No
Conflicts.  The execution and delivery by Purchaser of this
Agreement, the consummation of the transactions contemplated hereby, and the
performance by Purchaser of this Agreement in accordance with its terms shall
not:

     

    (a)           violate
the certificate of incorporation or by-laws of Purchaser or contravene any
resolution adopted by the directors or shareholders of Purchaser;

     

    (b)           violate
any Law to which Purchaser or its assets are bound or subject; or

     

    (c)           violate,
result in any breach of, constitute a default under, or require any consent of
any Person (including any Governmental Body) pursuant to any
contract.

     

    4.3          Litigation.  There
are no Claims pending or, to the knowledge of Purchaser, threatened by or
against Purchaser before any Governmental Body that, either individually or in
the aggregate, would reasonably be expected to prevent or delay the consummation
by Purchaser of the transactions contemplated by this Agreement.

     

    4.4          Purchaser’s Financial
Capability.  Purchaser has, or as of the Closing Date shall
have, available funds necessary to consummate the transactions contemplated by
this Agreement, including payment of the Purchase Price and assumption of the
Assumed Liabilities.  Without limiting the foregoing, Purchaser is
(or, upon the Closing, shall be) capable of satisfying the conditions contained
in sections 365(b)(1)(C) and 365(f)(2)(B) of the Bankruptcy Code with respect to
each of the Assumed Contracts.

    
      
         

      

      
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    4.5          Brokers.  Purchaser
has not paid or agreed to pay, or received any Claim with respect to, any
brokerage commissions, finders’ fees or similar compensation in connection with
the transactions contemplated hereby.

     

    4.6          Acknowledgement of Sellers’
Disclaimer.  PURCHASER REPRESENTS, WARRANTS AND ACKNOWLEDGES
THAT, EXCEPT AS SET FORTH IN THIS AGREEMENT (INCLUDING THE DISCLOSURE SCHEDULES)
AND IN ANY AGREEMENT, DOCUMENT OR INSTRUMENT TO BE EXECUTED AND DELIVERED BY
SELLERS (OR ANY OF THEM) AT THE CLOSING:  (A) PURCHASER IS PURCHASING
THE TRANSFERRED ASSETS ON AN “AS IS, WHERE IS, WITH ALL FAULTS” BASIS BASED
SOLELY ON PURCHASER’S OWN INVESTIGATION OF THE TRANSFERRED ASSETS AND (B)
NEITHER SELLERS NOR ANY OF THEIR REPRESENTATIVES HAVE MADE ANY REPRESENTATIONS,
WARRANTIES OR GUARANTEES, EXPRESS, IMPLIED OR STATUTORY, WRITTEN OR ORAL, WITH
RESPECT TO THE TRANSFERRED ASSETS (OR ANY PART THEREOF), THE FINANCIAL
PERFORMANCE OF THE BUSINESS OR THE TRANSFERRED ASSETS, OR THE PHYSICAL CONDITION
OF THE TRANSFERRED ASSETS.

     

    4.7          Purchaser
Disclaimer.  THE REPRESENTATIONS AND WARRANTIES MADE BY
PURCHASER IN THIS AGREEMENT AND IN ANY AGREEMENT, DOCUMENT OR INSTRUMENT TO BE
EXECUTED AND DELIVERED BY PURCHASER AT THE CLOSING ARE THE EXCLUSIVE
REPRESENTATIONS AND WARRANTIES MADE BY PURCHASER.  PURCHASER HEREBY
DISCLAIMS ANY OTHER EXPRESS OR IMPLIED REPRESENTATIONS AND
WARRANTIES.

     

    ARTICLE
V

     

    COVENANTS
AND AGREEMENTS

     

    5.1          Operation of the
Business.  Subject to any restrictions and obligations imposed
by the Bankruptcy Court, Sellers shall not, nor shall they cause or permit any
Transferred Subsidiary to, engage in any practice, take any action or enter into
any transaction outside the Ordinary Course of Business between the date hereof
and the Closing Date.  In particular (but without limitation), between
the date hereof and the earlier of the Closing Date or the date of termination
of this Agreement pursuant to Section 8.1, without the
prior written consent of Purchaser:

     

    (a)           Sellers
shall not, nor shall they cause or permit any Transferred Subsidiary to, (i)
sell, transfer, lease (as lessor), sublease (as sublessor), license (as
licensor), encumber or otherwise dispose of any property or asset or any
interest therein, other than Inventory sold or disposed of in the Ordinary
Course of Business in the Home Business, insurance products sold in the Ordinary
Course of Business in the Insurance Business and mortgage finance products sold
in the Ordinary Course of Business in the Finance Business, and other than
dispositions of Excluded Assets, (ii) terminate or modify any Assumed Contract
or any Contract to which any Transferred Subsidiary is a party or by which it is
bound, (iii) enter into any Contract that would cause the representation and
warranty contained in Section 3.10(a) or
3.10(b) to be
untrue had such Contract been entered into prior to the date hereof, other than
any such Contract entered into in the Ordinary Course of Business having a value
or cost to any Seller or Transferred Subsidiary of less than $50,000, (iv)
except as approved by the Bankruptcy Court as part of a key employee retention
plan, make any change in the compensation payable or to become payable to any
director or employee of any Seller or Transferred Subsidiary, (v) make, declare
or agree to any dividend, distribution, loan or other disposition of cash or any
other asset from any Transferred Subsidiary to any Seller, or (vi) issue, sell,
assign, transfer or grant any equity interest in any Transferred Subsidiary or
any option, warrant, right or other instrument providing for the right, directly
or indirectly, to purchase or otherwise acquire any equity interest in any
Transferred Subsidiary; and

     

    
      
         

      

      
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    (b)           Sellers
shall and, as applicable, shall cause the Transferred Subsidiaries to,
(i) use commercially reasonable efforts to preserve intact the goodwill of
the Business and the relationships of Sellers and the Transferred Subsidiaries
with their customers, vendors, suppliers, creditors, agents, equipment lessors,
service providers, employees and others having business relations with Sellers,
the Transferred Subsidiaries and the Business, (ii) continue to maintain,
service and protect the Transferred Assets and the assets of the Transferred
Subsidiaries in the same manner as maintained, serviced and protected on the
date hereof, and in any event in a commercially reasonable and prudent manner,
(iii) continue to maintain the books and records related to the Business,
the Transferred Assets, the Assumed Liabilities and the assets and Liabilities
of the Transferred Subsidiaries on a basis consistent with Sellers’ and the
Transferred Subsidiaries’ past practice, and in any event in a commercially
reasonable and prudent manner; (iv) report periodically to Purchaser, as
Purchaser may reasonably request, concerning the status of the Business, the
Transferred Assets, the Assumed Liabilities and the assets and Liabilities of
the Transferred Subsidiaries, (v) maintain compliance, in all material respects,
with all Laws that relate to the Business, the Transferred Assets, the Assumed
Liabilities and the assets and Liabilities of the Transferred Subsidiaries
(other than the reporting requirements of the Securities and Exchange
Commission), and (vi) pay all debts and obligations (including all trade
payables) incurred by it in the Ordinary Course of the Business.

     

    5.2          Confidentiality.

     

    (a)           Until
the Closing Date, each party hereto shall hold in confidence, and shall cause
its respective Affiliates and Representatives to hold in confidence, all
Confidential Information obtained by any of them from any other party or its
Affiliates or Representatives relating to such other party or the transactions
contemplated hereby.  Notwithstanding the foregoing, the party
receiving Confidential Information from the party disclosing such Confidential
Information may disclose such Confidential Information:  (i) to the
extent that such disclosure was previously authorized in writing by the
disclosing party; (ii) to any Governmental Body, with valid and competent
jurisdiction thereof, if the receiving party is directed to disclose such
Confidential Information to and by such Governmental Body, provided that the
receiving party shall provide written notice of such disclosure to the
disclosing party; (iii) to the receiving party’s Affiliates and Representatives
who have a need to know such information solely for purposes of assisting in
regard to this Agreement and the transactions contemplated hereby, and who are
subject to confidentiality obligations to the receiving party; (iv) to the
extent that disclosure is required under any applicable Law; or (v) to the
Bankruptcy Court or to any Person in connection with the Bankruptcy Case (such
instances described in clauses (i)-(iv) above being referred to herein as “Permitted
Disclosures”).  Except as otherwise set forth herein, no party
shall disclose or make use of, and each party shall cause its respective
Affiliates and Representatives not to disclose or make use of, the other party’s
Confidential Information without the prior written consent of such other
party.  In the event that this Agreement is terminated, each party
shall, and shall cause its respective Affiliates and Representatives to,
promptly return to the other party or destroy all documents (including all
copies thereof) containing Confidential Information obtained from such other
party or its Affiliates or Representatives.

     

    
      
         

      

      
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    (b)           After
the Closing, each Seller shall maintain as confidential and shall not use or
disclose (except as required by Law or as authorized in writing by Purchaser in
its sole discretion) any Confidential Information of Purchaser or any
Confidential Information in any way related to the Business, the Transferred
Assets, the Assumed Liabilities or the assets and Liabilities of the Transferred
Subsidiaries, except for Permitted Disclosures.

     

    (c)           Each
party hereto further agrees to take all appropriate steps (and to cause each of
its Affiliates to take all appropriate steps) to safeguard the Confidential
Information of each other party and to protect it against disclosure, misuse,
espionage, loss and theft.  Each party agrees to be responsible for
enforcing the terms of this Section 5.2 as to its
Representatives and to take such action, legal or otherwise, to the extent
necessary to cause them to comply with the terms and conditions of this Section 5.2 and
thereby prevent any disclosure of the Confidential Information by any of its
Representatives (including all actions that such party would take to protect its
own trade secrets and confidential information); provided, however, that the
actual expenses of such action, legal or otherwise, shall be paid by the party
whose Confidential Information is being safeguarded in such action, unless such
action is precipitated by the failure of the party undertaking to protect such
Confidential Information to comply with its obligations under this Section
5.2(c).  In the event any party is required by Law to disclose
any Confidential Information, such party shall promptly notify the other party
in writing, which notification shall include the nature of the legal requirement
and the extent of the required disclosure, and shall cooperate reasonably with
such party to preserve the confidentiality of such information consistent with
applicable Law.

     

    5.3          Expenses.  Except
as otherwise specifically provided herein (including the Exhibits hereto),
Purchaser and Sellers shall bear their respective expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the transactions contemplated hereby, including all fees and expenses of their
Representatives.

     

    5.4          Access to Information;
Preservation of Records; Litigation Support.

     

    (a)           From
the date hereof until the earlier of the Closing or the termination of this
Agreement pursuant to Section 8.1, upon
reasonable notice, Sellers shall, subject to ParentCo approval, not to be
unreasonably withheld, (i) afford the Representatives of Purchaser reasonable
access, during normal business hours, to the offices, plants, warehouses,
properties, books and records and employees of Sellers and the Transferred
Subsidiaries, subject to applicable Law and arrangements being made by and
through one or more executive officers of ParentCo, and (ii) furnish to the
Representatives of Purchaser such additional financial and operating data and
other information regarding the operations of the Business as Purchaser may from
time to time reasonably request.

     

    
      
         

      

      
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    (b)           Following
the Closing, Purchaser shall, and shall cause its Affiliates to, preserve and
keep the records (including the Books and Records) held by them relating to the
Business prior to the Closing for a period of four (4) years from the Closing
Date (or longer if required by applicable Law) and shall make such records and
personnel available to Sellers as may be reasonably requested by any Seller in
connection with, among other things, the preparation of any Tax Returns, the
Bankruptcy Case, any insurance claims by, Claims or Tax audits against or
governmental investigations of, any Seller or any of their
Affiliates.

     

    (c)           After
the Closing, Purchaser shall have the right (but not the obligation) to have any
Claim made by or against or otherwise involving Purchaser related to any
Warranty Liability purported assumed by Purchaser pursuant to Section 1.3(b) to be
adjudicated before the Bankruptcy Court, notwithstanding any venue or other
dispute resolution provision to the contrary in the applicable warranty
documents.

     

    5.5          Regulatory and Other Authorizations;
Consents.

     

    (a)           Each
of the parties hereto shall use its commercially reasonable efforts to
(i) take, or cause to be taken, all appropriate action, and do, or cause to
be done, all things necessary, proper or advisable under any Law or otherwise to
consummate and make effective the transactions contemplated by this Agreement,
(ii) obtain any consents, approvals or orders required to be obtained or made in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, and (iii) make all
filings and give any notice, and thereafter make any other submissions either
required or reasonably deemed appropriate by each of the parties, with respect
to this Agreement and the transactions contemplated hereby required under any
applicable Law.

     

    (b)           The
parties hereto shall work closely and cooperatively and consult with each other
in connection with the making of all such filings and notices, including by
providing copies of all such documents to the non-filing party and its advisors
a reasonable period of time prior to filing or the giving of
notice.  Each party hereto shall pay for its own filing fees and other
charges arising out of the actions taken under this Section
5.5.

     

    5.6          Further
Actions.  Each of the parties hereto shall execute such
documents and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and give effect to the transactions
contemplated hereby.

     

    5.7          Bankruptcy Court
Approval.

     

    (a)           Within
five (5) days following the parties’ execution and delivery of this Agreement,
Sellers shall:

     

    (i)           make
all applicable filings with the Bankruptcy Court and take all other applicable
actions to commence the Bankruptcy Case in the Bankruptcy Court;

     

    (ii)          file
with the Bankruptcy Court a motion (in form and substance reasonably
satisfactory to Purchaser) seeking entry of an order of the Bankruptcy Court for
interim approval of the DIP Facility (the “Interim DIP Facility
Order”) and a motion (in form and substance reasonably satisfactory to
Purchaser) seeking entry of an order of the Bankruptcy Court for final approval
of the DIP Facility;

     

    
      
         

      

      
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    (iii)         file
with the Bankruptcy Court a motion or motions (in form and substance reasonably
satisfactory to Purchaser) (the “Bidding Procedures
Motion”) seeking entry of an order of the Bankruptcy Court (the “Bidding Procedures
Order”) approving, among other things, (A) Purchaser as the stalking
horse bidder for the Transferred Assets, (B) notice and service requirements to
creditors and parties in interest with respect to the transactions contemplated
hereby, (C) the Break-Up Fee and the Expense Reimbursement (and deeming the
Break-Up Fee an administrative priority expense entitled to first priority under
sections 503(b) and 507(a)(1) of the Bankruptcy Code and which shall be a
super-priority first priority Lien on the Transferred Assets pursuant to section
364 of the Bankruptcy Code), and (D) the bidding procedures related to the
sale of the Transferred Assets pursuant to this Agreement (the “Bidding Procedures”),
including the ability of Purchaser, to the extent of its interest as assignee of
Fleetwood under the DIP Facility, to credit bid all outstanding amounts owing by
Sellers under the DIP Facility, which Bidding Procedures Order shall be
substantially in the form of Exhibit C hereto
(with such changes thereto as Sellers and Purchaser may mutually approve, which
approval shall not be unreasonably withheld, conditioned or delayed);
and

     

    (iv)         file
with the Bankruptcy Court a motion or motions (in form and substance reasonably
satisfactory to Purchaser) seeking entry of an order of the Bankruptcy Court
approving the sale of the Transferred Assets pursuant to this Agreement (the
“Sale Approval
Order”), which Sale Approval Order shall be substantially in the form of
Exhibit D
hereto (with such changes thereto as Sellers and Purchaser may mutually approve,
which approval shall not be unreasonably withheld, conditioned or
delayed).

     

    (b)           Sellers
shall promptly take such actions as are reasonably requested by Purchaser,
including assisting with the filing of affidavits or other documents or
information with the Bankruptcy Court for purposes, among others, of (i)
demonstrating that Purchaser is a “good faith” purchaser under section 363(m) of
the Bankruptcy Code, and (ii) establishing adequate assurance of future
performance within the meaning of section 365 of the Bankruptcy
Code.

     

    (c)           Sellers
shall cooperate with Purchaser and its representatives in connection with the
Sale Approval Order, the Bidding Procedures Order and the Bankruptcy Case
proceedings in connection therewith, which cooperation shall include consulting
with Purchaser at its reasonable request concerning the status of such
proceedings and providing Purchaser with copies of requested pleadings, notices,
proposed orders and other documents relating to such proceedings as soon as
reasonably practicable prior to any submission thereof to the Bankruptcy
Court.

     

    (d)           Sellers
shall not submit any plan to the Bankruptcy Court for confirmation that shall
conflict with, supersede, abrogate, nullify or restrict the terms of this
Agreement, or in any way prevent or interfere with the consummation or
performance of the transactions contemplated by this Agreement, including any
transaction contemplated by or approved pursuant to the Sale Approval Order or
the Bidding Procedures Order.

     

    
      
         

      

      
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    5.8          Books and
Records.  If, in order to properly prepare documents required
to be filed with Governmental Bodies or its financial statements, it is
necessary that any party hereto or any successors thereto be furnished with
additional information relating to the Business, the Transferred Assets, the
Assumed Liabilities or any of the assets or Liabilities of any Transferred
Subsidiary, and such information is in the possession of any other party hereto
or any successor thereto or any of their respective Affiliates, such party
agrees to use commercially reasonable efforts to furnish or cause to be
furnished such information to such other party, at the reasonable cost and
expense of the party being furnished such information.

     

    5.9          Tax
Matters.

     

    (a)           Filing of Tax Returns;
Payment of Taxes.

     

    (i)           The
parties acknowledge and agree that the taxable year for all Transferred
Subsidiaries shall end on the Closing Date, and Sellers and Purchaser shall take
all applicable actions and make all applicable filings to reflect such taxable
year end.  Following the Closing Date (to the extent not filed as of
the Closing Date), ParentCo shall timely prepare or cause to be prepared all Tax
Returns that are required to be filed with respect to the Transferred
Subsidiaries for all taxable periods ending on the Closing Date.  All
such Tax Returns shall be prepared on a basis consistent with past practice,
procedures and accounting methods, expect to the extent otherwise required by
Law and except for the aforementioned taxable year end being the Closing
Date.  At least fifteen (15) Business Days prior to filing any such
Tax Return, ParentCo shall provide Purchaser with a copy of such Tax Return (or
applicable portion thereof) for Purchaser’s review and
comment.  ParentCo shall cooperate reasonably with Purchaser to
incorporate any change to any such Tax Return (or applicable portion thereof)
that Purchaser proposes in writing to ParentCo at least five (5) Business Days
before the filing date for such Tax Return and that is intended to correct or
more accurately reflect the Tax position or Liabilities of the Transferred
Subsidiary with respect to which such Tax Return applies.  All Taxes
payable by or with respect to any Transferred Subsidiary for any taxable period
ending on or before the Closing Date shall be payable by
Sellers.  Sellers shall be entitled to all Tax refunds with respect to
Taxes paid by any Transferred Subsidiary (or by any Seller on behalf of or with
respect to any Transferred Subsidiary) with respect to any taxable period ending
on or before the Closing Date.

     

    (ii)          Following
the Closing Date, Purchaser shall timely prepare or cause to be prepared all Tax
Returns that are required to be filed with respect to the Transferred
Subsidiaries for all taxable periods (A) that begin on or before the Closing
Date and end after the Closing Date, or (B) that begin after the Closing
Date.  Subject to the provisions of Section 5.9(a)(i),
all Taxes payable by or with respect to any Transferred Subsidiary for any
taxable period beginning on or before the Closing Date and ending after the
Closing Date shall be payable by Purchaser or the applicable Transferred
Subsidiary (it being understood and agreed by the parties hereto that, based on
the agreed upon Closing Date taxable year end referred to in Section 5.9(a)(i),
such Taxes shall not include any income Tax applicable to any Transferred
Subsidiary for any period of time up to and including the Closing
Date).  Purchaser shall be entitled to all Tax refunds with respect to
Taxes paid by Purchaser or any Transferred Subsidiary with respect to any
taxable period beginning on or before the Closing Date and ending after the
Closing Date or with respect to any taxable period that begins after the Closing
Date.

     

    
      
         

      

      
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    (b)           Sales, Use and Other
Transfer Taxes.  Any sales, use, purchase, transfer, deed,
stamp, documentary stamp, use or other similar Taxes and recording charges due
and which may be payable by reason of the sale of the Transferred Assets or the
assumption of the Assumed Liabilities under this Agreement or the transactions
contemplated herein shall be borne and timely paid by
Sellers.  Sellers shall be responsible for all income, profit and
similar Taxes incurred or imposed with respect to the sale of the Transferred
Assets by Sellers.  Purchaser shall provide Sellers with resale
exemption certificates as are appropriate and available to Purchaser under
applicable Law.  The parties hereto agree to cooperate in the filing
of all necessary documentation and all Tax Returns with respect to all such
Taxes, including any available pre-sale filing procedure.

     

    (c)           Cooperation.  The
parties hereto shall cooperate reasonably with each other and with each other’s
respective Representatives, including accounting firms and legal counsel, in
connection with the preparation or audit of any Tax Return(s) and any Tax claim
or litigation in respect of the Transferred Assets, the Assumed Liabilities or
any of the assets or Liabilities of any Transferred Subsidiary that include
whole or partial taxable periods, activities, operations or events on or prior
to the Closing Date, which cooperation shall include making available employees,
if any, for the purpose of providing testimony and advice, or original
documents, or either of them; provided, however, that such
cooperation shall be conditioned on the party requesting such cooperation either
directly paying or reimbursing the cooperating party or its Affiliate for (i)
reasonable compensation costs of employees who provide such cooperation, (ii)
travel costs of such employees incurred in connection with providing such
cooperation, (iii) reasonable costs of document retrieval, review and/or
delivery incurred in providing such cooperation, and (iv) any other reasonable
costs incurred in providing such cooperation.

     

    5.10        Notification of Certain
Matters.  Until the earlier of the Closing or the termination
of this Agreement pursuant to Section 8.1, each party
hereto shall promptly notify the other party in writing of any fact, change,
condition, circumstance or occurrence or nonoccurrence of any event of which it
is aware that shall or is reasonably likely to result in any of the conditions
set forth in Article
VI or Article
VII becoming incapable of being satisfied.  In furtherance of
the foregoing, ParentCo (on behalf of Sellers) shall give prompt notice to
Purchaser of (i) the occurrence or nonoccurrence of any event that would cause
either (A) any representation or warranty of Sellers contained in this Agreement
to be untrue or inaccurate in any material respect at any time after the date
hereof, or (B) directly or indirectly, any Material Adverse Effect,
(ii) any material failure of Sellers to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by them
hereunder, or (iii) the termination of employment of any senior manager or the
termination of employment or furlough of any material number of employees of any
Seller or Transferred Subsidiary.  Notwithstanding the foregoing, the
delivery of any notice pursuant to this Section 5.10 shall not (x) be
deemed to amend or supplement any Schedule to this Agreement, (y) be deemed to
cure any breach of any representation, warranty covenant or agreement or to
satisfy any condition, or (z) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.

     

    5.11        Knowledge of
Breach.  If prior to the Closing Purchaser shall have reason to
believe that any breach of a representation or warranty of Sellers has occurred
(other than through notice from ParentCo), Purchaser shall promptly so notify
ParentCo, in reasonable detail.  Nothing in this Agreement, including
this Section
5.11,
shall imply that Sellers are making any representation or warranty as of any
date other than the date of this Agreement and the Closing Date.

     

    
      
         

      

      
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    5.12        Employment
Arrangements.

     

    (a)           Future
Employment.  On the Closing Date, Purchaser may offer
employment to those of Sellers’ current employees as Purchaser shall determine
in its sole discretion.  All such offers of employment shall be
subject to such compensation and other terms of employment as Purchaser shall
determine in its sole discretion.  Each such Seller employee who
accepts Purchaser’s offer of employment and is hired by Purchaser is referred to
herein as a “Transferred Seller
Employee”.  On the Closing Date, the applicable Sellers shall
terminate the employment of each Transferred Seller Employee and Purchaser shall
commence its employment of such Transferred Seller Employee.  If
Purchaser does not wish to offer employment to any employee of a Seller or if
Purchaser offers such employment but any employee of a Seller refuses to be
employed by Purchaser, the applicable Seller may elect to retain or terminate
such employee, but such Seller shall be solely liable for all costs of any
retention or termination of such employee’s employment.

     

    (b)           No Right to
Employment.  Notwithstanding Section 5.12(a),
nothing herein expressed or implied shall confer upon any of the employees of
any Seller or Transferred Subsidiary or any Transferred Seller Employees any
right to employment or continued employment for any specified period, of any
nature or kind whatsoever under or by reason of this Agreement.

     

    (c)           No
Obligation.  Neither Purchaser nor any of its Affiliates shall
have any Liability whatsoever for (i) any compensation or other obligations
actually or purported to be owing to any Transferred Seller Employee by any
Seller, including any severance, separation pay, change of control payments or
benefits, retention payments or any other payments or benefits arising in
connection with such employee’s employment by, or termination of employment
with, any Seller before, on or after the Closing Date, or (ii) any Claim under
the WARN Act or any similar state or local Law by any past or present employee
of any Seller (whether or not a Transferred Seller Employee) in connection with
Seller’s pre-Closing conduct of the Business or any other business, including
any plant closing or mass layoff.

     

    (d)           Sellers’ Cooperation in
Review and Hiring of Employees.  Subject to applicable Law and
prior approval and arrangements in advance by and through one or more executive
officers of ParentCo, not to be unreasonably withheld or delayed, Sellers shall
cooperate with Purchaser and shall permit Purchaser a reasonable period during
normal business hours prior to the Closing Date, (i) to meet with employees of
Sellers and the Transferred Subsidiaries (including managers and supervisors) at
such times as Purchaser shall reasonably request, (ii) to speak with such
employees’ managers and supervisors (in each case with appropriate
authorizations and releases from such employees) who are being considered for
employment (or in the case of the Transferred Subsidiaries, continued
employment) by Purchaser, (iii) to distribute to such employees such forms and
other documents relating to potential employment (or continued employment) after
the Closing; and (iv) subject to any restrictions imposed under applicable Law,
to permit Purchaser, upon request, to review personnel files and other relevant
employment information regarding such employees.

     

    
      
         

      

      
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    (e)           Post-Closing Cooperation on
Employee Compensation and Benefits.  Following the Closing,
Sellers and Purchaser shall cooperate reasonably with each other to provide an
orderly administrative transition to Purchaser of the Transferred Seller
Employees and the employees of the Transferred Subsidiaries, including (i) the
provision by Sellers to Purchaser of all necessary or appropriate documents,
records, materials, accounting files and Tax information with respect to the
Transferred Seller Employees and the employees of the Transferred Subsidiaries,
and (ii) Sellers’ causing their Employee Benefit Plan providers to assist in the
conversion and rollover of employee benefits for Transferred Seller Employees
and the employees of the Transferred Subsidiaries to Purchaser’s applicable
Employee Benefit Plans, including medical, dental, short-term disability,
long-term disability, life insurance and 401(k) plans.  ParentCo shall
provide Purchaser with Certificates of Credible Coverage for all health plan
participants under any applicable Employee Benefit Plan of Sellers and/or the
Transferred Subsidiaries within thirty (30) days following the Closing
Date.  Sellers and Purchaser agree to utilize the standard procedure
set forth in IRS Revenue Procedure 2004-53 with respect to wage reporting for
Transferred Seller Employees, such that Sellers shall be responsible for all
reporting of wages and other compensation paid by it to Transferred Seller
Employees before the Closing Date (including furnishing and filing of Forms W-2
and W-3).

     

    (f)   
        Sellers to Retain COBRA
Liability.  At the Closing, to the extent required by
applicable Law, Purchaser shall assume Sellers’ obligations to provide health
care continuation coverage under Tax Code §4980B and ERISA §601 for all M&A
Qualified Beneficiaries (as that term is defined in Treasury Regulations Section
54.4980B-9, Q&A-4) of Sellers; provided, however, that such
assumption of Sellers’ obligations shall apply only to M&A Qualified
Beneficiaries who timely elect to receive COBRA coverage through Purchaser and
only with respect to claims incurred by such M&A Qualified Beneficiaries
after the Closing Date (it being understood and agreed by the parties hereto
that any claim incurred (whether or not reported) by an M&A Qualified
Beneficiary on or before the Closing Date shall constitute an Excluded
Liability).

     

    5.13        Insurance.  Between
the date hereof and the earlier of the Closing Date or the date of termination
of this Agreement pursuant to Section 8.1, Sellers shall,
and shall cause the Transferred Subsidiaries to, at their cost, keep in effect
and in good standing all policies of insurance maintained by any of them to
insure the Business, the Transferred Assets and the assets of the Transferred
Subsidiaries (collectively, the “Existing Insurance
Policies”).  To the extent that any Existing Insurance Policy
insures against any loss, Liability, Claim, damage or expense resulting from,
arising out of, based on or relating to occurrences arising on or after the date
hereof and prior to the Closing with respect to the Business, the Transferred
Assets or the assets of the Transferred Subsidiaries and permit claims to be
made thereunder with respect to such losses, Liabilities, claims, damages or
expenses after the Closing, Sellers shall use their commercially reasonable
efforts to obtain an insurance certificate naming Purchaser as an additional
insured under the Existing Insurance Policies.

     

    
      
         

      

      
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    5.14        Licensed Computer Software;
Consents.  Prior to and (if necessary) following the Closing,
to the extent requested by Purchaser, Sellers shall cooperate reasonably and in
good faith to assist Purchaser with obtaining any required third-party consent,
waiver or approval for (i) Sellers’ assignment and transfer to Purchaser of
the licensed Computer Software to be included in the Transferred Assets, and
(ii) if applicable, the change of control of any Transferred Subsidiary that is
a party to any Computer Software license where such license provides that a
change of control constitutes a deemed assignment of such license requiring the
consent of the licensor or otherwise requires such licensor’s consent or would
permit such licensor to terminate such license; provided, however, that no
Seller shall be required to pay any transfer fee or similar payment to obtain
any such consent, waiver or approval.  If any such consent, approval
or waiver which is required in order to assign any licensed Computer Software to
be included in the Transferred Assets is not obtained prior to the Closing Date,
or if an attempted assignment would be ineffective or would adversely affect the
ability of any Seller to convey its interest in question to Purchaser, Sellers
shall cooperate with Purchaser in good faith and in a reasonable manner in any
lawful arrangement to provide that Purchaser shall receive the interests of any
Seller in the benefits of such licensed Computer Software; provided, however, that if such
consent, waiver or approval is not obtained before the Closing Date, it shall
not be an impediment or condition to any party’s obligation to consummate the
Closing under this Agreement.  For the avoidance of doubt, Purchaser
shall be solely responsible for obtaining any approvals, waivers or consents
(and paying any fees or costs) related to the assignment to (or permitted use
by) Purchaser of any licensed Computer Software to be included in the
Transferred Assets.

     

    5.15        Seller Release of Claims
Against Transferred Subsidiaries.  Effective as of the time of
Closing, Sellers hereby unconditionally waive, release and discharge each
Transferred Subsidiary from and against any and all Claims and Liabilities,
whether or not known to Sellers (or any of them) as of the Closing Date,
including any Claim or Liability arising under the Bankruptcy Code or any other
applicable Law.

     

    5.16        Change of Purchaser’s Name;
Dissolution.  Within two (2) Business Days following the
earlier of (i) the date on which Purchaser is not selected as the winning bidder
in the sale auction for the Transferred Assets contemplated by the Bidding
Procedures and is not selected by the Bankruptcy Court as the back-up purchaser
for the Transferred Assets in the event that the successful bidder in the sale
auction fails to close its purchase of the Transferred Assets that it agrees to
purchase, or (ii) the date on which ParentCo notifies Purchaser in writing
of the completion of closing of the sale of Transferred Assets to either the
third-party winning bidder in the sale auction or another Person designated by
the Bankruptcy Court as the back-up bidder, Purchaser shall either change its
name to a name that does not include the words “Palm Harbor Homes” or any
confusingly similar words or cause itself to be wound up and
dissolved.

     

    ARTICLE
VI

     

    PURCHASER’S
CLOSING CONDITIONS

     

    The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement is subject to the fulfillment on or prior to the Closing Date of each
of the following conditions, any one or more of which (to the extent permitted
by applicable Law) may be waived by Purchaser:

     

    
      
         

      

      
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    6.1          Representations and
Warranties; Covenants.  The representations and warranties of
Sellers contained in this Agreement that are qualified by materiality shall be
true and correct and the representations and warranties of Sellers contained in
this Agreement that are not so qualified shall be true and correct in all
material respects, in each case on and as of the Closing Date with the same
effect as though made on the Closing Date, except for changes expressly
contemplated by this Agreement and except for any particular representation or
warranty that specifically addresses matters only as of a particular date (which
shall remain true as of such date, to the extent required above), except where
such failure to be true and correct has been or shall be cured, remedied or
otherwise accounted for pursuant to the Sale Approval Order.  The
covenants and agreements contained in this Agreement to be complied with by
Sellers at or before the Closing shall have been complied with in all material
respects.  At Closing, Purchaser shall have received a certificate of
Sellers (the “Sellers’
Certificate”) with respect to such truth and correctness of Sellers’
representations and warranties and such compliance by Sellers with their
covenants and agreements hereunder signed by a duly authorized officer
thereof.

     

    6.2          No Intervening
Law.  No Governmental Body shall have enacted, issued,
promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent) which is in effect and has the effect of making the transactions
contemplated by this Agreement illegal or otherwise restraining or prohibiting
consummation of such transactions and which is not satisfied or resolved or
preempted by the Sale Approval Order.

     

    6.3          No Legal
Proceedings.  No Claim by or before a Governmental Body
(including any proceeding over which the Bankruptcy Court has jurisdiction under
28 U.S.C. § 157(b) and (c)), shall have been made, instituted or threatened
against any Seller, Transferred Subsidiary or Purchaser seeking to restrain or
prohibit or to obtain substantial damages with respect to the consummation of
the transactions contemplated hereby.

     

    6.4          Bankruptcy
Filing.  The Bankruptcy Case shall not have been dismissed or
converted to one or more proceedings under chapter 7 of the Bankruptcy Code, and
no trustee or examiner shall have been appointed for Sellers (or any of them),
and the automatic stay under section 362 of the Bankruptcy Code shall not have
been lifted, modified or annulled as to any Transferred Assets having a value,
either individually or in the aggregate, of at least $1,000,000.

     

    6.5          Final
Orders.  The Bankruptcy Court shall have entered the Sale
Approval Order and a final order approving the DIP Facility, and the Sale
Approval Order and such order approving the DIP Facility shall have become Final
Orders.

     

    6.6          Regulatory
Approvals.  All required approvals of Governmental Bodies for
Purchaser’s purchase of the Transferred Subsidiaries shall have been obtained by
ParentCo, the applicable Transferred Subsidiaries or
Purchaser.

     

    6.7          Closing
Documents.  Seller shall have delivered to Purchaser on the
Closing Date the documents required to be delivered pursuant to Sections 1.8 and 2.3.

     

    6.8          No Purchaser Objection to
Initial Price Adjustment.  If Purchaser shall have timely
delivered to ParentCo a good faith objection to the Initial Price Adjustment, as
contemplated in Section 1.11(a), such
objection shall have been resolved or waived by Purchaser in
writing.

     

    
      
         

      

      
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    6.9          No Material Adverse
Effect.  No event, occurrence, fact, condition, change,
development or circumstance shall have arisen or occurred since the date of this
Agreement which has had or could reasonably be expected to have a Material
Adverse Effect.

     

    ARTICLE
VII

     

    SELLERS’
CLOSING CONDITIONS

     

    The
obligation of Sellers to consummate the transactions contemplated by this
Agreement is subject to the fulfillment on or prior to the Closing Date of each
of the following conditions, any one or more of which (to the extent permitted
by applicable Law) may be waived by ParentCo (on behalf of
Sellers):

     

    7.1          Representations and
Warranties; Covenants.  The representations and warranties of
Purchaser contained in this Agreement that are qualified by materiality shall be
true and correct, and the representations and warranties of Purchaser contained
in this Agreement that are not so qualified shall be true and correct in all
material respects, in each case at and as of the Closing Date with the same
effect as though made on the Closing Date, except for changes expressly
contemplated by this Agreement and except for any particular representation or
warranty that specifically addresses matters only as of a particular date (which
shall remain true as of such date, to the extent required above), except where
such failure to be true and correct has been or shall be cured, remedied or
otherwise accounted for pursuant to the Sale Approval Order.  The
covenants and agreements contained in this Agreement to be complied with by
Purchaser at or before the Closing shall have been complied with in all material
respects.  At Closing, ParentCo shall have received a certificate of
Purchaser (the “Purchaser’s
Certificate”) with respect to such truth and correctness of Purchaser’s
representations and warranties and such compliance by Purchaser with its
covenants and agreements hereunder signed by a duly authorized officer
thereof.

     

    7.2          No Intervening
Law.  No Governmental Body shall have enacted, issued,
promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent) which is in effect and has the effect of making the transactions
contemplated by this Agreement illegal or otherwise restraining or prohibiting
consummation of such transactions and which is not satisfied or resolved or
preempted by the Sale Approval Order.

     

    7.3          Sale Approval
Order.  The Bankruptcy Court shall have entered the Sale
Approval Order, and the Sale Approval Order shall have become a Final
Order.

     

    7.4          No Legal
Proceedings.  No Claim by or before a Governmental Body
(including any proceeding over which the Bankruptcy Court has jurisdiction under
28 U.S.C. § 157(b) and (c)), shall have been made, instituted or threatened
against any Seller, Transferred Subsidiary or Purchaser seeking to restrain or
prohibit or to obtain substantial damages with respect to the consummation of
the transactions contemplated hereby.

     

    
      
         

      

      
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    7.5          Bankruptcy
Filing.  The Bankruptcy Case shall not have been dismissed or
converted to a proceeding under chapter 7 of the Bankruptcy Code and no trustee
or examiner shall have been appointed.

     

    7.6          Final
Orders.  The Bankruptcy Court shall have entered the Sale
Approval Order and a final order approval the DIP Facility, and the Sale
Approval Order and such order approval the DIP Facility shall have become Final
Orders.

     

    7.7          Regulatory
Approvals.  All required approvals of Governmental Bodies for
Purchaser’s purchase of the Transferred Subsidiaries shall have been obtained by
ParentCo, the applicable Transferred Subsidiaries or
Purchaser.

     

    7.8          Closing
Documents.  Purchaser shall have delivered to ParentCo on the
Closing Date the documents and payments required to be delivered by it pursuant
to Sections
1.9 and
2.4.

     

    ARTICLE
VIII

     

    TERMINATION
OF AGREEMENT

     

    8.1          Termination Prior to
Closing.  Notwithstanding anything in this Agreement to the
contrary, this Agreement may be terminated, and the transactions contemplated by
this Agreement abandoned, at any time prior to the Closing, upon notice by the
terminating party to the other party as follows:

     

    (a)           by
the mutual written consent of ParentCo (on behalf of Sellers) and
Purchaser;

     

    (b)           by
either ParentCo (on behalf of Sellers) or Purchaser if the Closing shall not
have occurred prior to the date that is one hundred fifty (150) days after the
date hereof (the “Termination Date”);
provided, however, that the
right to terminate this Agreement under this Section 8.1(b) shall
not be available to any party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the failure
of the Closing to occur prior to such date;

     

    (c)           (i)
by ParentCo (on behalf of Sellers), if Purchaser breaches or fails to perform in
any respect any of its representations, warranties or covenants contained in
this Agreement and such breach or failure to perform (A) would give rise to the
failure of a condition set forth in Article VII, (B)
cannot be or has not been cured within ten (10) Business Days following delivery
of written notice of such breach or failure to perform, and (C) has not been
waived by ParentCo (on behalf of Sellers); or (ii) by Purchaser, if any Seller
breaches or fails to perform in any respect any of its representations,
warranties or covenants contained in this Agreement and such breach or failure
to perform (X) would give rise to the failure of a condition set forth in Article VI, (Y)
cannot be or has not been cured within ten (10) Business Days following delivery
of written notice of such breach or failure to perform, and (Z) has not
been waived by Purchaser.

     

    
      
         

      

      
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    (d)           (i)
by ParentCo (on behalf of Sellers), if any of the conditions set forth in Article VII shall
have become incapable of fulfillment prior to the Termination Date, or
(ii) by Purchaser, if any of the conditions set forth in Article VI shall have
become incapable of fulfillment prior to the Termination Date; provided, however, that the
right to terminate this Agreement pursuant to this Section 8.1(d) shall
not be available if the failure of the party so requesting termination to
fulfill any obligation under this Agreement shall have been the cause of the
failure of such condition to be satisfied on or prior to the Termination
Date.

     

    (e)           by
either ParentCo (on behalf of Sellers) or Purchaser, if the Bankruptcy Court
approves a sale, transfer or other disposition by Sellers to a Person (or group
of Persons) other than Purchaser of (i) all or substantially all of the
Transferred Assets, (ii) the Standard Casualty Shares and/or the Standard
Insurance Shares or substantially all of the assets of the Insurance
Subsidiaries, or (iii) the CountryPlace Shares or substantially all of the
assets of the Finance Subsidiaries (any of which, a “Competing
Transaction”); or

     

    (f)      
     by Purchaser (provided that Purchaser is not then
in material breach of any provision of this Agreement), if any of the following
shall occur:

     

    (i)           the
Bankruptcy Case is dismissed or converted to one or more proceedings under
chapter 7 of the Bankruptcy Code, a trustee or examiner is appointed for Sellers
(or any of them), or the automatic stay under section 362 of the Bankruptcy Code
is lifted, modified or annulled as to Transferred Assets having a value, either
individually or in the aggregate, of at least $1,000,000;

     

    (ii)          the
Bankruptcy Court denies any portion of the Bidding Procedures Motion with
respect to any of (A) the Break-Up Fee, (B) the Expense Reimbursement, or (C)
the ability of Purchaser, to the extent of its interest as assignee of Fleetwood
under the DIP Facility, to credit bid all outstanding amounts owing by Sellers
under the DIP Facility; or

     

    (iii)         the
Bidding Procedures Order or the Sale Approval Order is modified in any material
respect without the consent of the Purchaser; or

     

    (iv)        the
Sale Approval Order has not been entered by the Bankruptcy Court and become a
Final Order within ninety (90) days after the date hereof; provided, however, that
Purchaser shall not be entitled to exercise its rights under this clause (iv)
later than five (5) Business Days after such ninety (90) day period has expired
or if the Sale Approval Order has been entered by the Bankruptcy Court prior to
Purchaser exercising such rights.

     

    8.2          Break-up Fee; Expense
Reimbursement.

     

    (a)           In
the event that this Agreement is terminated under Section 8.1(e), and
provided that (i) Purchaser is not in material breach of any provision of this
Agreement prior to such termination and (ii) a Competing Transaction has been
consummated, Seller shall pay to Purchaser, in cash, the sum of $1,100,000 (the
“Break-Up Fee”)
at the time of the consummation of the Competing Transaction.

     

    
      
         

      

      
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    (b)           In
the event that this Agreement is terminated under Section 8.1(e), and
provided that (i) Purchaser is not in material breach of any provision of this
Agreement prior to such termination and (ii) a Competing Transaction has been
consummated, Seller shall reimburse Purchaser for reasonable, documented
out-of-pocket expenses actually incurred by Purchaser in connection with this
Agreement and the transactions contemplated hereby, the amount of which shall
not in the aggregate exceed $250,000 (the “Expense
Reimbursement”), at the time of the consummation of the Competing
Transaction.

     

    (c)           In
the event that this Agreement is terminated under Section 8.1(e), the
Break-Up Fee and the Expense Reimbursement shall be Purchaser’s sole and
exclusive remedy against Sellers (and such remedies shall be available only if
in accordance with this Section 8.2 and the
Bidding Procedures Order), in full satisfaction of all of Sellers’ obligations
hereunder.  For the avoidance of doubt, in the event of a breach or
violation of any representation and warranty or covenant or agreement of any
Seller under this Agreement, if this Agreement is terminated under Section 8.1(e),
Purchaser’s sole and exclusive remedy against Sellers or any Seller (whether in
contract or tort, under statute, rule, Law or otherwise) shall be to terminate
this Agreement in accordance with Section 8.1(e) and
receive the Break-Up Fee and Expense Reimbursement in accordance with this Section 8.2 and the
Bidding Procedures Order.

     

    8.3          Survival After
Termination.  If this Agreement is terminated pursuant to Section 8.1 and the
transactions contemplated hereby are not consummated, or if the Bankruptcy Court
does not approve this Agreement or the transactions contemplated hereby, this
Agreement shall become null and void and have no further force or effect, except
that any such termination shall be without prejudice to the rights of any party
on account of the non-satisfaction of the conditions set forth in Article VI and Article VII resulting
from fraud or intentional misconduct of another party under this
Agreement.  Notwithstanding anything in this Agreement to the
contrary, the provisions of Sections 5.2
(Confidentiality), 5.3 (Expenses), 8.2, this Section 8.3 and Article IX shall
survive any termination of this Agreement.

     

    ARTICLE
IX

     

    MISCELLANEOUS

     

    9.1          Certain
Definitions.

     

    (a)           As
used in this Agreement, the following terms have the following
meanings:

     

    “Accounts Receivable”
means, with respect to any Person, all trade and other accounts receivable and
other rights to payment from past or present customers and other account debtors
of such Person (including any such account receivable or other right to payment
due from any Affiliate of such Person), and the full benefit of all security for
such accounts or rights to payment, including all trade, vendor and other
accounts receivable representing amounts receivable in respect of goods sold or
services rendered to customers of such Person or in respect of amounts
refundable or otherwise due to such Person from vendors, suppliers or other
Persons.

     

    “Accounts Receivable and
Inventory Value Shortfall” means the amount, if any, by which the
aggregate value of the Accounts Receivable and Inventory of Sellers as of the
Effective Time is less than 75% of Sellers’ reported aggregate Accounts
Receivable and Inventory value as of October 29, 2010 (which, for added
certainty, shall exclude any Account Receivable of any Transferred Subsidiary),
as such aggregate value is determined in accordance with Section
1.12.

     

    
      
         

      

      
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    “Affiliate” means,
with respect to any specified Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with such specified Person; with the term “control” (and
its derivatives) meaning the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person
whether through the ownership of voting securities, contract or
otherwise.

     

    “Assignment and Assumption
Agreement” means the Assignment and Assumption Agreement substantially in
the form of Exhibit
B hereto to be executed by Purchaser and the applicable Sellers on the
Closing Date.

     

    “Assumed Warranty
Liabilities” means Liabilities arising under express written warranties
issued by any Seller in connection with the sale of a Seller’s products produced
in the Ordinary Course of Business at any of the Seller plants listed on Schedule 9.1(a)(i),
but only to the extent of the warranty terms set forth in Exhibit E attached
hereto.  Assumed Warranty Liabilities shall not include any Liability
arising under any other written or oral warranty given by any Seller or
representative thereof or any other actual or purported warranty obligation,
including implied warranties (such as, but not limited to, implied warranties of
merchantability or fitness for particular purpose).

     

    “Bill of Sale” means
the Bill of Sale substantially in the form of Exhibit A hereto to
be executed by the applicable Sellers on the Closing Date.

     

    “Business Day” means
any day that is not a Saturday, Sunday or other day on which banks located in
Dallas, Texas or Phoenix, Arizona are authorized or obligated to
close.

     

    “Claim” means a suit,
claim, action, proceeding, inquiry, investigation, litigation, legal proceeding,
written demand, charge, complaint, arbitration, indictment, information, or
grand jury subpoena, whether civil, criminal, administrative, judicial or
investigative and whether public or private, in each case, filed with, made by
or conducted or heard before a Governmental Body.

     

    “COBRA” means the
Consolidated Omnibus Reconciliation Act of 1985.

     

    “Computer Software”
means all computer software (including source code, executable code, data,
databases and documentation) owned by or licensed to any Sellers which is used
in or necessary for the conduct of the Business as it is conducted on the date
hereof.

     

    “Confidential
Information” means all information regarding a party’s business or
affairs, including business concepts, processes, methods, trade secrets,
systems, know-how, devices, formulas, product specifications, marketing methods,
prices, customer lists, supplier lists, methods of operation or other
information, whether in oral, written or electronic form, that is
either:  (i) designated in writing (including by electronic mail) as
confidential; (ii) is of a nature such that a reasonable Person would know that
it is confidential; or (iii) is disclosed under circumstances such that a
reasonable Person would know it is confidential.  Notwithstanding the
foregoing, the following information shall not be considered Confidential
Information:  (A) information that is or becomes publicly
available through no fault of the party obligated to keep it confidential (or
such party’s Affiliates or Representatives); (B) information with regard to the
other party that was rightfully known by a party prior to commencement of
discussions regarding the subject matter of this Agreement, as evidenced by
documentation; (C) information that was independently developed by a party
without use of the Confidential Information, as evidenced by documentation; and
(D) information rightfully disclosed to a party by a third party without
continuing restrictions on its use or disclosure.

     

    
      
         

      

      
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    “Contract” means any
written or oral contract, agreement, arrangement, understanding, lease, license,
deed or instrument or other contractual or similar arrangement or commitment,
but excluding Purchase Orders.

     

    “Effective Time” means
11:59 p.m. (Central Standard Time) on the Closing Date.

     

    “Employee Benefit
Plan” means any “employee benefit plan” as such term is defined in ERISA
§3(3)) and any other material employee benefit plan, program or
arrangement.

     

    “Employee Pension Benefit
Plan” has the meaning set forth in ERISA §3(2).

     

    “Employee Welfare Benefit
Plan” has the meaning set forth in ERISA §3(1).

     

    “Encumbrances” means
all interests, Liens, Claims, conditional sales agreements, rights of first
refusal or options.

     

    “Environmental, Health and
Safety Liabilities” means any and all Claims, costs, damages, expenses,
Liabilities and/or other responsibility or potential responsibility arising from
or under any Environmental Law or Occupational Safety and Health Law (including
compliance therewith).

     

    “Environmental Laws”
means all applicable federal, state, local, and foreign Laws, all judicial and
administrative orders and determinations, and all common law concerning public
health and safety, worker health and safety, pollution, or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, exposure to, or cleanup of any hazardous materials,
substances, wastes, chemical substances, pesticides, pollutants, contaminants,
toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise, odor, mold, or radiation, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended; the
Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. §§ 5101 et seq.; the Clean Water Act, 33
U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601
et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Safe Drinking Water
Act, 42 U.S.C. §§ 300f et seq.; the Atomic Energy Act, 42 U.S.C. §§ 2011 et
seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et
seq.; and the Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§ 301 et
seq.

     

    
      
         

      

      
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    “ERISA” means the U.S.
Employee Retirement Income Security Act of 1974, as amended, together with the
rules and regulations promulgated thereunder.

     

    “ERISA Affiliate”
means, with respect to any Person, any trade or business (whether or not
incorporated) (i) under common control within the meaning of section 4001(b)(1)
of ERISA with such Person, or (ii) which together with such Person is treated as
a single employer under sections 414(b), (c), (m), (n) or (o) of the Tax
Code.

     

    “Final Order” means an
order entered by the Bankruptcy Court or other court of competent jurisdiction
as to which: (i) no appeal, notice of appeal, motion for reconsideration, motion
to amend or make additional findings of fact, motion to alter or amend judgment,
motion for rehearing or motion for new trial has been timely filed; (ii) the
time for instituting or filing an appeal, motion for rehearing or motion for new
trial shall have expired; and (iii) if an appeal has been timely filed no stay
pending an appeal is in effect and the time for requesting a stay pending appeal
shall have expired; provided, however, that the
filing or pendency of a motion under Federal Rule of Bankruptcy Procedure 9024
shall not cause an order not to be deemed a “Final Order” unless such motion
shall be filed within ten (10) days of the entry of the order at
issue.

     

    “Finance Subsidiaries”
means, collectively, CountryPlace Acceptance Corp., a Nevada corporation,
CountryPlace Acceptance GP, LLC, a Texas limited liability company, CountryPlace
Acceptance LP, LLC, a Delaware limited liability company, CountryPlace Mortgage,
Ltd., a Texas limited partnership, CountryPlace Title, Ltd., a Texas limited
partnership, CountryPlace Mortgage Holdings, LLC, a Delaware limited liability
company, CountryPlace Funding, a Delaware corporation, CountryPlace
Securitization, LLC, a Delaware limited liability company, and CountryPlace
Holdings, LLC, a Delaware limited liability company.

     

    “GAAP” means United
States generally accepted accounting principles.

     

    “Governmental Body”
means a domestic or foreign national, federal, state, provincial, or local
governmental, regulatory or administrative authority, department, agency,
commission, court, tribunal, arbitral body or self-regulated
entity.

     

    “Hazardous Activity”
means the distribution, generation, handling, importing, management,
manufacturing, processing, production, refinement, release, storage, transfer,
transportation, treatment or use (including any withdrawal or other use of
groundwater) of any Hazardous Material in, on, under, about or from any Owned
Real Property, whether or not in connection with the conduct of the Business,
except to the extent in material compliance with applicable Environmental
Law.

     

    “Hazardous Material”
means any substance, material or waste which is regulated by any Environmental
Law, including any material, substance or waste which is defined as a “hazardous
waste,” “hazardous material,” “hazardous substance,” “extremely hazardous
waste,” “restricted hazardous waste,” “contaminant,” “pollutant,” “toxic waste”
or “toxic substance” under any provision of Environmental Law, and including
petroleum, petroleum product, asbestos, presumed asbestos-containing material or
asbestos-containing material, urea formaldehyde and polychlorinated
biphenyls.

     

    
      
         

      

      
        55

        
          

        

      

      
         

      

    

     

    “Hedging Contract”
means any interest rate, currency or commodity swap agreement, cap agreement or
collar agreement, and any other agreement or arrangement designed to protect a
Person against fluctuations in interest rates, currency exchange rates or
commodity prices.

     

    “Income Tax Return”
means any return, declaration, report, claim for refund, or information return
or statement relating to Income Taxes, including any schedule or attachment
thereto, and including any amendment thereof.

     

    “Indebtedness” means,
with respect to any Person, without duplication: (a) any indebtedness for
borrowed money or issued in substitution for or exchange of indebtedness for
borrowed money, including principal, premium (if any), early or prepayment
penalties, charges, premiums, break fees or other similar charges, and accrued
interest; (b) any indebtedness or obligation evidenced by any bond, debenture,
note, debt security, unfunded letter of credit or other similar instrument,
including principal, premium (if any), early or prepayment penalties, charges,
premiums, break fees or other similar charges, and accrued interest; (c) bank
overdrafts (excluding undrawn lines) and outstanding checks to the extent
treated as bank overdrafts or otherwise included as debt in the financial
statements of such Person (without duplication) (it being understood that only
the amount of such bank overdraft or the portion of the check that is treated as
a bank overdraft or debt shall be treated as “Indebtedness”); (d) any
Liability under any sale and leaseback transaction, any synthetic lease or Tax
ownership operating lease transaction or under any lease recorded for accounting
purposes by such Person as a capitalized lease or a financing lease with respect
to which such Person is liable, contingently or otherwise, as obligor or
otherwise; (e) any Liability of such Person under deferred compensation plans,
stock appreciation rights plan, phantom stock plans, severance or bonus plans or
similar arrangements made payable as a result of the consummation of the
transactions contemplated by this Agreement or with respect to periods ending on
or prior to the Closing Date; (f) any off-balance sheet financing of such Person
(but excluding any leases recorded for accounting purposes by such Person as an
operating lease); (g) any dividends or distributions payable, or accrued for, by
such Person; (h) any Liability of such Person under any Hedging Contract;
(i) all indebtedness of others referred to in clauses (a) through (h) above
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement (i) to pay
or purchase such indebtedness or to advance or supply funds for the payment or
purchase of such indebtedness, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such indebtedness or to assure the holder
of such indebtedness against loss, (iii) to supply funds to or in any other
manner invest in the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such services are
rendered) or (iv) otherwise to assure a creditor against loss, (k) all
indebtedness referred to in clauses (a) through (i) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Encumbrance on any property owned by such
Person, even though such Person has not assumed or become liable for the payment
of such indebtedness; and (k) any accrued and unpaid interest on, and any
prepayment premiums, penalties or similar contractual charges in respect of, any
of the foregoing Liabilities computed as though payment is being made in respect
thereof on the Closing Date; provided, however, that
“Indebtedness” shall not include (x) trade payables and accrued expenses to the
extent such items are aged sixty (60) days or less; or (y) prepaid or deferred
revenue to the extent such revenue is reflected as a current liability in the
Most Recent Financial Statements; or (z) purchase price holdbacks arising in the
Ordinary Course of Business in respect of a portion of the purchase prices of an
asset to satisfy unperformed obligations of the seller of such asset to the
extent that holdbacks are reflected as a current liability in the Most Recent
Financial Statements.

     

    
      
         

      

      
        56

        
          

        

      

      
         

      

    

     

    “Insider” means any
executive officer, director, governing body member, majority (i.e., greater than
50%) equity holder, partner in a partnership or Affiliate, as applicable, of any
Seller or Transferred Subsidiary or any predecessor or Affiliate of any Seller
or Transferred Subsidiary or any individual related by blood, marriage or
adoption to any such individual.

     

    “Insurance
Subsidiaries” means, collectively, Standard Casualty Co., a Texas
corporation, Standard Insurance Agency, Inc., a Texas corporation, and Palm
Harbor Ins. Agency of Texas, a Texas corporation.

     

    “Intellectual
Property” means all of the following in any jurisdiction throughout the
world (i) trade names, trademarks and service marks, service names, brand names,
logos, Internet domain names, trade dress and similar rights, logos, slogans,
and corporate names (and all translations, adaptations, derivations and
combinations of the foregoing), and general intangibles of a like nature,
together with all goodwill associated with each of the foregoing and all
registrations and applications to register any of the foregoing (“Marks”); (ii)
patents, patent applications and patent disclosures, together with all
reissuances, divisionals, continuations, continuations-in-part, revisions,
reissues, extensions and reexaminations thereof (“Patents”);
(iii) copyrights (whether registered or unregistered) and applications for
registration and copyrightable works (“Copyrights”); (iv)
confidential and proprietary information, including trade secrets and know-how
(including ideas, research and development, engineering designs and related
approvals of Governmental Bodies, self-regulatory organizations, and trade
associations, inventions, formulas, compositions, manufacturing and production
processes and techniques, designs, drawings and specifications; and (vi) all
licenses and sublicenses held by any Seller as licensee pertaining to
intellectual property of any other Person; and for the avoidance of doubt,
“Intellectual
Property” shall exclude Computer Software.

     

    “Inventory” means all
inventory of Seller, including raw and packing materials, work-in-progress,
finished goods, supplies, parts and similar items related to, used or held for
use in connection with the Business.

     

    “IRS” means the United
States Internal Revenue Service.

     

    “Knowledge” means,
when used to qualify any representation, warranty or other statement of Sellers
contained herein, the actual current knowledge of any of Larry H. Keener, Kelly
Tacke, Ron Powell (solely as to Palm Harbor Homes, Inc. and Nationwide Homes,
Inc.), Gavin Ryan (solely as to Standard Casualty Co. and its subsidiaries), Joe
Kesterson (solely as to Palm Harbor Homes, Inc.) or Greg Aplin (solely as to
CountryPlace Acceptance Corporation and its subsidiaries) after reasonable
investigation or inquiry into the subject matter of the representation, warranty
or other statement to which such term is being applied.

     

    
      
         

      

      
        57

        
          

        

      

      
         

      

    

     

    “Law” means any
federal, state, local or foreign statute, law, rule, regulation, order, writ,
ordinance, judgment, governmental directive, injunction, decree or other
requirement of any Governmental Body (including the Bankruptcy
Code).

     

    “Liabilities” means
any direct or indirect, primary or secondary, liability, indebtedness,
obligation, penalty, cost or expense (including costs of investigation,
collection and defense), claim, deficiency, guaranty or endorsement of or by any
Person of any type, whether known or unknown, accrued, absolute or contingent,
liquidated or unliquidated, choate or inchoate, matured or unmatured, disputed
or undisputed, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or
otherwise.  Without limiting the foregoing, the term “Liabilities”
includes and refers to all liabilities and obligations for or with respect to
Taxes, including liabilities for Taxes of any Person under Treasury Regulation
Section 1.1502 6 (or any similar provision of any applicable Law), as a
transferee or successor, by contract, or otherwise.

     

    “Lien” means any
security interest, mortgage, pledge, lien, encumbrance, charge or claim (as
defined in section 101(5) of the Bankruptcy Code).

     

    “Material Adverse
Effect” means any circumstance, occurrence, event or change that has or
could be reasonably expected to have a material adverse effect on (a) the
Transferred Assets, the Assumed Liabilities, the Business or the assets and
Liabilities of the Transferred Subsidiaries, in each case taken as a whole, or
(b) the ability of Sellers to timely satisfy and perform their obligations under
this Agreement and consummate the transactions contemplated hereby; provided, however, that in no
event shall any of the following be deemed to constitute, nor shall any of the
following be taken into account in determining whether there has been or shall
be, a Material Adverse Effect:  (i) general economic or business
conditions or changes therein, including changes in interest or currency rates,
or acts of war, civil unrest or terrorism; (ii) any change in Law; (iii) any
occurrence or condition generally affecting the industries in which the Business
operates, including any change in such conditions; (iv) any occurrence or
condition arising out of the announcement of the transactions described in this
Agreement or the performance of the transactions contemplated hereby (including
any occurrence or condition arising out of the identity of or facts relating to
Purchaser); and (v) any effect or result of a breach of this Agreement by
Purchaser; provided, further, that the
circumstances, changes, developments, events or states of facts set forth in
clauses (i), (ii), (iii) above shall be taken into account in determining
whether a Material Adverse Effect has occurred to the extent, and only to the
extent, such circumstances, changes, developments, events or states of facts
have a disproportionately adverse effect on the Transferred Assets, the Assumed
Liabilities, the Business and the assets and Liabilities of the Transferred
Subsidiaries, taken as a whole, as compared to other participants in the
industries in which Sellers and the Transferred Subsidiaries
operate.

     

    “Occupational Safety and
Health Law” means any applicable Law designed to provide safe and
healthful working conditions and to reduce occupational safety and health
hazards, including the Occupational Safety and Health Act, and any program,
whether governmental or private (such as those promulgated or sponsored by
industry associations and insurance companies), designed to provide safe and
healthful working conditions.

     

    
      
         

      

      
        58

        
          

        

      

      
         

      

    

     

    “Ordinary Course of
Business” means the operation of the Business by Sellers and the
Transferred Subsidiaries in the usual and ordinary course in a manner
substantially similar to the manner in which Sellers and the Transferred
Subsidiaries operated, including after the commencement of the Bankruptcy Case
and as permitted under the Bankruptcy Code and by the Bankruptcy
Court.

     

    “Permitted
Encumbrance” means:  (i) the Virgo Security Interest, (ii) the
security interest granted under the Textron Facility, (iii) Encumbrances for
Taxes and assessments not yet payable; (iv) Encumbrances that shall be
released at or prior to the Closing; and (v) (A) easements,
rights-of-way, servitudes, permits, licenses, surface leases, ground leases to
utilities, municipal agreements, railway siding agreements and other similar
rights, all as reflected in the official records of the jurisdictions where any
real property is located, (B) conditions, covenants or other restrictions
reflected in the official records of the jurisdictions where any real property
is located, and (C) easements for streets, alleys, highways, telephone lines,
gas pipelines, power lines, railways and other easements and rights-of-way on,
over or in respect of any real property, all as reflected in the official
records of the jurisdictions where any real property is located; in each case
with respect to clauses (iii) through (v) above, individually or in the
aggregate, that do not or would not reasonably be expected to materially and
adversely affect the current use or value of the property subject thereto or the
operations of the Business as it is currently conducted by Sellers and the
Transferred Subsidiaries.

     

    “Person” means any
individual, corporation, partnership, limited liability company, limited
liability partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Body or other
entity.

     

    “Pre-Closing Claims”
means (i) Claims asserted by or against a Seller prior to the Closing Date, and
(ii) counterclaims with respect to a Claim asserted by or against a Seller prior
to the Closing Date.

     

    “Purchase Order” means
(i) any open purchase order (or equivalent document) received and accepted by
any Seller from any customer of the Business in the Ordinary Course of Business
for the production and sale of any finished goods Inventory capable of being
produced at any Real Property (based on its current configuration), whether or
not such purchase order or equivalent document was originally intended for
fulfillment at a Real Property, or (ii) any open purchase order (or equivalent
document) delivered by any Seller to any third party vendor or supplier for the
purchase by such Seller from such vendor or supplier in the Ordinary Course of
Business of raw materials, supplies or other similar Inventory intended for use
in the production of finished goods Inventory from any Real Property or for any
other conduct of operations at any Real Property.

     

    “Release” means any
release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, or leaching into the indoor or outdoor environment, or
into or out of any property.

     

    “Representative”
means, with respect to a particular Person, any director, officer, manager,
partner, member, employee, agent, consultant, advisor or other representative of
such Person, including legal counsel, accountants, and financial
advisors.

     

    
      
         

      

      
        59

        
          

        

      

      
         

      

    

     

    “Tax” or “Taxes” means all
taxes, charges, fees, imposts, levies or other assessments, including all net
income, franchise, profits, gross receipts, capital, sales, use, ad valorem,
value added, transfer, transfer gains, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation, real or personal property, and estimated taxes,
customs duties, fees, assessments and charges of any kind whatsoever, together
with any interest and any penalties, fines, additions to tax or additional
amounts thereon, imposed by any taxing authority (federal, state, local or
foreign) and shall include any transferee Liability in respect of
Taxes.

     

    “Tax Code” means the
Internal Revenue Tax Code of 1986, as amended.

     

    “Tax Return” means any
return, declaration, report, form, estimate, information return or statement
required to be filed in respect of any Taxes or to be supplied to a taxing
authority in connection with any Taxes.

     

    “Textron Facility”
means that certain Amended and Restated Agreement for Wholesale Financing
(Finished Goods – Shared Credit Facility) dated May 25, 2004, as amended, by and
among ParentCo, Palm Harbor Manufacturing, L.P., Palm Harbor Homes I, L.P., Palm
Harbor Marketing, Inc., Textron Financial Corporation and the other “Lenders”
named therein.

     

    “Title Company” means
First American Title Company, or such alternate title company as ParentCo and
Purchaser shall agree.

     

    “Transferred
Subsidiaries” means, collectively, the Finance Subsidiaries and the
Insurance Subsidiaries, and “Transferred
Subsidiary” means any of them.

     

    “Unauthorized
Indebtedness” means, as of the Effective Time, any Indebtedness of any
Transferred Subsidiary other than (i) the Virgo Indebtedness and (ii)
Indebtedness incurred under construction lending facilities entered into in the
Ordinary Course of Business by CountryPlace Mortgage, Ltd. with third party
lenders prior to the date hereof.

     

    “Virgo Indebtedness”
means any Indebtedness owing by CountryPlace Acceptance Corporation,
CountryPlace Mortgage, Ltd., CountryPlace Mortgage Holdings, LLC, ParentCo,
CountryPlace Acceptance G.P., LLC and CountryPlace Acceptance L.P., LLC to the
“Lender” parties (or their successors, assigns or nominees) under that certain
Credit Agreement dated as of January 29, 2010 by and among CountryPlace
Acceptance Corporation, CountryPlace Mortgage, Ltd., CountryPlace Mortgage
Holdings, LLC, ParentCo, CountryPlace Acceptance G.P., LLC, CountryPlace
Acceptance L.P., LLC, the “Lenders” who are party to such Credit Agreement and
Virgo Service Company LLC.

     

    “Virgo Security
Interest” means the security interest in certain collateral granted to
Virgo Service Company LLC as Administrative Agent and Collateral Agent under
that certain Guaranty and Security Agreement dated as of January 29, 2010 by and
among CountryPlace Acceptance Corporation, CountryPlace Mortgage, Ltd.,
CountryPlace Mortgage Holdings, LLC, ParentCo, CountryPlace Acceptance G.P.,
LLC, CountryPlace Acceptance L.P., LLC and Virgo Service Company
LLC.

     

    
      
         

      

      
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    (b)           The
following capitalized terms are defined in the following Sections of this
Agreement:

     

    
      
        
          
            
              
                	
                        Definition

                      	 	
                        Location

                      
	
                        Acquired
      Leased Real Property

                      	 	
                        2.10(a)

                      
	
                        Agreement

                      	 	
                        Preamble

                      
	
                        Allocation

                      	 	
                        1.13

                      
	
                        Assumed
      Contracts

                      	 	
                        1.1(f)

                      
	
                        Assumed
      Liabilities

                      	 	
                        1.3

                      
	
                        Bankruptcy
      Case

                      	 	
                        Recitals

                      
	
                        Bankruptcy
      Code

                      	 	
                        Recitals

                      
	
                        Bankruptcy
      Court

                      	 	
                        Recitals

                      
	
                        Bankruptcy
      Court Approval

                      	 	
                        5.7

                      
	
                        Base
      Price

                      	 	
                        1.6

                      
	
                        Bidding
      Procedures

                      	 	
                        5.7(a)(ii)

                      
	
                        Bidding
      Procedures Motion

                      	 	
                        5.7(a)(ii)

                      
	
                        Bidding
      Procedures Order

                      	 	
                        5.7(a)(ii)

                      
	
                        Books
      and Records

                      	 	
                        1.1(k)

                      
	
                        Break-Up
      Fee

                      	 	
                        8.2(a)

                      
	
                        Business

                      	 	
                        Recitals

                      
	
                        Closing

                      	 	
                        1.7

                      
	
                        Closing
      Apportionments

                      	 	
                        2.10

                      
	
                        Closing
      Date

                      	 	
                        1.7

                      
	
                        Closing
      Payment

                      	 	
                        1.6

                      
	
                        Closing
      Statements

                      	 	
                        2.3(a)

                      
	
                        Competing
      Transaction

                      	 	
                        8.1(e)

                      
	
                        Cure
      Costs

                      	 	
                        1.4

                      
	
                        Deeds

                      	 	
                        2.3(b)

                      
	
                        DIP
      Facility

                      	 	
                        Recitals

                      
	
                        Excluded
      Assets

                      	 	
                        1.2

                      
	
                        Excluded
      Liabilities

                      	 	
                        1.5

                      
	
                        Existing
      Insurance Policies

                      	 	
                        5.13

                      
	
                        Expense
      Reimbursement

                      	 	
                        8.2(b)

                      
	
                        Final
      Price Adjustment

                      	 	
                        1.11(d)

                      
	
                        Finance
      Business

                      	 	
                        Recitals

                      
	
                        Fleetwood

                      	 	
                        Recitals

                      
	
                        Home
      Business

                      	 	
                        Recitals

                      
	
                        Insurance
      Business

                      	 	
                        Recitals

                      
	
                        Insurance
      Representative

                      	 	
                        3.8(d)

                      
	
                        Interim
      DIP Facility Owner

                      	 	
                        5.7(a)(i)

                      
	
                        Inventory

                      	 	
                        1.1(d)

                      
	
                        Leased
      Real Property / Leased Real Properties

                      	 	
                        3.12(b)

                      
	
                        Most
      Recent Financial Statements

                      	 	
                        3.5

                      
	
                        Objection
      Notice

                      	 	
                        1.11(b)

                      
	
                        Owned
      Real Property / Owned Real Properties

                      	 	
                        3.12(a)

                      
	
                        ParentCo

                      	 	
                        Preamble

                      
	
                        Permits

                      	 	
                        3.9(a)

                      

              

            

          

        

      

    

    
      
         

      

      
        61

        
          

        

      

      
         

      

    

     

    
      
        
          	
                  Permitted
      Disclosures

                	 	
                  5.2(a)

                
	
                  Petition
      Date

                	 	
                  Recitals

                
	
                  Post-Closing
      Price Adjustment

                	 	
                  1.11(b)

                
	
                  Purchase
      Price

                	 	
                  1.6

                
	
                  Purchaser

                	 	
                  Preamble

                
	
                  Purchaser’s
      Certificate

                	 	
                  7.1

                
	
                  Real
      Properties

                	 	
                  3.12(b)

                
	
                  Real
      Property Lease

                	 	
                  3.12(b)

                
	
                  Real
      Property Escrow

                	 	
                  2.1

                
	
                  Reinsurance
      Contract

                	 	
                  3.10(b)(ix)

                
	
                  Sale
      Approval Order

                	 	
                  5.7(a)(iii)

                
	
                  Sellers

                	 	
                  Preamble

                
	
                  Sellers’
      Certificate

                	 	
                  6.1

                
	
                  Standard
      Casualty Share

                	 	
                  1.1(a)

                
	
                  Surveys

                	 	
                  2.6

                
	
                  Tangible
      Personal Property

                	 	
                  1.1(c)

                
	
                  Termination
      Date

                	 	
                  8.1(b)

                
	
                  Title
      Commitment

                	 	
                  2.6

                
	
                  Title
      Commitments

                	 	
                  2.6

                
	
                  Title
      Policies

                	 	
                  2.7

                
	
                  Transferred
      Assets

                	 	
                  1.1

                
	
                  Transferred
      IP

                	 	
                  1.1(i)

                
	
                  Transferred
      Permits

                	 	
                  1.1(j)

                
	
                  Transferred
      Seller Employee

                	 	
                  5.12(a)

                
	
                  WARN
      Act

                	 	
                  3.26(e)

                

        

      

    

     

    9.2          Consent to Jurisdiction;
Service of Process; Waiver of Jury Trial.

     

    (a)           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).

     

    (b)           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.

     

    (c)           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 at the Closing, 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.

     

    
      
         

      

      
        62

        
          

        

      

      
         

      

    

     

    (d)           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.

     

    9.3          Notices.  Any
notice or other communication required or permitted hereunder shall be in
writing and shall be deemed to have been duly given (i) on the day of delivery
if delivered in person, (ii) 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),
(iii) on the first (1st) Business Day following the date of dispatch if
delivered using a next-day service by a nationally recognized express courier
service, or (iv) on the earlier of confirmed receipt or the fifth (5th) 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 9.3 by the party to
receive such notice:

     

    (a)          if
to Purchaser, to:

     

    Palm
Harbor 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
to:

     

    Third
Avenue Management

    622 Third
Avenue, 32nd
Floor

    New York,
New York  10017

    Attention:  Robert
Jordan, Sr. Managing Director, Corporate Counsel

    Facsimile:  (212)
735-0003

     

    with a
copy (which shall not constitute notice to Purchaser) to:

     

    Snell
& Wilmer L.L.P.

    One
Arizona Center

    400 E.
Van Buren

    Phoenix,
Arizona  85004

    Attention:  Garth
D. Stevens

    Facsimile:  (602)
382-6070

     

    
      
         

      

      
        63

        
          

        

      

      
         

      

    

     

    (b)          if
to any of Sellers, to:

     

    Palm
Harbor Homes, Inc.

    15303
Dallas Parkway, Suite 800

    Addison,
Texas  75001-4600

    Attention:  Larry
H. Keener, Chairman, President & CEO

    Facsimile:  (972)
764-9020

     

    with a
copy (which shall not constitute notice to Sellers) to

     

    Locke
Lord Bissell & Liddell LLP

    2200 Ross
Avenue, Suite 2200

    Dallas,
Texas  75201

    Attention:  Gina
E. Betts

    Facsimile:  (214)
756-8515

     

    9.4           Entire
Agreement.  This Agreement (including the Exhibits and
Schedules hereto), the DIP Facility and any other ancillary agreements executed
by the parties hereto in connection with the consummation of the transactions
contemplated by this Agreement and the DIP Facility contain the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede all prior agreements, written or oral, with respect
thereto.

     

    9.5           Non-Survival of
Representations, Warranties and Covenants.  The respective
representations, warranties and covenants of Sellers and Purchaser contained in
this Agreement and any certificate delivered pursuant hereto shall terminate at,
and not survive, the Closing; provided, that this Section shall not limit any
covenant or agreement of the parties that by its terms requires performance
after the Closing.

     

    9.6           Amendments.  This
Agreement may be amended, superseded, canceled, renewed or extended only by a
written instrument signed by Purchaser and ParentCo (on behalf of
Sellers).

     

    9.7           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.

     

    9.8           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.

     

    
      
         

      

      
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    9.9           Binding Effect;
Assignment.  This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and
assigns.  This Agreement is not assignable by any party without the
prior written consent of each other party.

     

    9.10         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.

     

    9.11         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.

     

    9.12         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.

     

    
      
         

      

      
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    9.13         No Third Party
Beneficiaries.  Except as otherwise set forth in this
Agreement, no provision of this Agreement is intended to, or shall, confer any
third party beneficiary or other rights or remedies upon any Person other than
the parties hereto.

     

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    IN
WITNESS WHEREOF, the parties have executed this Asset Purchase Agreement as of
the date first above written.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            	
                                                    SELLERS:

                                                  
	 
      
	
                                                    Palm Harbor Homes, Inc.,
      a Florida corporation

                                                  
	 
      	 
      
	
                                                    By:

                                                  	/s/
      Larry H. Keener
	
                                                    Name:

                                                  	Larry
      H. Keener
	
                                                    Title:

                                                  	President
      and Chief Executive Officer
	 
      	 
      
	
                                                    Palm Harbor GenPar, LLC,
      a Nevada limited

                                                    liability
      company

                                                  
	 
      	 
      
	
                                                    By:

                                                  	/s/
      Larry H. Keener
	
                                                    Name: 

                                                  	Larry
      H. Keener
	
                                                    Title:

                                                  	President
	 
      	 
      
	
                                                    Palm Harbor Mfg., L.P.,
      a Texas limited

                                                    partnership

                                                  
	 
      	 
      
	
                                                    By:

                                                  	/s/
      Larry H. Keener
	
                                                    Name:

                                                  	Larry
      H. Keener
	
                                                    Title:

                                                  	President
	 
      	 
      
	
                                                    Palm Harbor Real Estate,
      LLC, a Texas limited

                                                    liability
      company

                                                  
	 
      	 
      
	
                                                    By:

                                                  	/s/
      Larry H. Keener
	
                                                    Name:

                                                  	Larry
      H. Keener
	
                                                    Title:

                                                  	President
      of Sole Member
	 
      	 
      
	
                                                    Nationwide Homes, Inc.,
      a Delaware corporation

                                                  
	 
      	 
      
	
                                                    By:

                                                  	/s/
      Larry H. Keener
	
                                                    Name:

                                                  	Larry
      H. Keener
	
                                                    Title:

                                                  	Chairman

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    Signature
Page to Asset Purchase Agreement

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              	
                                      Palm Harbor Albemarie,
      LLC, a Delaware

                                      corporation

                                    
	 
      	 
      
	
                                      By:

                                    	/s/
      Larry H. Keener
	
                                      Name: 

                                    	Larry
      H. Keener
	
                                      Title:

                                    	President
      
	 
      	 
      
	
                                      PURCHASER:

                                    
	 
      	 
      
	
                                      Palm Harbor Homes, Inc.,
      a Delaware corporation

                                    
	 
	
                                      By:

                                    	/s/ Joseph H. Stegmayer
	
                                      Name:

                                    	Joseph H. Stegmayer
	
                                      Title:

                                    	President

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    Signature
Page to Asset Purchase Agreement

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