Document:

Prepared by MERRILL CORPORATION

AMENDED AND RESTATED CREDIT AGREEMENT

 

among

 

MONACO COACH CORPORATION

ROYALE COACH BY MONACO, INC.

and

MCC ACQUISITION CORPORATION

as Borrowers

 

THE LENDERS NAMED HEREIN,

as Lenders

 

U.S. BANK NATIONAL ASSOCIATION,

as Administrative Lender,

Swingline Lender, and

L/C Bank

 

TOTAL COMMITMENT -- $110,000,000

 

SEPTEMBER 28, 2001

 

CONTENTS

 

	

  ARTICLE

  I.

  	

  DEFINITIONS

  
	

  1.1

  	

  DEFINED TERMS

  
	

  1.2

  	

  ACCOUNTING AND

  FINANCIAL DETERMINATIONS

  
	

  1.3

  	

  HEADINGS

  
	

  1.4

  	

  ADDITIONAL DEFINITION

  PROVISIONS

  
	

   

  	

   

  
	

  ARTICLE

  II.

  	

  APPOINTMENT

  OF BORROWERS' AGENT; JOINT AND SEVERAL LIABILITY

  
	

  2.1

  	

  APPOINTMENT

  OF AGENT

  
	

  2.2

  	

  AUTHORIZED REPRESENTATIVES

  
	

  2.3

  	

  JOINT

  AND SEVERAL LIABILITY; RIGHTS OF CONTRIBUTION

  
	

   

  	

   

  
	

  ARTICLE

  III.

  	

  THE

  CREDITS

  
	

  3.1

  	

  REVOLVING LOANS

  
	

  3.2

  	

  SWING LOANS

  
	

  3.3

  	

  TERM LOAN

  
	

  3.4

  	

  LETTER

  OF CREDIT FACILITY

  
	

  3.5

  	

  INTEREST/FEES

  
	

  3.6

  	

  INTEREST

  OPTIONS

  
	

  3.7

  	

  OTHER

  PAYMENT TERMS

  
	

  3.8

  	

  FUNDING

  
	

  3.9

  	

  PRO RATA

  TREATMENT

  
	

  3.10

  	

  CHANGE

  OF CIRCUMSTANCES

  
	

  3.11

  	

  TAXES ON

  PAYMENTS

  
	

  3.12

  	

  FUNDING LOSS

  INDEMNIFICATION

  
	

   

  	

   

  
	

  ARTICLE IV.

  	

  ADMINISTRATION

  
	

  4.1

  	

  STATEMENTS

  
	

  4.2

  	

  PAYMENTS

  
	

   

  	

   

  
	

  ARTICLE

  V.

  	

  SECURITY

  
	

  5.1

  	

  GRANT OF SECURITY INTEREST

  
	

  5.2

  	

  PERFECTION;

  DUTY OF CARE

  
	

   

  	

   

  
	

  ARTICLE VI.

  	

  REPRESENTATIONS

  AND WARRANTIES

  
	

  6.1

  	

  LEGAL STATUS; SUBSIDIARIES

  
	

  6.2

  	

  DUE AUTHORIZATION; NO

  VIOLATION

  
	

  6.3

  	

  GOVERNMENT APPROVAL,

  REGULATION

  
	

  6.4

  	

  VALIDITY;

  ENFORCEABILITY

  
	

  6.5

  	

  CORRECTNESS OF

  FINANCIAL STATEMENTS

  
	

  6.6

  	

  TAXES

  
	

  6.7

  	

  LITIGATION,

  LABOR CONTROVERSIES

  
	

  6.8

  	

  TITLE TO

  PROPERTY, LIENS

  
	

  6.9

  	

  ERISA

  
	

  6.10

  	

  OTHER

  OBLIGATIONS

  
	

  6.11

  	

  ENVIRONMENTAL

  MATTERS

  
	

  6.12

  	

  NO BURDENSOME

  RESTRICTIONS; NO DEFAULTS

  
	

  6.13

  	

  NO OTHER

  VENTURES

  
	

  6.14

  	

  INSURANCE

  
	

  6.15

  	

  FORCE MAJEURE

  
	

  6.16

  	

  INTELLECTUAL

  PROPERTY

  
	

  6.17

  	

  CERTAIN

  INDEBTEDNESS

  
	

  6.18

  	

  SOLVENCY

  
	

  6.19

  	

  CHIEF

  EXECUTIVE OFFICE AND OTHER LOCATIONS

  
	

  6.20

  	

  FISCAL YEAR

  
	

  6.21

  	

  COMPLIANCE

  WITH LAW

  
	

  6.22

  	

  NO SUBORDINATION

  
	

  6.23

  	

  TRUTH,

  ACCURACY OF INFORMATION

  
	

   

  	

   

  
	

  ARTICLE

  VII.

  	

  CONDITIONS

  
	

  7.1

  	

  CONDITIONS OF

  INITIAL EXTENSION OF CREDIT

  
	

  7.2

  	

  CONDITIONS OF

  EACH EXTENSION OF CREDIT

  
	

   

  	

   

  
	

  ARTICLE VIII.

  	

  AFFIRMATIVE

  COVENANTS

  
	

  8.1

  	

  PAYMENTS

  
	

  8.2

  	

  ACCOUNTING

  RECORDS

  
	

  8.3

  	

  INFORMATION

  AND REPORTS

  
	

  8.4

  	

  COMPLIANCE

  
	

  8.5

  	

  INSURANCE

  
	

  8.6

  	

  FACILITIES

  
	

  8.7

  	

  TAXES AND OTHER LIABILITIES

  
	

  8.8

  	

  LITIGATION

  
	

  8.9

  	

  NOTICE TO

  ADMINISTRATIVE LENDER

  
	

  8.10

  	

  CONDUCT

  OF BUSINESS

  
	

  8.11

  	

  PRESERVATION OF

  CORPORATE EXISTENCE, ETC.

  
	

  8.12

  	

  ACCESS

  
	

  8.13

  	

  PERFORMANCE

  AND COMPLIANCE WITH OTHER COVENANTS

  
	

  8.14

  	

  FISCAL YEAR;

  ACCOUNTING PRACTICES

  
	

  8.15

  	

  ENVIRONMENTAL

  
	

  8.16

  	

  LIENS

  
	

  8.17

  	

  FUTURE

  SUBSIDIARIES

  
	

  8.18

  	

  USE OF PROCEEDS

  
	

  8.19

  	

  FURTHER

  ASSURANCES

  
	

   

  	

   

  
	

  ARTICLE IX.

  	

  NEGATIVE COVENANTS

  
	

  9.1

  	

  LIENS

  
	

  9.2

  	

  INDEBTEDNESS

  
	

  9.3

  	

  RESTRICTED

  PAYMENTS, REDEMPTIONS

  
	

  9.4

  	

  MERGERS,

  STOCK ISSUANCES, SALE OF ASSETS, ETC.

  
	

  9.5

  	

  INVESTMENTS

  
	

  9.6

  	

  CHANGE IN NATURE OF

  BUSINESS

  
	

  9.7

  	

  PLANS

  
	

  9.8

  	

  CANCELLATION OF

  INDEBTEDNESS OWED TO IT

  
	

  9.9

  	

  MARGIN

  REGULATIONS

  
	

  9.10

  	

  ENVIRONMENTAL

  
	

  9.11

  	

  TRANSACTIONS WITH

  AFFILIATES

  
	

  9.12

  	

  NEW COLLATERAL

  LOCATION; NAME CHANGE

  
	

  9.13

  	

  NO SPECULATIVE TRANSACTIONS

  
	

   

  	

   

  
	

  ARTICLE X.

  	

  FINANCIAL COVENANTS

  
	

  10.1

  	

  LEVERAGE RATIO

  
	

  10.2

  	

  CURRENT RATIO

  
	

  10.3

  	

  FIXED CHARGE COVERAGE RATIO

  
	

  10.4

  	

  TANGIBLE

  NET WORTH

  
	

   

  	

   

  
	

  ARTICLE XI.

  	

  EVENTS OF DEFAULT

  
	

  11.1

  	

  EVENTS OF

  DEFAULT

  
	

  11.2

  	

  REMEDIES

  
	

  11.3

  	

  ADMINISTRATIVE

  LENDER AS BORROWERS' ATTORNEY

  
	

   

  	

   

  
	

  ARTICLE XII.

  	

  ADMINISTRATIVE

  LENDER

  
	

  12.1

  	

  ACTIONS

  
	

  12.2

  	

  RELIANCE BY

  ADMINISTRATIVE LENDER

  
	

  12.3

  	

  EXCULPATION

  
	

  12.4

  	

  SUCCESSOR

  
	

  12.5

  	

  LOANS

  BY ADMINISTRATIVE LENDER; OTHER ACTIONS

  
	

  12.6

  	

  CREDIT

  DECISIONS

  
	

   

  	

   

  
	

  ARTICLE XIII.

  	

  MISCELLANEOUS

  
	

  13.1

  	

  NOTICES

  
	

  13.2

  	

  COSTS, EXPENSES,

  ATTORNEYS' FEES

  
	

  13.3

  	

  INDEMNIFICATION

  
	

  13.4

  	

  WAIVERS,

  AMENDMENTS

  
	

  13.5

  	

  SUCCESSORS

  AND ASSIGNS

  
	

  13.6

  	

  SETOFF

  
	

  13.7

  	

  NO WAIVER; CUMULATIVE

  REMEDIES

  
	

  13.8

  	

  ENTIRE

  AGREEMENT

  
	

  13.9

  	

  NO THIRD PARTY

  BENEFICIARIES

  
	

  13.10

  	

  CONFIDENTIALITY

  
	

  13.11

  	

  TIME

  
	

  13.12

  	

  SEVERABILITY OF PROVISIONS

  
	

  13.13

  	

  GOVERNING LAW

  
	

  13.14

  	

  SUBMISSION TO JURISDICTION

  
	

  13.15

  	

  WAIVER

  OF JURY TRIAL

  
	

  13.16

  	

  COUNTERPARTS

  
	

  13.17

  	

  OREGON

  STATUTORY NOTICE

  
	

   

  	

   

  
	

  SCHEDULES

  
	

  I

  	

  Lenders

  
	

  II

  	

  Pricing Schedule

  
	

  III

  	

  Existing

  Letters of Credit

  
	

   

  	

   

  
	

  EXHIBITS

  
	

  A

  	

  Borrowing Base Certificate

  
	

  B

  	

  Note Forms

  
	

  C

  	

  Notice of Authorized Representatives

  
	

  D

  	

  Notice of Borrowing

  
	

  E

  	

  Notice of Conversion or Continuation

  
	

  F

  	

  Form of Chief Financial Officer's

  Certificate

  
	

  G

  	

  Assignment Agreement

  

 

AMENDED AND

RESTATED CREDIT AGREEMENT

 

THIS AMENDED AND RESTATED CREDIT AGREEMENT is entered

into as of September 28, 2001 by and among MONACO COACH CORPORATION, a

Delaware corporation ("Parent"), ROYALE COACH BY MONACO, INC., an

Indiana corporation, and MCC ACQUISITION CORPORATION, a Delaware corporation

(each of the foregoing parties individually referred to as "Borrower"

and all collectively referred to as "Borrowers"), each of the

financial institutions from time to time listed on Schedule I

attached hereto, as amended from time to time, and U.S. BANK NATIONAL

ASSOCIATION ("U.S. Bank"), as the administrator for the Lenders (in

such capacity, "Administrative Lender").

 

RECITALS

 

Borrowers, Administrative Lender and certain of the

Lenders are parties to that certain Credit Agreement dated January 12.

2001 (as amended by that certain First Amendment to Credit Agreement dated as

of August 6, 2001, the "Existing Credit Agreement").  The parties desire to make certain changes

to the Existing Credit Agreement and have decided, for ease of reference, to

amend and restate the Existing Credit Agreement in its entirety.

 

NOW, THEREFORE, in consideration of the mutual

covenants and promises of the parties contained herein, Administrative Lender,

Lenders and Borrowers hereby agree as follows:

 

ARTICLE I.                   DEFINITIONS

 

1.1                  DEFINED

TERMS

 

All terms defined above shall have the meanings set

forth above.  The following terms shall

have the meanings set forth below (with all such meanings to be equally

applicable to both the singular and plural forms of the terms defined):

 

"Accounts" means (i) all

"accounts" as defined in the Code and (ii) all presently

existing and hereafter arising rights to payment of a monetary obligation,

whether or not earned by performance.

 

"Administrative Lender's Office" means

(i) initially, Administrative Lender's office designated as such in Schedule I

hereto, and (ii) subsequently, such other office designated as such, from

time to time, in writing by Administrative Lender to Lenders and Borrower.

 

"Agreement" means this Amended and

Restated Credit Agreement as amended, modified or supplemented from time to

time.

 

"Applicable Lending Office" means, with

respect to each Lender, (i) initially, its office designated as such in Schedule I

hereto, and (ii) subsequently, such other office designated as such from

time to time in writing by such Lender to Administrative Lender.

 

"Applicable Rate" means, at any date,

the lesser of (a) the Highest Lawful Rate or (b) the following:  (i) with respect to each Prime Rate

Loan (other than a Swing Loan), a per annum rate equal to the Prime Rate in

effect on such date plus the applicable Prime Margin; (ii) with respect to

each Swing Loan, a per annum rate equal to Daily LIBOR plus the applicable

LIBOR Margin; and (iii) with respect to each LIBOR Loan, a per annum rate

equal to the sum of LIBOR plus the applicable LIBOR Margin, both as determined

on the second Business Day before the first day of the applicable Fixed Rate

Term.

 

"Approved Dealer Financing Agreement"

means (i) agreements entered into by a Borrower in the ordinary course of

business with financial institutions providing floor-plan financing to

customers who purchase finished goods inventory of Borrowers, which

institutions have credit ratings of BBB or better from Standard & Poor's

Corporation, and the terms of which agreements (including repurchase

obligations) are both customary in the recreational vehicle industry and are no

less favorable in all material respects to Borrowers that those in effect as of

the Closing Date.

 

"Approved Sale" means a sale by

Borrower to a customer evidenced by an account which has been approved for

payment by a lender in accordance with an Approved Dealer Financing Agreement.

 

"Authorized Representative" means a

person designated as such by Borrowers' Agent in a Notice of Authorized

Representatives delivered to Administrative Lender.

 

"Available Credit" means, at any time,

the amount by which (a) the lesser of (i) the total of the Revolving

Loan Commitments or (ii) the Borrowing Base is greater than (b) the

total of the outstanding principal amount of the Revolving Loans, the Letter of

Credit Obligations and Swing Loans.

 

"Bankruptcy Code" means the Bankruptcy

Reform Act, Title 11 of the United States Code, as amended or recodified from

time to time, including (unless the context otherwise requires) any rules or

regulations promulgated thereunder.

 

"Borrowers' Agent" means Parent in its

capacity as agent for the Borrowers.

 

"Borrowing Base" means, as of any date

of determination, an amount equal to the following amount:

 

(a)           85%

of the outstanding Eligible Accounts;

 

(b)           plus

50% of Eligible Inventory consisting of raw materials, valued at the lower of

cost (determined on a "first in, first out" basis) or market value;

 

(c)           plus

the lesser of $50,000,000 or 90% of Eligible Inventory consisting of finished

goods, valued at the lower of cost (determined on a "first in, first

out" basis) or market value; and

 

(d)           less

the outstanding balance of all accounts payable with respect to chassis which

are secured in whole or in part.

 

"Borrowing Base Certificate" means a

certificate substantially in the form of Exhibit A attached hereto.

 

"Business Day" means (a) for all

purposes other than as covered by clause (b) below, any day other than a

Saturday, Sunday or other day on which commercial banks are authorized or required

to be closed in Portland, Oregon, Minneapolis, Minnesota or New York, New York,

and (b) with respect to all notices, determinations, fundings and payments

in connection with any LIBOR interest selection or LIBOR Loan, any day that is

a Business Day described in clause (a) above and that also is a day for

trading by and between banks in U.S. Dollar deposits in the London interbank

eurocurrency market.

 

"Capitalized Lease" means, as to any

Person, any lease of property by such Person as lessee that would be

capitalized on a balance sheet of such Person prepared in accordance with GAAP.

 

"Capitalized Lease Obligations" means,

as to any Person, the capitalized amount of all obligations of such Person and

its subsidiaries under Capitalized Leases, as determined on a consolidated

basis in accordance with GAAP.

 

"Cash Equivalent Investment" means, at

any time: (a) any evidence of indebtedness, maturing not more than one

year after such time, issued or guaranteed by the United States government;

(b) commercial paper, maturing not more than nine months from the date of

issue, which is issued by (i) a corporation (other than an affiliate of

any Obligor) organized under the laws of any state of the United States or of

the District of Columbia and rated at least A–1 by Standard & Poor's

Corporation or P–1 by Moody's Investors Service, Inc.,

or (ii) any Lender (or its holding company); (c) any certificate

of deposit or bankers acceptance, maturing not more than one year after such

time, which is issued by either (i) a commercial banking institution that

is a member of the Federal Reserve System and has a combined capital and

surplus and undivided profits of not less than $500,000,000, or (ii) any

Lender; (d) any repurchase agreement entered into with any Lender (or other

commercial banking institution of the stature referred to in

clause (c)(i)) which (i) is secured by a fully perfected security

interest in any obligation of the type described in any of clauses (a) through

(c), and (ii) has a market value at the time such repurchase agreement is

entered into of not less than 100% of the repurchase obligation of such Lender

(or other commercial banking institution) thereunder; (e) investments

permitted under any investment policy adopted by Borrower and approved by Administrative

Lender; or (f) any mutual fund holding investments consisting of at least

95% of the foregoing.

 

"Change in Control" means the

acquisition by any Person, or two or more Persons acting in concert to acquire

securities, of beneficial ownership (within the meaning of Rule 13d–3 of

the Securities and Exchange Commission under the Securities Exchange Act of

1934) of 35% or more of the outstanding shares of voting stock of Borrower.

 

"Change of Law" means the adoption of

any Governmental Rule, any change in any Governmental Rule or the application

or requirements thereof (whether such change occurs in accordance with the

terms of such Governmental Rule as enacted, as a result of amendment or

otherwise), any change in the interpretation or administration of any

Governmental Rule by any Governmental Authority, or compliance by any Lender

(or any entity controlling a Lender) with any request, guideline or directive

(whether or not having the force of law) of any Governmental Authority.

 

"Closing Date" means the date of this

Agreement.

 

"Code" means the Uniform Commercial

Code of the State of Oregon, as amended from time to time (including, without

limitation, amendments to defined terms).

 

"Collateral" means all of Borrowers'

assets, including, without limitation, (a) all Accounts, Rights to

Payment, General Intangibles, Records, goods, fixtures, inventory, equipment,

money, letter of credit rights, supporting obligations, instruments, chattel

paper, deposit accounts, documents, investment property, and commercial tort

claims; (b) all products, proceeds, rents and profits of the foregoing;

and (c) all of the foregoing, whether now owned or existing or hereafter

acquired or arising or in which Borrower now has or hereafter acquires any

rights.

 

"Commitment" means any obligation of a

Lender to extend credit or any other financial accommodation under any of the

Loan Documents.

 

"Commodity Contracts" means commodity

options, futures, swaps, and other similar agreements and arrangements designed

to provide protection against fluctuations in commodity prices.

 

"Contaminant" means any pollutant,

hazardous substance, toxic substance, hazardous waste or other substance

regulated or forming the basis of liability under any Environmental Law.

 

"Contingent Obligation" means, as

applied to any Person, any direct or indirect liability, contingent or

otherwise, of such Person with respect to any Indebtedness or Contractual

Obligation of another Person, if the purpose or intent of such Person in

incurring the Contingent Obligation is to provide assurance to the obligee of

such Indebtedness or Contractual Obligation that such Indebtedness or

Contractual Obligation will be paid or discharged, or that any agreement

entered into by such other Person relating to such Indebtedness or Contractual

Obligation will be complied with, or that any holder of such Indebtedness or

Contractual Obligation will be protected against loss in respect thereof.  Contingent Obligations of a Person include,

without limitation, (a) the direct or indirect guarantee, endorsement

(other than for collection or deposit in the ordinary course of business),

co-making, discounting with recourse or sale with recourse by such Person of an

obligation of another Person, and (b) any liability of such Person for an obligation

of another Person through any agreement (contingent or otherwise) (i) to

purchase, repurchase or otherwise acquire such obligation or any security

therefor, or to provide funds for the payment or discharge of such obligation

(whether in the form of a loan, advance, stock purchase, capital contribution

or otherwise), (ii) to maintain the solvency or any balance sheet item,

level of income or financial condition of another Person, (iii) to make

take-or-pay or similar payments, if required, regardless of nonperformance by

any other party or parties to an agreement, (iv) to purchase, sell or

lease (as lessor or lessee) property, or to purchase or sell services,

primarily for the purpose of enabling the debtor to make payment of such

obligation or to assure the holder of such obligation against loss, or

(v) to supply funds to or in any other manner invest in such other Person

(including, without limitation, to pay for property or services irrespective of

whether such property is received or such services are rendered), if in the

case of any agreement or liability described under subclauses (i) through (v)

of this sentence the primary purpose or intent thereof is as described in the

preceding sentence.  The amount of any Contingent

Obligation shall be equal to the lesser of (A) the amount payable under

such Contingent Obligation (if quantifiable) or (B) the portion of the

obligation so guaranteed or otherwise supported.

 

"Contractual Obligation" of any Person

means any obligation, agreement, undertaking or similar provision of any

security issued by such Person or of any agreement, undertaking, contract,

lease, indenture, mortgage, deed of trust or other instrument to which such

Person is a party or by which it or any of its property is bound or to which

any of its property is subject.

 

"Current Ratio" means, as of the end of

a fiscal quarter, the ratio of (a) Parent's consolidated current

assets (exclusive of notes and receivables from a Subsidiary or any affiliate,

shareholder, officer, director or employee of any Borrower or Subsidiary) to

(b) the total of Parent's consolidated current liabilities and, without

duplication, the outstanding principal balance of the Revolving Loans.

 

"Daily LIBOR" means a rate of interest

fluctuating daily equal on each day to LIBOR that would be applicable on such

day for a LIBOR Loan with a Fixed Rate Term of one month beginning on such day.

 

"Debt" of any Person means, without

duplication, (a) all obligations of such Person for borrowed money and all

obligations of such Person evidenced by bonds, debentures, notes, bills or

other similar instruments; (b) all obligations, contingent or otherwise,

relative to the face amount of all letters of credit, whether or not drawn, and

banker's acceptances issued for such Person's account; (c) all Capitalized

Lease Obligations and Other Lease obligations of such Person; (d) whether or

not so included as liabilities in accordance with GAAP, all obligations of such

Person to pay the deferred purchase price of property or services, and indebtedness

(excluding prepaid interest thereon) secured by a Lien on property owned or

being purchased by such Person (including indebtedness arising under

conditional sales or other title retention agreements), whether or not such

indebtedness shall have been assumed by such Person or is limited in recourse;

and (e) all Contingent Obligations of such Person in respect of any of the

foregoing, other than Contingent Obligations in connection with an Approved

Dealer Financing Agreement.  For

purposes of determining the amount of Debt in a circumstance when the creditor

has recourse only to specified assets, the amount shall be the lesser of

(i) the amount of such obligation or (ii) the fair market value of

such assets.

 

"Default" means (i) an Event of

Default, (ii) an event or condition that with the giving of notice or the

passage of time, or both, would constitute an Event of Default, or

(iii) the filing against Borrower of a petition commencing an involuntary

case under the Bankruptcy Code.

 

"Disclosure Letter" means the

Disclosure Letter from Borrowers' Agent to Administrative Lender dated the

Closing Date.

 

"EBITDA" means, as of the end of a

fiscal quarter, Parent's consolidated net income after taxes for the twelve

months ending with such quarter plus (A) the sum of the amounts for such

twelve month period included in determining such net income of

(i) interest expense, (ii) income tax expense, (iii) depreciation

expense, (iv) amortization expense, and (v) extraordinary non–cash

losses and charges and other non–recurring non–cash losses and

charges; less (B) gains on sales of assets (excluding sales of

inventory in the ordinary course of business) and other extraordinary non–cash

gains for such twelve month period.

 

"ERISA" means the Employee Retirement

Income Security Act of 1974, as amended or recodified from time to time,

including (unless the context otherwise requires) any rules or regulations

promulgated thereunder.

 

"Eligible Accounts" means those

Accounts that Administrative Lender determines in the Good Faith exercise of

its discretion to be eligible for inclusion in the Borrowing Base.  General criteria for Eligible Accounts may

be established and revised from time to time by Administrative Lender in Good

Faith.  Without limiting such discretion

as to other Accounts, the following Accounts shall not be Eligible Accounts:

 

(i)            Accounts

that do not consist of ordinary trade accounts receivable owned by Borrower,

payable in cash in United States Dollars and arising out of the final sale of

recreational vehicles in the ordinary course of Borrower's business as

presently conducted by it;

 

(ii)           Accounts

with respect to which Borrower failed to issue an original invoice at the

agreed-upon purchase price to the account debtor promptly after delivering such

goods to the account debtor;

 

(iii)          Accounts

with respect to which more than 60 days have elapsed since the date of the

original invoice applicable thereto;

 

(iv)          Accounts

with respect to which the account debtor is an affiliate of Borrower or any

officer, employee, or agent of the account debtor is an officer, employee or

agent of or affiliated with Borrower directly or indirectly by virtue of family

membership, ownership, control, management or otherwise;

 

(v)           Accounts

with respect to which the account debtor is a Governmental Authority, except

for those Accounts as to which Borrower has assigned its right to payment

thereof to Administrative Lender, and the assignment has been acknowledged,

pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.

§ 3727);

 

(vi)          the

chief executive office of the account debtor with respect to such Account is

not located in the United States of America, unless (A) the account debtor

has delivered to Borrower an irrevocable letter of credit issued or confirmed

by a bank satisfactory to Administrative Lender, sufficient to cover such

Account, in form and substance satisfactory to Administrative Lender, and, if

required by Administrative Lender, the original of such letter of credit has

been delivered to Administrative Lender or Administrative Lender's agent and

the issuer thereof notified of the assignment of the proceeds of such letter of

credit to Administrative Lender, (B) such Account is subject to credit

insurance payable to Administrative Lender issued by an insurer and on terms

and in an amount acceptable to Administrative Lender, (C) the account

debtor resides in a province of Canada that recognizes Administrative Lender's

perfection and enforcement rights as to Accounts by reason of the filing of a

UCC financing statement in Oregon or by reason of other methods of perfection

that have been completed, or (D) such Account is otherwise acceptable in

all respects to Administrative Lender;

 

(vii)         Accounts

with respect to which Administrative Lender does not have a valid and prior,

fully perfected Lien or which are not free of all Liens or other claims

(including, without limitation, claims for rebates, credits, allowances or

adjustments, but "other claims" shall not include Approved Sales) of

all other Persons;

 

(viii)        Accounts

with respect to which the account debtor is the subject of bankruptcy or a

similar insolvency proceeding, or has made an assignment for the benefit of

creditors, or whose assets have been conveyed to a receiver or trustee, or who

has failed or suspended or gone out of business;

 

(ix)           Accounts

with respect to which the account debtor's obligation to pay the Accounts is

conditional upon the account debtor's approval to the extent such Accounts

exceed $300,000 in the aggregate;

 

(x)            Accounts

from an account debtor to the extent that the account debtor's indebtedness to

Borrowers (whether evidenced by such Accounts or otherwise) exceeds an amount

which is greater than 25% of the face amount (less maximum discounts, credits

and allowances which may be taken by or granted to account debtors in

connection therewith) of all then outstanding Eligible Accounts, but only to

the extent of the excess over 25%;

 

(xi)           Accounts

owed by a particular account debtor if 25% or more of the aggregate Accounts

then owed to Borrowers by that account debtor and its affiliates are not

Eligible Accounts;

 

(xii)          Accounts

that represent a prepayment or progress payment or a partial payment under an

installment contract;

 

(xiii)         Accounts

that are evidenced by a promissory note or other instrument; and

 

(xiv)        Accounts

with respect to which the account debtor is located in any jurisdiction

requiring the timely filing by Borrower of a report or document before such

Account is created in order to bring suit or otherwise enforce its remedies

against such account debtor in the courts or through any judicial process of

such jurisdiction, unless Borrower has filed, or is exempt from filing, such a

report.

 

Administrative Lender shall have the right, but not

the duty, to declare particular accounts ineligible.  The fact that Administrative Lender has not declared a particular

account ineligible shall not be deemed to be a determination or representation

by Administrative Lender or any Lender as to the creditworthiness or financial

condition of any account debtor. 

Because of banking relationships between account debtors of Borrower and

Administrative Lender or a Lender, Administrative Lender or a Lender may have

information about the creditworthiness of such account debtors; however,

neither Administrative Lender nor any Lender shall have any duty to Borrowers

to disclose information it may have about any of Borrowers' account debtors and

Borrowers shall have no right to rely upon any action or inaction of

Administrative Lender or any Lender concerning the creditworthiness or

financial condition of Borrowers' account debtors.  BORROWERS HEREBY COVENANT NOT TO SUE AND TO HOLD HARMLESS LENDERS AND

ADMINISTRATIVE LENDER AND THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,

SUCCESSORS AND ASSIGNS FOR AND FROM ANY AND ALL DAMAGES, LIABILITY, OR CLAIMS

OF LIABILITY, WHETHER KNOWN OR UNKNOWN, OF ANY NATURE ARISING OUT OF OR BASED

IN WHOLE OR IN PART UPON ADMINISTRATIVE LENDER'S OR ANY LENDER'S FAILURE TO

DISCLOSE UNFAVORABLE INFORMATION ABOUT AN ACCOUNT DEBTOR OF BORROWER TO

BORROWERS, OR ADMINISTRATIVE LENDER'S FAILURE TO TREAT AS INELIGIBLE THE

ACCOUNT OF AN ACCOUNT DEBTOR OF BORROWER ABOUT WHOM ADMINISTRATIVE LENDER OR

ANY LENDER HAS UNFAVORABLE INFORMATION.

 

"Eligible Inventory" means inventory

that Administrative Lender determines in the Good Faith exercise of its

discretion to be eligible for inclusion in the Borrowing Base.  General criteria for Eligible Inventory may

be established and revised from time to time by Administrative Lender in Good

Faith.  Without limiting such discretion

as to other inventory, the following inventory shall in any event not

constitute Eligible Inventory:

 

(i)            finished

goods that are not held by Borrower for sale as inventory in the ordinary

course of Borrower's business as presently conducted by it or that are

obsolete, not in good condition, not of merchantable quality or not salable in

the ordinary course of Borrower's business or that are subject to defects that

would affect their market value;

 

(ii)           inventory

that Administrative Lender, in the Good Faith exercise of its discretion

determines to be unacceptable due to age, type, category or quantity;

 

(iii)          work

in process;

 

(iv)          inventory

in the possession of any Person other than Borrower, except (subject to any

additional requirements imposed by Administrative Lender, in the Good Faith

exercise of its discretion to protect Borrower's title thereto or

Administrative Lender's Lien therein) goods held in storage solely for the

account of Borrower, if the Person in possession has acknowledged in writing

Administrative Lender's Lien thereon and has not issued a negotiable document

of title as to the goods; provided, that notwithstanding the foregoing, (A) up

to $500,000 of inventory located on premises of subcontractors and (B) up to

$5,000,000 of finished goods inventory located at trade shows or rallies (or in

transit for such purposes) shall not be excluded from Eligible Inventory by

virtue of this item (iv);

 

(v)           inventory

with respect to which Administrative Lender does not have a valid and prior,

fully perfected Lien and that is not free of all other Liens, except Permitted

Liens other than Permitted Liens described in items (g) or (n) of the

definition of "Permitted Liens;"

 

(vi)          inventory

in the possession of a warehouseman or other bailee if Administrative Lender

has not received a bailee letter acceptable to Administrative Lender from such

warehouseman or bailee; and

 

(vii)         except

as provided in item (iv), inventory located on premises leased by Borrower if

Administrative Lender has not received a landlord's waiver acceptable to

Administrative Lender with respect to such premises to the extent the aggregate

value of all such inventory exceeds $5,000,000.

 

"Environmental Law" means all

applicable federal, state and local laws, statutes, ordinances and regulations,

and any applicable judicial or administrative interpretation, order, consent

decree or judgment, relating to the regulation and protection of the

environment.  Environmental Laws include

but are not limited to the Comprehensive Environmental Response, Compensation,

and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.);

the Hazardous Material Transportation Act, as amended (49 U.S.C. § 180 et

seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended

(7 U.S.C. § 136 et seq.); the Resource Conservation and Recovery

Act, as amended (42 U.S.C. § 6901 et seq.); the Toxic Substance

Control Act, as amended (42 U.S.C. § 7401 et seq.); the Clean Air

Act, as amended (42 U.S.C. § 740 et seq.); the Federal Water

Pollution Control Act, as amended (33 U.S.C. § 1251 et seq.);

and the Safe Drinking Water Act, as amended (42 U.S.C. § 300f et seq.),

and their state and local counterparts or equivalents and any applicable

transfer of ownership notification or approval statutes.

 

"Environmental Liabilities and Costs"

means, as to any Person, all liabilities, obligations, responsibilities,

Remedial Actions, losses, damages, punitive damages, consequential damages,

treble damages, costs and expenses (including, without limitation, all fees,

disbursements and expenses of counsel, experts and consultants and costs of

investigation and feasibility studies), fines, penalties, sanctions and

interest incurred as a result of any claim or demand by any other Person, whether

based in contract, tort, implied or express warranty, strict liability,

criminal or civil statute, including, without limitation, any thereof arising

under any Environmental Law, Permit, order or agreement with any Governmental

Authority or other Person, and which relate to any violation or alleged

violation of an Environmental Law or a Permit, or a Release or threatened

Release.

 

"Event of Default" has the meaning set

forth in Section 11.1 hereof.

 

"Federal Funds Rate" means, for any

day, the weighted average of the per annum rates on overnight Federal funds

transactions with member banks of the Federal Reserve System arranged by

Federal funds brokers as published by the Federal Reserve Bank of New York for

such day (or, if such rate is not so published for any day, the average rate

quoted to Administrative Lender on such day by three Federal funds brokers of

recognized standing selected by Administrative Lender).

 

"Fee Percentage" means the number of

basis points determined in accordance with Schedule II.

 

"Fixed Charge Coverage Ratio" means, as

of the end of a fiscal quarter, the ratio of (A) EBITDA, less

the sum of the following for the twelve month period ending with such quarter:

(i) Parent's consolidated income tax expense; (ii) cash dividends and

distributions paid in respect of Parent's Stock; and (iii) capital

expenditures to the extent not financed with long-term debt, proceeds of

Revolving Loans and/or net cash proceeds from the sale of capital assets to

(B) the sum of the following for the twelve month period ending with such

quarter: (i) Parent's consolidated interest expense; and

(ii) scheduled principal payments of Debt of Parent and the Subsidiaries.

 

"Fixed Rate Term" means a period of

one, two, three or six months, as designated by Borrowers' Agent, during which

a Loan bears interest determined in relation to LIBOR; provided, however, that

no Fixed Rate Term for a Revolving Loan may extend beyond the Revolver Maturity

Date, no Fixed Rate Term for a Term Loan may extend beyond the Maturity Date,

and if the last day of a Fixed Rate Term is not a Business Day, such term shall

be extended to the next succeeding Business Day, or if the next succeeding

Business Day falls in another calendar month, such term shall end on the next

preceding Business Day.

 

"Foreign Subsidiary" means any

Subsidiary that is a "controlled foreign corporation" as that term is

used in the Internal Revenue Code.

 

"GAAP" means generally accepted

accounting principles as in effect in the United States from time to time, consistently

applied.

 

"General Intangibles" means

(i) all "general intangibles" as defined in the Code and

(ii) all tax and duty refunds, registered and unregistered patents,

trademarks, service marks, copyrights, trade names, applications for the

foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer

lists, licenses, whether as licensor or licensee, choses in action, causes of

action and other claims, judgments in favor of Borrower, leasehold interests in

equipment, software and payment intangibles.

 

"Good Faith" means honesty in fact in

the conduct or transaction concerned, without regard to whether standards that

might be deemed commercially reasonable have been observed.

 

"Governmental Authority" means any

domestic or foreign national, state or local government, any political

subdivision thereof, any department, agency, authority or bureau of any of the

foregoing, or any other entity exercising executive, legislative, judicial,

regulatory or administrative functions of or pertaining to government,

including the Federal Deposit Insurance Corporation, the Federal Reserve Board,

the Comptroller of the Currency, any central bank or any comparable authority.

 

"Governmental Rule" means any

applicable law, rule, regulation, ordinance, order, code interpretation,

judgment, decree, directive, guidelines, policy or similar form of decision of

any Governmental Authority.

 

"Highest Lawful Rate" means, at the

particular time in question, the maximum rate of interest which, under

applicable law, Lenders are then permitted to charge Borrowers on the

applicable Loan, and if the maximum rate changes at any time, the Highest

Lawful Rate shall increase or decrease, as the case may be, as of the effective

time of each such change, without notice to Borrowers.

 

"Indebtedness" of any Person means,

without duplication, (a) all liabilities of such Person as determined in

accordance with GAAP, (b) all obligations of such Person created or

arising under any conditional sale or other title retention agreement with respect

to property acquired by such Person (even though the rights and remedies of the

seller or lender under such agreement in the event of default are limited to

repossession or sale of such property), (c) all lease obligations of such

Person (including, without limitation, operating leases, Capitalized Leases and

Other Leases), (d) all Contingent Obligations of such Person, (e) all

obligations of such Person to purchase, redeem, retire, defease or otherwise

acquire for value any Stock or Stock Equivalents of such Person with a

mandatory repurchase or redemption date of less than ten years from the date of

issuance thereof, (f) all obligations secured by (or for which the holder

of such obligations has an existing right, contingent or otherwise, to be secured

by) any Lien upon or in property owned by such Person, even though such Person

has not assumed or become liable for the payment of such obligations,

(g) all liabilities of such Person in connection with the failure to make

when due any contribution or payment pursuant to or under any Plan and

(h) net liabilities of such Person under all Commodity Contracts, Interest

Rate Contracts and foreign exchange agreements.  For purposes of determining the amount of Indebtedness in a

circumstance when the creditor has recourse only to specified assets, the

amount shall be the lesser of (i) the amount of such obligation or

(ii) the fair market value of such assets.

 

"Indemnitees" has the meaning set forth

in Section 13.3 hereof.

 

"Indemnified Liabilities" has the meaning

set forth in Section 13.3.

 

"Interest Rate Contracts" means

interest rate swap agreements, interest rate cap agreements, interest rate

collar agreements, interest rate insurance, and other agreements or

arrangements designed to provide protection against fluctuations in interest

rates.

 

"Investment" means, relative to any

Person, (a) any loan or advance made by such Person to any other Person

(excluding commission, travel and similar advances to officers and employees

made in the ordinary course of business) and (b) any ownership or similar

interest held by such Person in any other Person.  The amount of any Investment shall be the original principal or

capital amount thereof less all returns of principal or equity thereon (and

without adjustment by reason of the financial condition of such other Person)

and shall, if made by the transfer or exchange of property other than cash, be

deemed to have been made in an original principal or capital amount equal to

the fair market value of such property.

 

"L/C Bank" means U.S. Bank.

 

"Lenders" means, collectively, each of

the financial institutions from time to time listed on Schedule I,

L/C Bank and Swingline Lender, and "Lender" means any one of the Lenders.

 

"Letter of Credit" means a letter of

credit listed on Schedule III or a letter of credit issued by L/C Bank

pursuant to Section 3.4 hereof.

 

"Letter of Credit Agreement" means L/C

Bank's standard letter of credit application and documentation modified to such

extent, if any, as L/C Bank deems necessary.

 

"Letter of Credit Obligations" means,

at any time, all liabilities at such time of Borrowers to L/C Bank with respect

to Letters of Credit, whether or not any such liability is contingent.

 

"Leverage Ratio" means, as of the end

of a fiscal quarter, the ratio of (i) Debt (exclusive of any Contingent

Obligations) as of the end of such quarter to (ii) EBITDA.

"LIBOR" means, for each Fixed Rate

Term, the rate per annum (rounded upward if necessary to the nearest whole

1/100 of 1%) and determined pursuant to the following formula:

 

	

   

  	

   

  	

  LIBOR =

  	

   

  	

  Base LIBOR

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  100% - LIBOR Reserve Percentage

  	

   

  	

   

  

 

As used herein, (a) "Base LIBOR" means

the rate per annum determined by Administrative Lender to be the offered rate

for deposits in U.S. Dollars with a term comparable to such Fixed Rate Term

that appears on Dow Jones Markets Service, Page 3750 (or any successor

page) as the London interbank offered rate for deposits in U.S. Dollars at

approximately 11:00 AM (London time) two Business Days prior to the beginning of

such Fixed Rate Term, and (b) "LIBOR Reserve Percentage" means,

for any day, the aggregate (without duplication) of the maximum rates

(expressed as a decimal) of reserve requirements in effect on such day

(including basic, supplemental, marginal and emergency reserves under any

regulations of the Federal Reserve Board or other Governmental Authority having

jurisdiction with respect thereto) dealing with reserve requirements prescribed

for eurocurrency funding (currently referred to as "Eurocurrency Liabilities"

in Regulation D of the Federal Reserve Board) maintained by a member bank of

the Federal Reserve System.

 

"LIBOR Loan" means any Loan that bears

interest with reference to LIBOR.

 

"LIBOR Margin" means the number of

basis points determined in accordance with Schedule II.

 

"Lien" means any mortgage, deed of

trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance,

lien (statutory or other), security interest, priority or other security

agreement or preferential arrangement of any kind or nature whatsoever,

including, without limitation, any conditional sale or other title retention

agreement or the interest of a lessor under a Capitalized Lease Obligation or

any Other Lease.

 

"Loan" means an advance made by a

Lender to Borrowers pursuant to Section 3.1, Section 3.2 or

Section 3.3.

 

"Loan Documents" means this Agreement,

the Notes, each Letter of Credit Agreement, each Swap Protection Agreement and

each other agreement, note, notice, document, contract or instrument to which

Borrower now or hereafter is a party and that is required by Lender in

connection with this Agreement, a Note, a Letter of Credit Agreement, a Swap

Protection Agreement or any of the obligations arising under any of such

agreements or Notes.

 

"Material Adverse Effect" means a

material adverse effect on (a) the condition (financial or otherwise),

business, performance, operations or properties of Borrowers, (b) the

ability of Borrowers to perform their obligations under the Loan Documents, or

(c) the rights and remedies of any Lender or Administrative Lender under

the Loan Documents.

 

"Maturity Date" means the earlier of

September 28, 2005 or the due date determined pursuant to

Section 11.2.

 

"Note" means any of a master promissory

note executed by Borrowers in favor of Administrative Lender for the ratable

benefit of Lenders evidencing Revolving Loans, a master promissory note

executed by Borrowers in favor of Administrative Lender for the ratable benefit

of Lenders evidencing Term Loans or a promissory note executed by Borrowers in

favor of Swingline Lender evidencing the Swing Loans, each substantially in the

form of one of the forms attached as Exhibit B.

 

"Notice of Authorized Representatives"

has the meaning set forth in Section 2.2 hereof.

 

"Notice of Borrowing" has the meaning

set forth in Section 3.1(c) hereof.

 

"Notice of Conversion or Continuation"

has the meaning set forth in Section 3.6(c) hereof.

 

"ORA" means any of Outdoor Resorts of

America, Inc. and its subsidiaries.

 

"Obligations" means all of Borrowers'

obligations under the Loan Documents, whether direct or indirect, absolute or

contingent, due or to become due, now existing or hereafter arising.

 

"Obligor" means any Borrower or other

Person (other than Administrative Lender or any Lender) obligated under, or otherwise

a party to, any Loan Document

 

"Organic Documents" means, relative to

any Obligor, as applicable, its certificate or articles of incorporation, its

by–laws, its partnership agreement, its certificate of partnership,

certificate of organization, operating agreement and other limited liability

company organizational documents and all shareholder agreements, voting trusts

and similar arrangements applicable to any of its Stock or Stock Equivalents.

 

"Other Lease" means any synthetic

lease, tax retention operating lease, financing lease or any other lease having

substantially the same economic effect as a conditional sale, title retention

agreement or similar arrangement.

 

"PBGC" means the Pension Benefit

Guaranty Corporation established pursuant to Title IV of ERISA.

 

"Permit" means any permit, approval,

authorization, license, variance or permission required from a Governmental

Authority under an applicable Governmental Rule.

 

"Permitted

Liens" means (a) Liens arising by operation of law for

taxes, assessments or governmental charges not yet due; (b) statutory

Liens of mechanics, materialmen, shippers, warehousemen, carriers, and other

similar persons for services or materials arising in the ordinary course of

business for which payment is not more than 30 days past due;

(c) nonconsensual Liens incurred or deposits made in the ordinary course

of business in connection with workers' compensation, unemployment insurance

and other types of social security; (d) Liens for taxes or statutory Liens

of mechanics, materialmen, shippers, warehousemen, carriers and other similar

persons for services or materials that are due but are being contested in good

faith and by appropriate and lawful proceedings promptly initiated and

diligently conducted and for which reserves have been established to the extent

required by GAAP; (e) Liens listed on the Disclosure Letter;

(f) Liens granted in the Loan Documents; (g) purchase money Liens

upon or in any property (other than chassis and real property) of Borrower and

used by Borrower in the ordinary course of business and Liens to secure

Capitalized Lease Obligations and Other Leases and any related payment and

performance obligations if, in each case, the incurrence of such Indebtedness

is permitted by Section 9.2; provided, however, that: (A) any such

Lien is created solely for the purpose of securing Indebtedness representing,

or incurred to finance, refinance or refund, the cost (including, without

limitation, the cost of construction and the reasonable fees and expenses relating

to such Indebtedness) of the property subject thereto, (B) the principal

amount of the Indebtedness secured by such Lien does not exceed such cost, and

(C) such Lien does not extend to or cover any other property other than

such item of property, any improvements on or replacements for such item, and

the proceeds from the disposition of such items; (h) zoning restrictions,

easements, rights of way, survey exceptions, encroachments, covenants,

licenses, reservations, leasehold interests, restrictions on the use of real

property or minor irregularities incident thereto which do not in the aggregate

materially detract from the value or use of the property or assets of Borrower

or impair, in any material manner, the use of such property for the purposes for

which such property is held by Borrower; (i) the interests of lessors or

lessees of property leased pursuant to leases permitted hereunder;

(j) Liens of a depository institution arising solely by virtue of any

statutory or common law provision relating to banker's liens, rights of setoff,

or similar rights and remedies as to deposit accounts or other funds maintained

with such institution, provided that (A) such deposit account is not a

dedicated cash collateral account and is not subject to restrictions against

access by Borrower in excess of those set forth by regulations promulgated by

any Government Authority, and (B) such deposit account is not intended by

Borrower to provide collateral to the depository institution; (k) judgment

Liens to the extent the existence of such Liens is not an Event of Default

under Section 11.1(g); (l) any of the following arising in the

ordinary course of business: deposits or pledges to secure bids, tenders,

contracts (other than contracts for the payment of money), leases, statutory

obligations, surety and appeal bonds and other obligations of like nature;

(m) Liens on chassis purchased by Borrower in the ordinary course of

business; and (n) Liens not otherwise included in items (a) through (m)

that do not encumber real property, do not secure, in the aggregate, amounts in

excess of $5,000,000 and do not have priority over the Liens granted by

Borrowers to Administrative Lender.

 

"Person" means an individual,

partnership, corporation (including, without limitation, a business trust),

joint stock company, limited liability company, trust, unincorporated

association, joint venture or other entity, or a Governmental Authority.

 

"Plan" means an employee benefit plan,

as defined in Section 3(3) of ERISA, which Borrower maintains, contributes

to or has an obligation to contribute to on behalf of participants who are or

were employed by any of them.

 

"Prime Margin" means the number of

basis points determined in accordance with Schedule II.

 

"Prime Rate" means, for any day, an

interest rate per annum equal to the rate of interest most recently announced

within U.S. Bank at its principal office as its prime rate, with any change in

the prime rate to be effective as of the day such change is announced within

U.S. Bank and with the understanding that the prime rate is one of U.S. Bank's

base rates used to price some loans and may not be the lowest rate at which

U.S. Bank makes any loan, and is evidenced by the recording thereof in such

internal publication or publications as U.S. Bank may designate.

 

"Prime Rate Loan" means any Loan that

bears interest with reference to the Prime Rate.

 

"Ratable Portion" or "ratably"

means, with respect to any Lender, the quotient obtained by dividing

(i) the total of such Lender's Revolving Loan Commitment and Term Loan

Commitment by (ii) the Total Commitments, and at all times when the

Total Commitments are zero, means, with respect to any Lender, the quotient

obtained by dividing item (i) by item (ii) immediately before the Total

Commitments became zero.

 

"Records" means all of Borrowers'

present and future records and books of account of every kind or nature,

purchase and sale agreements, invoices, ledger cards, bills of lading and other

shipping evidence, statements, correspondence, memoranda, credit files,

electronically stored data and other data, together with the tapes, disks,

diskettes, drives and other data and software storage media and devices, file

cabinets or containers in or on which the foregoing are stored (including any

rights of Borrower with respect to the foregoing maintained with or by any

other Person).

 

"Release" means, as to any Person, any

unpermitted spill, emission, leaking, pumping, injection, deposit, disposal,

discharge, dispersal, leaching or migration of a Contaminant into the

environment, and any "release" as defined in the Comprehensive

Environmental Response, Compensation, and Liability Act of 1980, as amended (42

U.S.C. § 9601 et seq.).

 

"Remedial Action" means all actions

required to clean up, remove, prevent or minimize a Release or threat of

Release or to perform pre-remedial studies and investigations and post-remedial

monitoring and care.

 

"Required Lenders" means any

non-defaulting Lender or Lenders having more than two-thirds of the Total

Commitments.

 

"Repurchase Obligations" all

obligations of Parent to its dealers incurred in the ordinary course of

Parent's business to repurchase recreational vehicles.

 

"Responsible Officer" means any

executive officer of Borrower, including, without limitation, president, chief

executive officer, chief financial officer, treasurer, controller, general

counsel, chief risk management officer, chief environmental officer or any

other person performing responsibilities customarily performed by such

officers.

 

"Revolver Maturity Date" means the

earlier of June 30, 2004 or the due date pursuant to Section 11.2.

 

"Revolving Loan" means a Loan made by a

Lender to Borrowers pursuant to Section 3.1.

 

"Revolving Loan Commitment" means, as

to any Lender, the amount set opposite such Lender's name on Schedule I

as its "Revolving Loan Commitment," as such amount may be reduced

from time to time pursuant to this Agreement or as such amount may be adjusted

pursuant to Section 13.5(c).

 

"Rights to Payment" means all Accounts,

General Intangibles, contract rights, chattel paper, documents, instruments,

letters of credit, bankers acceptances and guaranties, and all present and

future liens, security interests, rights, remedies, title and interest in, to

and in respect of Accounts and other Collateral, and shall include without

limitation, (a) rights and remedies under or relating to guaranties,

contracts of suretyship, letters of credit and credit and other insurance

related to the Collateral, (b) rights of stoppage in transit, replevin,

repossession, reclamation and other rights and remedies of an unpaid vendor,

lienor or secured party, (c) goods described in invoices, documents,

contracts or instruments with respect to, or otherwise representing or

evidencing, Accounts or other Collateral, including without limitation,

returned, repossessed and reclaimed goods, and (d) deposits by and

property of account debtors or other persons securing the obligations of

account debtors, moneys, securities, credit balances, deposits, deposit

accounts and other property of Borrower now or hereafter held or received by or

in transit to Administrative Lender, any Lender or any of their affiliates or

at any other depository or other institution from or for the account of

Borrower, whether for safekeeping, pledge, custody, transmission, collection or

otherwise.

 

"Stock" means shares of capital stock,

membership interests, beneficial or partnership interests, participations or

other equivalents (regardless of how designated) of or in a corporation,

limited liability company, partnership or other entity, whether voting or

nonvoting, and includes, without limitation, common stock and preferred stock.

 

"Stock Equivalents" means all

securities convertible into or exchangeable for Stock and all warrants, options

or other rights to purchase or subscribe for any Stock, whether or not

presently convertible, exchangeable or exercisable.

 

"Subsidiary" means any Person required

by GAAP to be included in the consolidated financial reporting of Borrower.

 

"Swap Protection Agreement” means an Interest Rate Contract

between Borrower and a Lender which is entered into by Borrower for hedging

purposes with respect to transactions engaged in by Borrower in the ordinary

course of business and not for speculative purposes.

 

"Swing Loan" means a Loan made by the

Swingline Lender to Borrowers pursuant to Section 3.2.

 

"Swing Loan Available Credit" means, at

any time, the amount by which the outstanding balance of the Swing Loans is

less than the lesser of (i) $10,000,000 or (ii) the Available Credit.

 

"Swingline Lender" means U.S. Bank.

 

"Tangible

Net Worth" means the total of Parent's shareholders'

equity, plus Debt subordinated in writing to the Obligations on terms

acceptable to Required Lenders in favor of the prior payment in full in cash of

the Obligations, less consolidated intangible assets.

 

"Term Loan" means a Loan made by a

Lender to Borrowers pursuant to Section 3.3.

 

"Term Loan Commitment" means, as to any

Lender, the amount set opposite such Lender's name on Schedule I as

its "Term Loan Commitment," as such amount may be reduced from time

to time pursuant to this Agreement or as such amount may be adjusted pursuant

to Section 13.5(c).

 

"Total Commitments" means the total of

all Revolving Loan Commitments and Term Loan Commitments.

 

"Tranche" means a collective reference

to all LIBOR Loans which have a Fixed Rate Term starting on the same day and

ending on the same day; provided

that if, notwithstanding that all such loans have the same interest term,

Borrowers request that a group of such Loans be treated separately for LIBOR

calculation purposes, then each such separate group of Loans shall be treated

as a separate Tranche.

 

1.2                  ACCOUNTING AND FINANCIAL

DETERMINATIONS

 

Any accounting

term used in this Agreement that is not specifically defined herein shall have

the meaning customarily given to it under GAAP, and all accounting

determinations and computations under any Loan Document shall be made, and all

financial statements required to be delivered under any Loan Document shall be

prepared, in accordance with GAAP applied in the preparation of the financial

statements referred to in Section 6.5.

 

1.3                  HEADINGS

 

Headings in this Agreement and each of the other Loan

Documents are for convenience of reference only and are not part of the substance

hereof or thereof.

 

1.4                  ADDITIONAL DEFINITION PROVISIONS

 

Whenever the terms "herein," "hereof,"

"hereto," "hereunder," "therein,"

"thereof," "thereto," "thereunder," and similar

terms contained in this Agreement or any Loan Document refer to this Agreement

or other Loan Document, such terms refer to the whole of this Agreement or

other Loan Document and not to any particular section, paragraph or

provision.  All other terms contained in

this Agreement that are not defined herein shall, unless the context indicates

otherwise, have the meanings provided in the Code to the extent such

terms are defined therein.

 

ARTICLE II.                 APPOINTMENT

OF BORROWERS' AGENT; JOINT AND SEVERAL LIABILITY

 

2.1                  APPOINTMENT

OF AGENT

 

In order to facilitate and insure prompt and accurate

communication among Borrowers and Lenders and to insure the efficient and

effective distribution of proceeds of the Loans, each Borrower hereby appoints

Parent as its agent to perform the functions of Borrowers' Agent under the Loan

Documents, to take such actions and make such elections on such Borrower's

behalf as are delegated to the Borrowers' Agent in the Loan Documents and for

the following purposes: (i) communicating to and receiving communications from

Administrative Lender and Lenders; (ii) receiving all proceeds of the Loans and

making all decisions regarding the distribution of such proceeds among the

Borrowers as Borrowers' Agent, in the sole exercise of its discretion, deems

fair and appropriate; and (iii) making all decisions and elections with

respect to requests for advances of credit, issuance of Letters of Credit and

election of interest options.

 

2.2                  AUTHORIZED REPRESENTATIVES

 

On the Closing Date, and from time to time subsequent

thereto at Borrowers' Agent's option, Borrowers' Agent shall deliver to

Administrative Lender a written notice in the form of Exhibit C

attached hereto, which designates by name one or more Authorized

Representatives and includes each of their respective specimen signatures

(each, a "Notice of Authorized Representatives").  Administrative Lender shall be entitled to

rely conclusively on the authority of each person designated as an Authorized

Representative in the most current Notice of Authorized Representatives

delivered by Borrowers' Agent to Administrative Lender, to request borrowings,

to select interest rate options hereunder, and to give to Administrative Lender

such other notices as are specified herein as being made through an Authorized

Representative, until such time as Borrowers' Agent has delivered to

Administrative Lender, and Administrative Lender has actual receipt of, a new

written Notice of Authorized Representatives. 

Administrative Lender shall have no duty or obligation to Borrowers to

verify the authenticity of any signature appearing on any Notice of Borrowing,

Notice of Conversion or Continuation or any other notice from an Authorized

Representative or to verify the authenticity of any person purporting to be an

Authorized Representative giving any telephonic notice permitted hereby.

 

2.3          JOINT AND SEVERAL LIABILITY; RIGHTS OF

CONTRIBUTION

 

(a)           Each

Borrower states and acknowledges that: 

(i) pursuant to this Agreement, Borrowers desire to utilize their

borrowing potential on a consolidated basis to the same extent possible if they

were merged into a single corporate entity; (ii) it has determined that it

will benefit specifically and materially from the advances of credit

contemplated by this Agreement; (iii) it is both a condition precedent to

the obligations of Lenders hereunder and a desire of Borrowers that each

Borrower execute and deliver to Lenders this Agreement; and (iv) Borrowers

have requested and bargained for the structure and terms of the credit

contemplated by this Agreement.

 

(b)           Each

Borrower hereby irrevocably and unconditionally:  (i) agrees that it is jointly and severally liable to

Lenders for the full and prompt payment of the Obligations and the performance

by each Borrower of its obligations hereunder in accordance with the terms of

the Loan Documents; (ii) agrees to fully and promptly perform all of its

obligations under the Loan Documents with respect to each advance of credit

hereunder as if such advance had been made directly to it; and

(iii) agrees as a primary obligation to indemnify Lenders on demand for

and against any loss incurred by Lenders (other than a loss arising any

Lender's willful misconduct or gross negligence) as a result of any of the

obligations of any one or more of Borrowers under the Loan Documents being or

becoming void, voidable, unenforceable or ineffective for any reason

whatsoever, whether or not known to Lenders or any other Person, the amount of

such loss being the amount which Lenders would otherwise have been entitled to

recover from any one or more of Borrowers. 

Each Borrower hereby irrevocably and unconditionally accepts, not merely

as a surety but also as a co-debtor, joint and several liability with each

other Borrower with respect to the payment and performance of all of the

Obligations.  If and to the extent that

any Borrower fails to make any payment with respect to the Obligations as and

when due or to perform any of its obligations in accordance with the terms of

the Loan Documents, then in each such event the other Borrowers will make such

payment with respect to, or perform, such obligations.

 

(c)           The

joint and several liability of each Borrower for the Obligations shall be

absolute and unconditional irrespective of and shall not be subject to any

reduction, limitation, impairment or termination for any reason, including,

without limitation, any claim of waiver, release, surrender, alteration or

compromise, and shall not be subject to any defense or setoff, counterclaim,

recoupment or termination whatsoever by reason of the invalidity, illegality or

unenforceability of any of the Obligations. 

Without limiting the generality of the foregoing, the obligations of

each Borrower shall not be discharged or impaired or otherwise affected by:

 

(i)            any

change in the manner, place or terms of payment or performance and/or any

change or extension of the time of payment or performance of, renewal or

alteration of, any Obligation, any security therefor, or any liability incurred

directly or indirectly in respect thereof, or any rescission of, or amendment,

waiver or other modification of, or any consent to departure from any Loan

Document, including any increase in the Obligations resulting from the

extension of additional credit to any Borrower;

 

(ii)           any

sale, exchange, release, surrender, realization upon any property at any time

pledged or mortgaged to secure any of the Obligations, and/or any offset

against, or failure to perfect, or continue the perfection of, any lien in any

such property, or delay in the perfection of any such lien, or any amendment or

waiver of or consent to departure from any other guaranty for any of the

Obligations;

 

(iii)          the

failure of Lenders to assert any claim or demand or to enforce any right or

remedy against any Borrower or other Person under the provisions of any Loan

Document;

 

(iv)          any

settlement or compromise of any Obligation, any security therefor or any

liability incurred directly or indirectly in respect thereof, and any

subordination of the payment of any part thereof to the payment of any

obligation (whether due or not) of any other Borrower to creditors of such

other Borrower other than any other Borrower;

 

(v)           any

manner of application of any collateral for the Obligations or proceeds

thereof, to any of the Obligations, or any manner of sale or other disposition

of any such collateral for all or any of the Obligations or any other assets of

any Borrower;

 

(vi)          any

change, restructuring or termination of the existence of any Borrower; or

 

(vii)         any

other agreement or circumstance of any nature whatsoever that might in any

manner or to any extent vary the risk of any Borrower, or that might otherwise

at law or in equity constitute a defense available to, or a discharge of, the

obligations of any Borrower, or a defense to, or discharge of, any Borrower or

other Person relating to any of the Obligations.

 

(d)           The

joint and several liability of Borrowers shall continue in full force and

effect notwithstanding any absorption, merger, amalgamation or any other change

whatsoever in the name, membership, constitution or place of formation of any

Borrower.

 

(e)           It

is the intent of each Borrower that the indebtedness, obligations and liability

hereunder of no one of them be subject to challenge on any basis.  Accordingly, as of the date hereof, the

liability of each Borrower under the Loan Documents, together with all of its

other liabilities to all Persons as of the date hereof and as of any other date

on which a transfer is deemed to occur by virtue of this Agreement, calculated

in an amount sufficient to pay its probable net liabilities (including

Contingent Obligations) as the same become absolute and matured ("Dated

Liabilities") is, and is to be, less than the amount of the aggregate of a

fair valuation of its property as of such corresponding date ("Dated

Assets").  To this end each

Borrower hereby (i) grants to and recognizes in each other Borrower,

ratably, rights of subrogation and contribution in the amount, if any, by which

the Dated Assets of such Borrower, but for the aggregate of subrogation and

contribution in its favor recognized herein, would exceed the Dated Liabilities

of such Borrower or, as the case may be (ii) acknowledges receipt of and

recognizes its right to subrogation and contribution ratably from each of the

other Borrowers in the amount, if any, by which the Dated Liabilities of such Borrower,

but for the aggregate of subrogation and contribution in its favor recognized

herein, would exceed the Dated Assets of such Borrower.  In recognizing the value of the Dated Assets

and the Dated Liabilities, it is understood that Borrowers will recognize, to

at least the same extent of their aggregate recognition of liabilities

hereunder, their rights to subrogation and contribution hereunder.  It is a material objective of this Section

that each Borrower recognizes rights to subrogation and contribution rather

than be deemed to be insolvent (or in contemplation thereof) by reason of its

joint and several obligations hereunder.

 

ARTICLE III.                THE

CREDITS

 

3.1                  REVOLVING

LOANS

 

(a)           On

the terms and subject to the conditions contained in this Agreement, each

Lender severally agrees to make loans (each a "Revolving Loan") to

Borrowers from time to time until the Revolver Maturity Date in an aggregate

amount not to exceed at any time outstanding such Lender's Revolving Loan

Commitment; provided, however, that at no time shall any Lender be obligated to

make a Revolving Loan in excess of such Lender's Ratable Portion of the

Available Credit.  Borrowers may from

time to time borrow, partially or wholly repay its outstanding borrowings, and

reborrow, subject to all the limitations, terms and conditions contained

herein.  The Revolving Loans shall be

evidenced by a Note.

 

(b)           If

at any time the Available Credit is negative, Borrowers, without demand or

notice, shall immediately repay that portion of the Revolving Loans necessary

to cause the Available Credit to be zero. 

Borrowers shall repay the outstanding principal balance of the Revolving

Loans, together with all accrued and unpaid interest and related fees on the

Revolver Maturity Date.

 

(c)           Borrowers'

Agent, through an Authorized Representative, shall request each advance of a

Revolving Loan by giving Administrative Lender irrevocable written notice or

telephonic notice (confirmed promptly by fax or email), in the form of Exhibit D

attached hereto (each, a "Notice of Borrowing"), which specifies,

among other things:

 

                    (i)        the aggregate principal amount of the

requested advances (which amount must be a minimum of $1,000,000 and in

integral multiples of $100,000 if a LIBOR Loan);

 

                   (ii)        the proposed date of borrowing, which

shall be a Business Day;

 

                  (iii)        whether such advance is to be a Prime

Rate Loan or a LIBOR Loan; and

 

                  (iv)        if such advance is to be a LIBOR Loan,

the length of the Fixed Rate Term applicable thereto.

 

Each such Notice of

Borrowing must be received by Administrative Lender not later than 9:00 AM

(Portland time) (x) on the date of borrowing if a Prime Rate Loan or

(y) at least three Business Days prior to the date of borrowing if a LIBOR

Loan.  Administrative Lender shall

promptly notify each Lender of the contents of each Notice of Borrowing and of

the amount of the advance to be made by such Lender no later than 10:00 AM

(Portland time) on the Business Day of receipt for Prime Rate Loans and

1:00 PM (Portland time) the Business Day after receipt with respect to

LIBOR Loans.

 

(d)           From

time to time before 9:00 AM (Portland time) on any Business Day, Borrowers may

make a voluntary prepayment, in whole or in part, of the outstanding principal

amount of any Revolving Loan(s) that are Prime Rate Loans.  From time to time before 9:00 AM

(Portland time) on any Business Day, Borrowers may make a voluntary prepayment,

in whole or in part, of the outstanding principal amount of any Revolving

Loan(s) that are LIBOR Loans; provided, however, that (i) Borrowers' Agent

gives Administrative Lender notice of such prepayment before 2:00 PM (Portland

time) on the third Business Day before the date of prepayment (which notice

shall be irrevocable), (ii) each voluntary partial prepayment must be in a

minimum of $1,000,000 and in integral multiples of $100,000; and (iii) any

prepayment shall be subject to the provisions of Section 3.12 hereof.

 

3.2                  SWING LOANS

 

(a)           In

lieu of making Revolving Loans, the Swingline Lender, in its sole discretion,

on the terms and subject to the conditions contained in this Agreement, may

make loans (each a "Swing Loan") to Borrowers from time to time until

the Revolver Maturity Date as provided herein in an aggregate amount not to

exceed at any time outstanding the Swing Loan Available Credit.  Each Swing Loan shall be made and prepaid

upon such notice as the Swingline Lender and Borrowers' Agent shall agree;

provided that in the absence of a written agreement to the contrary, Swingline

Lender must receive each request for a Swing Loan not later than 2:00 PM

(Portland time) on the Business Day of borrowing and any prepayment made after

2:00 PM (Portland time) shall be credited on the next Business Day.  Further, Swingline Lender may make Swing

Loans without notice from Borrowers' Agent or any Borrower

(A) automatically pursuant to cash management arrangements, if any, made

from time to time by Borrowers with Administrative Lender and/or (B) for the

purposes described in item (c) below. 

All Swing Loans shall be evidenced by a Note payable to the order of the

Swingline Lender.  Borrower shall repay

the outstanding principal balance of the Swing Loans, together with all accrued

and unpaid interest and related fees on the Revolver Maturity Date.

 

(b)           If

the aggregate outstanding balance of the Swing Loans exceeds $4,000,000 for ten

consecutive Business Days or at any time upon the request of the Swingline

Lender to Administrative Lender that some or all of the Swing Loans be

converted to Revolving Loans, then, by not later than noon (Portland time) on

the next Business Day, Administrative Lender shall notify each Lender of the

principal amount of Swing Loans outstanding as of 9:00 AM (Portland time)

on such Business Day (or of the principal amount of the Swing Loans which

Swingline Lender desires to be converted) and each Lender's Ratable Portion

thereof.  Each Lender shall, before

9:00 AM (Portland time) on the next Business Day, make available to

Administrative Lender, in immediately available funds, the amount of its

Ratable Portion of such principal amount of such Swing Loans.  Upon such payment by a Lender, such Lender

shall be deemed to have made a Revolving Loan as a Prime Rate Loan to

Borrowers, notwithstanding any failure by Borrowers to satisfy the conditions

contained in Section 7.2 (without regard to the minimum amount of Prime

Rate Loans).  Administrative Lender

shall use such funds to repay the principal amount of Swing Loans to the

Swingline Lender.  All interest due on

the Swing Loans shall be payable to the Swingline Lender.  With respect to the Swing Loans, after

receipt of payment of principal or interest thereon, Administrative Lender will

promptly distribute the same to the Swingline Lender at its Applicable Lending

Office.

 

(c)           Lenders

and Borrowers agree that Swing Loans may be made to allow Administrative Lender

to pay each Lender its share of fees, interest and other amounts due hereunder

to the extent such fees, interest and other amounts are then due and payable.

 

3.3                  TERM LOAN

 

(a)           On

the terms and subject to the conditions contained in this Agreement, each

Lender severally agrees to make a term loan (each a "Term Loan") in a

single advance on the Closing Date to Borrowers in the amount of such Lender's

Term Loan Commitment.  The Term Loans

shall be evidenced by a Note.

 

(b)           On the Maturity Date, Borrowers shall

repay the unpaid principal amount of each Term Loan, and prior thereto:

 

(i)            Borrowers shall, on the last day of

each calendar quarter, beginning December 31, 2001, repay the outstanding

principal balance of the Term Loans by making a payment in the aggregate amount

of $2,500,000;

 

(ii)           Borrowers may, from time to time on

any Business Day, make a voluntary prepayment, in whole or in part, of the

outstanding principal amount of the Term Loans; provided, however, that (A) no

such prepayment of any LIBOR Loan may be made on any day other than the last

day of the Fixed Rate Term for such Loan; (B) all such voluntary

prepayments shall require at least three but no more than five Business Days

prior written notice to Administrative Lender; and (C) all such voluntary

partial prepayments shall be in an aggregate minimum amount of $1,000,000 and

an integral multiple of $100,000;

(iii)          if as of the end of any fiscal quarter

of Parent the net book value of Borrowers' property, plant and equipment is

less than the total of (A) the net book value of Borrowers' property, plant and

equipment as of September 29, 2001, less (B) the sum of all principal payments

made on the Term Loan and less (C) $5,000,000, 

Borrowers, within 60 days after the end of such quarter (110 days if the

quarter is Parent's fourth fiscal quarter), shall prepay the outstanding

principal amount of the Terms Loans by an amount equal to such difference;

 

(iv)          Borrowers shall, within 30 days of

receipt by Borrowers of insurance or condemnation proceeds in excess of

$1,000,000, prepay the outstanding principal amount of the Term Loans by an

amount equal to such proceeds less the portion thereof to be utilized in the

repair or replacement of the affected property (as determined by Administrative

Lender); and

 

(v)           Borrowers shall, upon receipt of net

cash proceeds of any issuance of Stock or Stock Equivalents by Parent or any

Subsidiary (other than proceeds not exceeding $3,000,000 in the aggregate since

the Closing Date), prepay the outstanding principal amount of the Term Loans by

an amount equal to such proceeds.

 

Each prepayment of

Term Loans made pursuant to any of clauses (ii) through (v) shall be applied in

the inverse order of the scheduled repayments of Term Loans set forth in clause

(i) and shall be applied ratably among the Term Loans.  Each prepayment of any Term Loans made

pursuant to this Section shall be without premium or penalty, except for any

funding loss indemnification required by Section 3.12.  No amounts paid or prepaid with respect to

Term Loans may be reborrowed.

 

3.4                  LETTER OF CREDIT FACILITY

 

(a)           On the terms and subject to the

conditions contained in this Agreement, L/C Bank agrees promptly to issue one

or more Letters of Credit at the request of Borrowers' Agent for the account of

Borrowers from time to time until ten days before the Revolver Maturity Date;

provided, however, that L/C Bank shall not issue any Letter of Credit if:

 

                    (i)        any order, judgment or decree of any Governmental Authority or

arbitrator of which L/C Bank is aware shall purport by its terms to enjoin or

restrain L/C Bank from issuing such Letter of Credit or any Governmental Rule

applicable to L/C Bank or any request or directive (whether or not having the

force of law) from any Governmental Authority with jurisdiction over L/C Bank

shall prohibit, or request that L/C Bank refrain from, the issuance of letters

of credit generally or such Letter of Credit in particular or shall impose upon

L/C Bank with respect to such Letter of Credit any restriction or reserve or

capital requirement (for which L/C Bank is not otherwise compensated) not in

effect on the date hereof or result in any loss, cost or expense which (A) was

not applicable, in effect or known to L/C Bank on the Closing Date and which

L/C Bank in Good Faith deems material to it, and (B) the reimbursement of which

is not provided for hereunder;

 

                   (ii)        L/C Bank shall have received written notice from

Administrative Lender or Borrowers' Agent, on or before the Business Day prior

to the requested date of issuance of such Letter of Credit, that one or more of

the applicable conditions contained in Article VII is not then satisfied;

 

                  (iii)        after giving effect to the issuance of such Letter of Credit,

the Letter of Credit Obligations exceed $5,000,000;

 

                  (iv)        the amount of the Letter of Credit requested exceeds the

Available Credit; or

 

                   (v)        fees due in connection with a requested issuance have not

been paid.

 

None of the

Lenders (other than the Lender that is L/C Bank) shall have any obligation to

issue any Letters of Credit.

 

(b)           In no event shall the expiry date of

any Letter of Credit be more than one year for a standby Letter of Credit or

fall after ten days before the Revolver Maturity Date.

 

(c)           Prior to the issuance of each Letter

of Credit, Borrowers' Agent shall have delivered to L/C Bank, if requested by

L/C Bank, a Letter of Credit Agreement, signed by Borrowers, and such other

documents or items as L/C Bank may require pursuant to the terms thereof.

 

(d)           In connection with the issuance of

each Letter of Credit, Borrowers' Agent shall give L/C Bank and Administrative

Lender at least three Business Days prior written notice of the requested

issuance of such Letter of Credit.  Such

notice shall be irrevocable and binding on Borrowers and shall specify

(i) whether the Letter of Credit is to be a standby or commercial

(documentary) Letter of Credit, (ii) the stated amount of the Letter of

Credit requested, (iii) the date of issuance of such requested Letter of

Credit (which day shall be a Business Day), (iv) the date on which such

Letter of Credit is to expire (which date shall be a Business Day),

(v) the Person for whose benefit the requested Letter of Credit is to be

issued, and (vi) such other terms and conditions of the proposed Letter of

Credit as are requested by Borrowers' Agent and acceptable to L/C Bank.  Such notice, to be effective, must be

received by L/C Bank and Administrative Lender not later than 10:00 AM

(Portland time) on the last Business Day on which notice can be given under the

immediately preceding sentence.

 

(e)           Subject to the terms and conditions

of this Section 3.4 and provided that the applicable conditions set forth in

Article VII have been satisfied, L/C Bank shall, on the requested date, issue a

Letter of Credit on behalf of Borrowers in accordance with the applicable

request and L/C Bank's usual and customary business practices and in a final

form reasonably satisfactory to Borrowers' Agent.

 

(f)            Immediately upon L/C Bank's issuance

of a Letter of Credit, L/C Bank shall be deemed to have sold and transferred to

each Lender, and each Lender shall be deemed irrevocably and unconditionally to

have purchased and received from L/C Bank, without recourse or warranty, an

undivided interest and participation, to the extent of such Lender's Ratable

Portion, in such Letter of Credit and the obligations of Borrowers with respect

thereto (including, without limitation, all Letter of Credit Obligations with

respect thereto) and any security therefor and guaranty pertaining thereto and

each Lender's Revolving Loan Commitment shall be deemed used to the extent of

such Lender's Ratable Portion of such Letter of Credit Obligations.

 

(g)           In determining whether to pay under

any Letter of Credit, L/C Bank shall not have any obligation relative to

Lenders other than to confirm that any documents required to be delivered under

such Letter of Credit appear to have been delivered and that they appear to

comply on their face with the requirements of such Letter of Credit.  Any action taken or omitted to be taken by

L/C Bank under or in connection with any Letter of Credit, if taken or omitted

in the absence of gross negligence or willful misconduct, shall not put L/C

Bank under any resulting liability to any other Lender.

 

(h)           If L/C Bank makes any payment under

any Letter of Credit, L/C Bank shall promptly notify Administrative Lender, who

shall promptly notify each Lender, and each Lender shall promptly and

unconditionally pay to Administrative Lender for the account of L/C Bank the

amount of such Lender's Ratable Portion of such payment in same day funds (and

upon receipt, Administrative Lender shall promptly pay the same to L/C Bank),

which payment shall be deemed to be and shall constitute a Revolving Loan that

is a Prime Rate Loan made by such Lender to Borrowers; provided, however, that

if the Swingline Lender so elects, and if a Swing Loan can be made in such

amount, Administrative Lender shall promptly notify the Swingline Lender of

such payment by L/C Bank, and the Swingline Lender shall, and Borrowers hereby

authorize the Swingline Lender to, pay to Administrative Lender for the account

of L/C Bank the amount of such payment in same day funds, which payment shall

be deemed to be and shall constitute a Swing Loan made by the Swingline Lender

to Borrowers.  The Revolving Loans shall

be made, or the Swing Loan may be made, as contemplated in the preceding

sentence notwithstanding Borrowers' failure to satisfy the conditions set forth

in Section 7.2.  If Administrative

Lender so notifies such Lender prior to 10:00 AM (Portland time) on any

Business Day, such Lender shall make available to Administrative Lender for the

account of L/C Bank its Ratable Portion of the amount of such payment by 1:00

PM (Portland time) on such Business Day in same day funds.  If and to the extent such Lender does not

make its Ratable Portion available to Administrative Lender for the account of

L/C Bank, such Lender agrees to repay to Administrative Lender for the account

of L/C Bank on demand such amount together with interest thereon at the Federal

Funds Rate for each day from such date until the date paid.  The failure of any Lender to make available

to Administrative Lender for the account of L/C Bank its Ratable Portion of any

such payment shall not relieve any other Lender of its obligations hereunder.

 

(i)            The obligations of Lenders to make

payments to Administrative Lender for the account of L/C Bank with respect to

Letters of Credit shall be irrevocable and not subject to any qualification or

exception whatsoever and shall be made in accordance with the terms and

conditions of this Agreement under all circumstances (except as expressly

provided in Section 3.4(g)), including, without limitation, any of the

following circumstances:

 

  (i)        any lack of validity or enforceability

of any of the other Loan Documents;

 

(ii)        the existence of any claim, setoff,

defense or other right which Borrowers may have at any time against a

beneficiary named in a Letter of Credit, any transferee of any Letter of Credit

(or any Person for whom any such transferee may be acting), Administrative

Lender, any Lender or any other Person, whether in connection with this

Agreement, any Letter of Credit, the transactions contemplated herein or any

unrelated transactions (including, without limitation, any underlying

transaction between Borrower and the beneficiary named in any Letter of

Credit);

 

(iii)        any

draft, certificate or any other document presented under the Letter of Credit

proving to be forged, fraudulent, invalid or insufficient in any respect or any

statement therein being untrue or inaccurate in any respect; or

 

(iv)        the occurrence of any Default.

 

3.5                  INTEREST/FEES

 

(a)           Interest.  The outstanding principal balance of each

Loan shall bear interest at the Applicable Rate.  The foregoing notwithstanding, the rate of interest applicable at

all times during the continuation of an Event of Default shall be a fluctuating

rate per annum equal to the Prime Rate in effect from time to time, plus 200

basis points.  All fees, expenses and

other amounts not paid when due shall bear interest (from the date due until

paid) at the rate set forth in the preceding sentence.

 

(b)           Letter

of Credit Fees.  With respect

to each Letter of Credit, upon the issuance, renewal and/or amendment thereof,

Borrowers shall pay to Administrative Lender, for the ratable benefit of

Lenders, the following fees, each of which shall be nonrefundable even if any

Letter of Credit is terminated or canceled before its stated expiration date: 

 

                    (i)        with respect to each Letter of Credit

that is a standby letter of credit, a fee equal to the face amount thereof (or,

with respect to an amendment increasing the face amount, the increase in the

face amount only) multiplied by a rate per annum equal to the then applicable

LIBOR Margin for Revolving Loans for a period equal to the term of such Letter

of Credit (or, with respect to an amendment increasing the term, the increase

in the term only); and 

 

                   (ii)        with respect to each Letter of Credit

that is a commercial (documentary) Letter of Credit, a fee equal to the greater

of $350 or a percentage of the face amount thereof equal to the then applicable

LIBOR Margin for Revolving Loans for the period it is outstanding.  

 

In addition, upon the occurrence of any other activity

with respect to any Letter of Credit, Borrowers shall pay to L/C Bank a fee

determined in accordance with L/C Bank's standard fees and charges then in

effect for such activity.

 

(c)           Administrative

Lender's Fees.  Borrowers

shall pay to Administrative Lender, for Administrative Lender's own account,

the fees set forth in that certain fee letter from U.S. Bank to Borrowers'

Agent dated September 28, 2001.

 

(d)           Unused

Line Fee.  On the last

day of each calendar quarter beginning September 30, 2001 and on the

Revolver Maturity Date, Borrowers shall pay to Administrative Lender, for the

ratable benefit of Lenders, an unused line fee equal to (i) the amount by

which the Revolving Loan Commitments are greater than the total of the average

daily outstanding balance of the Revolving Loans and the average daily face

amount of outstanding Letters of Credit for such quarter or period multiplied

by (ii) a per annum rate equal to the Fee Percentage.

 

(e)           Computation

and Payment.  All

interest and per annum fees shall be computed on the basis of a 360-day year,

actual days elapsed, except interest on Prime Rate Loans shall be computed on

the basis of a 365/366-day year, actual days elapsed.  Interest on Prime Rate Loans shall be payable monthly, in

arrears, on the first day of each month, on the Revolver Maturity Date (with

respect to the Revolving Loans) and on the Maturity Date.  Interest on LIBOR Loans shall be paid on the

last day of each Fixed Rate Term, at the end of the third month with respect to

each Fixed Rate Term of six months, on the Revolver Maturity Date (with respect

to the Revolving Loans) and on the Maturity Date.

 

3.6                  INTEREST

OPTIONS

 

(a)           Election.  Subject to the requirement that each LIBOR

Loan be in a minimum amount of $1,000,000 and in integral multiples of $100,000

and the limitation in Section 3.6(b) regarding the number of Tranches

outstanding at any time, (i) except as otherwise provided herein, at any

time when a Default is not continuing Borrowers' Agent may convert all or any portion

of a Prime Rate Loan to a LIBOR Loan for a Fixed Rate Term designated by

Borrowers' Agent, and (ii) at any time Borrowers' Agent may convert all or

a portion of a LIBOR Loan at the end of the Fixed Rate Term applicable thereto

to a Prime Rate Loan or, if no Default is continuing, to a LIBOR Loan for a new

Fixed Rate Term designated by Borrowers' Agent.  If Borrowers' Agent has not made the required interest rate

conversion or continuation election prior to the last day of any Fixed Rate

Term, Borrowers shall be deemed to have elected to convert such LIBOR Loan to a

Prime Rate Loan.

 

(b)           Maximum

Number of Tranches.  At

no time shall there be more than ten Tranches outstanding at any time.

 

(c)           Notice to

Administrative Lender. 

Borrowers' Agent shall request each interest rate conversion or

continuation by giving Administrative Lender irrevocable written notice or

telephonic notice (confirmed promptly in writing), in the form of Exhibit E

attached hereto (a "Notice of Conversion or Continuation"), that

specifies, among other things: 

(i) the Loan to which such Notice of Conversion or Continuation

applies; (ii) the principal amount that is the subject of such conversion

or continuation; (iii) the proposed date of such conversion or

continuation, which shall be a Business Day; and (iv) if such Notice

pertains to a LIBOR Loan, the length of the applicable Fixed Rate Term.  Any such Notice of Conversion or

Continuation must be received by Administrative Lender not later than

9:00 AM (Portland time) (i) at least one Business Day prior to the

effective date of any Prime Rate interest selection, and (ii) at least

three Business Days prior to the effective date of any LIBOR interest

selection.  Administrative Lender shall

promptly notify each Lender of the contents of each such Notice of Conversion

or Continuation, or if timely notice is not received from Borrowers' Agent

prior to the last day of any Fixed Rate Term, of the automatic conversion of

such LIBOR Loan to a Prime Rate Loan.

 

3.7                  OTHER

PAYMENT TERMS

 

(a)           Automatic

Debit.  Administrative

Lender may, and Borrowers hereby authorize Administrative Lender to, debit any

deposit account of Borrower with Administrative Lender for all payments of

principal, interest, fees and other amounts due under the Loan Documents as

they become due, provided that Administrative Lender shall first debit

Borrowers' Agent's account no. 1-536-9121-3752 with Administrative Lender,

before debiting any other account.

 

(b)           Place and

Manner.  Borrowers shall

make all payments due to each Lender under the Loan Documents by payment to

Administrative Lender at Administrative Lender's Office, for the account of

such Lender, in lawful money of the United States and in same day or

immediately available funds not later than 11:00 AM (Portland time) on the

date due.  Administrative Lender shall

promptly disburse to each Lender at such Lender's Applicable Lending Office

each such payment received by Administrative Lender for such Lender no later

than 2:00 PM (Portland time) on the Business Day received if received before

11:00 AM (Portland time), or if received later, by 2:00 PM (Portland

time) on the next Business Day.

 

(c)           Date.  Whenever any payment due hereunder shall

fall due on a day other than a Business Day, such payment shall be made on the

next succeeding Business Day, and such extension of time shall be included in

the computation of interest or fees, as the case may be.

 

(d)           Application

of Payments.  All

payments under the Loan Documents (including prepayments) shall be applied

first to unpaid fees, costs and expenses then due and payable under the Loan

Documents, second to accrued interest then due and payable under the Loan

Documents (applied first to interest due and payable on the Swing Loans and

then to the other Loans), third to the outstanding principal of the Swing Loans

and finally to reduce the principal amount of the other outstanding Loans.

 

(e)           Failure

to Pay Administrative Lender. 

Unless Administrative Lender shall have received notice from Borrowers'

Agent at least one Business Day prior to the date on which any payment is due

to Lenders hereunder that Borrowers will not make such payment in full,

Administrative Lender may assume that Borrowers have made such payment in full

to Administrative Lender on such date and Administrative Lender may, in

reliance upon such assumption, cause to be distributed to each Lender on such

due date an amount equal to the amount then due such Lender.  If and to the extent Borrowers shall not

have made such payment in full to Administrative Lender, such Lender shall

repay to Administrative Lender on demand the amount distributed to such Lender

together with interest thereon at the Federal Funds Rate for each day from the

date distributed until the date repaid. 

A certificate of Administrative Lender submitted to any Lender with

respect to any amounts owing by such Lender under this Section shall be

presumptive evidence of such amounts.

 

3.8                  FUNDING

 

(a)           Lender

Funding and Disbursement. 

Each Lender shall, by 11:00 AM (Portland time) on the date of each

borrowing under Section 3.1, Section 3.3 or Section 3.4, make

available to Administrative Lender at Administrative Lender's Office, in same

day or immediately available funds, such Lender's Ratable Portion thereof.  After Administrative Lender's receipt of such

funds and upon fulfillment of the applicable conditions set forth in

Article VII hereof, Administrative Lender will promptly disburse such

funds in same day or immediately available funds to Borrowers.  Unless otherwise directed by Borrowers'

Agent in writing, Administrative Lender shall disburse the proceeds of each

borrowing to Parent by deposit to any demand deposit account maintained by

Parent with Administrative Lender designated by Borrowers' Agent in a notice to

Administrative Lender.

 

(b)           Lender Failure

to Fund.  Unless

Administrative Lender receives notice from a Lender on or before the date of

any borrowing hereunder that such Lender will not make available to

Administrative Lender such Lender's Ratable Portion thereof, Administrative

Lender may assume that such Lender has made such portion available to

Administrative Lender on the date of such borrowing in accordance with

Section 3.8(a) hereof, and Administrative Lender may, in reliance upon

such assumption, make available to Borrowers (or otherwise disburse) on such

date a corresponding amount.  If any

Lender does not make the amount of its Ratable Portion of any borrowing

available to Administrative Lender on the date of such borrowing, such Lender

shall pay to Administrative Lender, on demand, interest which shall accrue on

such amount until made available to Administrative Lender at a rate equal to

the daily Federal Funds Rate.  A

certificate of Administrative Lender submitted to any Lender with respect to

any amounts owing under this Section shall be presumptive evidence of such

amounts.  If any Lender's Ratable

Portion of any borrowing is not in fact made available to Administrative Lender

by such Lender within three Business Days after the date of such borrowing,

Borrowers shall pay to Administrative Lender, on demand, an amount equal to

such Ratable Portion together with interest thereon, for each day from the date

such amount was made available to Borrowers until the date such amount is

repaid to Administrative Lender, at the rate of interest then applicable

thereto.

 

(c)           Lenders'

Obligations Several.  The

obligation of each Lender hereunder is several.  The failure of any Lender to make available its Ratable Portion

of any borrowing shall not relieve any other Lender of its obligation hereunder

to do so on the date requested, but no Lender shall be responsible for the

failure of any other Lender to make available the Ratable Portion to be funded

by such other Lender.

 

3.9                  PRO

RATA TREATMENT

 

(a)           Borrowings.  Each Loan, except a Swing Loan, shall be

made or shared among Lenders ratably.

 

(b)           Sharing

of Payments, Etc.  Except

as otherwise provided herein, each payment of principal, interest or fees shall

be made or shared among Lenders ratably. 

If any Lender obtains any payment (whether voluntary, involuntary,

through the exercise of any right of setoff or otherwise) on account of a Loan

in excess of its Ratable Portion of payments on the Loans obtained by all

Lenders, such Lender ("Purchasing Lender") shall forthwith purchase

from the other Lenders sufficient participations to cause the Purchasing

Lender's interest in the Loans to be in the same proportionate relationship

with all Loans as before such payment was received; provided, however, that if

all or any portion of such excess payment is thereafter recovered from the

Purchasing Lender, the purchased participation shall be rescinded and each

other Lender shall repay to the Purchasing Lender (i) the purchase price

to the extent of such recovery together with (ii) an amount equal to such

other Lender's ratable share (according to the proportion of (A) the

amount of such other Lender's required repayment to (B) the total amount so

recovered from the Purchasing Lender) of any interest or other amount paid or

payable by the Purchasing Lender in respect of the total amount so

recovered.  Borrowers agree that any

Purchasing Lender may, to the fullest extent permitted by law, exercise all its

rights of payment (including the right of setoff) with respect to such

participation as fully as if the Purchasing Lender were the direct creditor of

Borrowers in the amount of such participation.

 

3.10                CHANGE

OF CIRCUMSTANCES

 

(a)           Inability

to Determine Rate.  If

Administrative Lender at any time determines that adequate and reasonable means

do not exist for ascertaining LIBOR, or the Required Lenders determine at any

time that LIBOR does not accurately reflect the cost to Lenders of making or

maintaining LIBOR interest rates hereunder, then Administrative Lender shall

give telephonic notice (promptly confirmed in writing) to Borrowers' Agent and

each Lender of such determination.  If

such notice is given and until such notice has been withdrawn in writing by

Administrative Lender, no LIBOR interest option may be selected by Borrowers'

Agent and each LIBOR Loan, subsequent to the end of the Fixed Rate Term

applicable thereto, shall become a Prime Rate Loan.

 

(b)           Illegality:  Termination of Commitment.  Notwithstanding any other provisions herein,

if any Change of Law shall make it unlawful for any Lender (i) to make a

LIBOR interest rate available, or (ii) to maintain LIBOR interest rates

hereunder, then, in the former event, any obligation of such Lender to make

available such unlawful LIBOR interest rate shall be suspended until such time

as it is once again lawful to make such rate available, and in the latter

event, any such unlawful LIBOR interest rate then outstanding shall be

converted so that interest is determined in relation to the Prime Rate pursuant

to the terms of this Agreement; provided, however, if any such Change in Law

shall permit a LIBOR interest rate until the expiration of the Fixed Rate Term

relating thereto, then such permitted LIBOR interest rate shall continue as

such until the end of such Fixed Rate Term. 

If as a result of this Section a LIBOR interest rate is converted to a

lower interest rate, Borrowers shall pay to each Lender immediately upon demand

such amount or amounts as may be necessary to compensate such Lender for any

loss in connection therewith.

 

(c)           Charges:  Illegality.  Upon the occurrence of any event described

in Section 3.10(b) hereof, Borrowers shall pay to each Lender, on demand,

such amount or amounts as may be necessary to compensate such Lender for any

fines, fees, charges, penalties or other amounts payable by such Lender as a

result thereof and that are attributable to LIBOR interest rates made available

to Borrowers hereunder.  In determining

which amounts payable by any Lender and/or losses incurred by any Lender are

attributable to LIBOR interest rates made available to Borrowers hereunder, any

reasonable allocation made by any Lender among its operations shall, in the

absence of manifest error, be conclusive and binding upon Borrowers.

 

(d)           Increased

LIBOR Loan Costs, etc. 

Borrowers shall reimburse each Lender for any increase in the cost to

such Lender of, or any reduction in the amount of any sum receivable by such

Lender in respect of, making, continuing or maintaining (or of its obligation

to make, continue or maintain) any Loans as, or of converting (or of its

obligation to convert) any Loans into, LIBOR Loans which results from any

Change of Law announced after the Closing Date.  Such Lender shall promptly notify Administrative Lender and

Borrowers' Agent in writing of the occurrence of any such event, such notice to

state, in reasonable detail, the reasons therefor, that substantially all

similarly situated borrowers are being treated similarly and the calculation of

the additional amount required fully to compensate such Lender for such

increased cost or reduced amount.  Such

additional amounts shall be payable by Borrowers directly to such Lender within

five days of Borrowers' Agent's receipt of such notice, and such notice shall,

in the absence of manifest error, be conclusive and binding on Borrowers.

 

(e)           Capital

Requirements.  If any

Lender determines that any Change of Law regarding capital adequacy which is

announced after the Closing Date has or shall have the effect of reducing the

rate of return on the capital of such Lender (or any entity controlling such

Lender) as a consequence of such Lender's obligations hereunder to a level

below that which such Lender or such entity would have achieved but for such

Change of Law (taking into consideration such Lender's or such entity's

policies with respect to capital adequacy), by an amount deemed by such Lender

to be material, then from time to time, within fifteen days after demand by

such Lender (with a copy to Administrative Lender) to Borrowers' Agent,

Borrowers shall pay to such Lender or such entity such additional amounts as

shall compensate such Lender or such entity for such reduction.  Any request by a Lender under this

Section shall set forth in reasonable detail the basis of the calculation

of such additional amounts, shall state that substantially all similarly

situated borrowers are being treated similarly and shall, in the absence of

manifest error, be conclusive and binding on Borrowers for all purposes.

 

3.11                TAXES ON

PAYMENTS

 

(a)           Payments

Free of Taxes.  All

payments made by Borrowers under the Loan Documents shall be made free and

clear of, and without deduction or withholding for or on account of, any

present or future income, stamp or other taxes, levies, imposts, duties,

charges, fees, deductions or withholdings, now or hereafter imposed, levied,

collected, withheld or assessed by any Governmental Authority (except taxes

based on overall net income imposed on Administrative Lender or any Lender)

(with all such non-excluded taxes, levies, imposts, duties, charges, fees,

deductions and withholdings being hereinafter referred to herein as

"Taxes").  Except to the

extent that withholding results from a failure of a  Lender to comply with Section 3.11(b), if any Taxes are required

to be withheld from any amounts payable to Administrative Lender or any Lender

under the Loan Documents, the amounts so payable to Administrative Lender or

such Lender shall be increased to the extent necessary to yield to

Administrative Lender or such Lender (after payment of all Taxes) interest or

any such other amounts payable hereunder at the rates or in the amounts

specified in the Loan Documents. 

Whenever any Taxes are payable by Borrowers, as promptly as possible

thereafter, Borrowers' Agent shall send to Administrative Lender for its own

account or for the account of such Lender, as the case may be, a certified copy

of an original official receipt received by Borrowers showing payment

thereof.  If Borrowers fail to pay any

Taxes when due to the appropriate taxing authority or Borrowers' Agent fails to

remit to Administrative Lender the required receipts or other required

documentary evidence, Borrowers shall indemnify Administrative Lender and

Lenders for any incremental taxes, interest or penalties that may become

payable by Administrative Lender or any Lender as a result of any such

failure.  This Section shall survive the

payment in full and performance of all of Borrowers' other Obligations.

 

(b)           Withholding

Exemption Certificates. 

Each Lender agrees that it will deliver to Borrowers' Agent and

Administrative Lender, upon the reasonable request of Borrowers' Agent or

Administrative Lender, either (i) a statement that it is incorporated

under the laws of the United States of America or a state thereof, or

(ii) if it is not so incorporated, two duly completed copies of the

applicable United States Internal Revenue Service form(s) certifying that such

Lender is entitled to receive payments under this Agreement without deduction

or withholding of any United States federal income taxes.

 

3.12                FUNDING LOSS INDEMNIFICATION

 

Borrowers will indemnify Lenders upon demand against

any loss or expense which Lenders may sustain or incur as a consequence of

(a) any payment of any portion of the principal of a LIBOR Loan before the

last day of the Fixed Rate Term applicable thereto (whether through voluntary

prepayment, acceleration or otherwise), or (b)  any failure to borrow the

full amount of a requested LIBOR Loan set forth in any Notice of Borrowing or

to convert or continue at the LIBOR interest option any portion of a Loan in

accordance with a Notice of Conversion or Continuation (in either event,

whether as a result of the failure to satisfy any applicable conditions or

otherwise).  The determination by

Administrative Lender of the amount payable under this Section shall, in the

absence of manifest error, be conclusive and binding on Borrowers for all

purposes.  In determining such amount,

Administrative Lender may use any reasonable averaging and attribution methods

and each Lender shall be deemed to have actually funded and maintained all

LIBOR Loans during the applicable Fixed Rate Term through the purchase of

deposits having a term corresponding to such Fixed Rate Term and bearing

interest at a rate equal to LIBOR for such Fixed Rate Term.  This Section shall survive the payment in

full and performance of all of Borrowers' other Obligations.

 

ARTICLE IV.                ADMINISTRATION

 

4.1                  STATEMENTS

From time to time, Administrative Lender may render to

Borrowers' Agent a statement setting forth the balance in the loan account(s)

maintained by Administrative Lender for Borrowers pursuant to this Agreement,

including principal, interest, fees, costs and expenses.  Each such statement shall be subject to

subsequent adjustment by Administrative Lender but shall, absent manifest

errors or omissions, be considered correct and deemed accepted by Borrowers and

conclusively binding upon Borrowers as an account stated except to the extent

that Administrative Lender receives notice from Borrowers' Agent of any

specific exceptions thereto within thirty days after the date such statement

has been mailed by Administrative Lender. 

Until such time as Administrative Lender shall have rendered to

Borrowers' Agent a written statement as provided above, the balance in the loan

account(s) shall be presumptive evidence of the amounts due and owing to

Lenders by Borrowers.

 

4.2                  PAYMENTS

All amounts due under any of the Loan Documents shall

be payable to such account as Administrative Lender may designate from time to

time.  Borrowers shall make all payments

due hereunder free and clear of, and without deduction or withholding for or on

account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,

fees, deductions, withholding, restrictions or conditions of any kind.  If after receipt of any payment of, or

proceeds of Collateral applied to the payment of, any of the Obligations any

Lender is required to surrender or return such payment or proceeds to any

person or entity for any reason, then the Obligations intended to be satisfied

by such payment or proceeds shall be reinstated and continue and this Agreement

shall continue in full force and effect as if such payment or proceeds had not

been received by such Lender.  Borrowers

hereby indemnify and hold Lenders harmless for the amount of any payments or

proceeds surrendered or returned.  This

Section shall remain effective notwithstanding any contrary action which

may be taken by any Lender in reliance upon such payment or proceeds.  This Section shall survive the payment in

full and performance of all of Borrowers' other Obligations.

 

ARTICLE V.                 SECURITY

 

5.1                  GRANT OF SECURITY INTEREST

 

Borrowers hereby grant to Administrative Lender, for

the benefit of and on behalf of Lenders, a security interest in all of the

Collateral as security for the full and prompt payment in cash and performance

of the Obligations.

 

5.2                  PERFECTION;

DUTY OF CARE

 

(a)           Until

all the Obligations have been fully satisfied and paid in cash and the

Commitments terminated, Borrowers shall perform all steps requested by

Administrative Lender to perfect, maintain and protect Administrative Lender's

security interest in the Collateral, including, without limitation,

(i) executing and filing financing and continuation statements in form and

substance satisfactory to Administrative Lender, and (ii) delivering all

Collateral in which Administrative Lender's security interest may be perfected

by possession together with such indorsements as Administrative Lender may

request.  Borrowers hereby authorize

Administrative Lender to execute and file UCC financing statements signed only

by Administrative Lender, except to the extent prohibited by law.

 

(b)           Administrative

Lender shall have the right at all times, and from time to time, to contact

Borrowers' account debtors to verify Rights to Payment; provided that at all

times when a Default is not continuing, verifications shall be made under

reasonable procedures directly with the obligors thereon.

 

(c)           Borrowers

shall pay or cause to be paid all taxes, assessments and governmental charges

levied or assessed or imposed upon or with respect to the Collateral or any

part thereof; provided, however, Borrowers shall not be required to pay any tax

if the validity and/or amount thereof is being contested in good faith and by

appropriate and lawful proceedings promptly initiated and diligently conducted

and for which appropriate reserves have been established and so long as levy

and execution have been and continue to be stayed.  If Borrowers fail to pay or so contest and reserve for such

taxes, assessments and governmental charges, Administrative Lender may (but

shall not be required to) pay the same and add the amount of such payment to

the principal of the Revolving Loans.

 

(d)           In

order to protect or perfect the security interest granted under the Loan

Documents, Administrative Lender may discharge any Lien that is not a Permitted

Lien or bond the same, pay for any insurance that Borrowers have failed to

maintain as required by this Agreement, maintain guards, pay any service

bureau, or obtain any record and add the same to the principal of the Revolving

Loans.

 

(e)           Administrative

Lender shall have no duty of care with respect to the Collateral, except to

exercise reasonable care with respect to the Collateral in its custody, but

shall be deemed to have exercised reasonable care if such property is accorded

treatment either (i) substantially equal to that which it accords its own

property or (ii) as Borrowers' Agent requests in writing, provided that no

failure to comply with any such request nor any omission to do any such act

requested by Borrowers' Agent shall be deemed a failure to exercise reasonable

care.  Administrative Lender's failure

to take steps to preserve rights against any parties or property shall not be

deemed to be a failure to exercise reasonable care with respect to the

Collateral in its custody.

 

ARTICLE

VI.                REPRESENTATIONS AND

WARRANTIES

 

Borrower makes the following representations and

warranties to Administrative Lender and Lenders, subject to the exceptions set

forth on the Disclosure Letter, which representations and warranties shall

survive the execution of this Agreement and shall continue in full force and

effect until the performance and payment in full, in cash, of all Obligations:

 

6.1                  LEGAL STATUS; SUBSIDIARIES

 

Each Borrower and

Subsidiary is a corporation validly organized and existing and in good standing

under the laws of the jurisdiction of its incorporation, is duly qualified to

do business and is in good standing as a foreign corporation in each

jurisdiction where the nature of its business requires such qualification, and

has full power and authority and holds all Permits and other approvals to enter

into and perform the Obligations and to own and hold under lease its property

and to conduct its business substantially as currently conducted by it, except

where the failure to have so qualified or have such power and authority could

not reasonably be expected to have a Material Adverse Effect.  Except as otherwise disclosed in Section 6.1

of the Disclosure Letter, Borrower has no Subsidiaries other than those which

it is permitted to acquire in accordance with Section 9.4 and does not

otherwise own or hold, directly or indirectly, any Stock or Stock Equivalents.

 

6.2                  DUE AUTHORIZATION; NO VIOLATION

 

The execution,

delivery and performance by each Obligor of the Loan Documents executed or to

be executed by it are within such Obligor's powers, have been duly authorized

by all necessary action, and do not (a) contravene such Obligor's Organic

Documents; (b) contravene any contractual restriction or Governmental Rule

binding on or affecting such Obligor; or (c) result in, or require the

creation or imposition of, any Lien on any Obligor's or Subsidiary's property,

except Liens for the benefit of Lenders.

 

6.3                  GOVERNMENT APPROVAL REGUALATION

 

No authorization

or approval or other action by, and no notice to or filing with, any

Governmental Authority or other Person is required for the due execution,

delivery or performance by any Obligor of the Loan Documents to which it is a

party.  No Borrower or Subsidiary is an

"investment company" within the meaning of the Investment Company Act

of 1940, as amended, or a "holding company", or a "subsidiary

company" of a "holding company", or an "affiliate" of

a "holding company" or of a "subsidiary company" of a

"holding company", within the meaning of the Public Utility Holding

Company Act of 1935, as amended.  No

Borrower or Subsidiary is engaged in the business of extending credit for the

purpose of purchasing or carrying margin stock, and no proceeds of any Loans

will be used for a purpose which violates, or would be inconsistent with,

Regulation U or X of the Board of Governors of the Federal Reserve System

 

6.4                  VALIDITY; ENFORCEABILITY

 

The Loan Documents

executed by each Obligor constitute, the legal, valid and binding obligations

of such Obligor enforceable in accordance with their respective terms.

 

6.5                  CORRECTNESS OF FINANCIAL STATEMENTS

 

The consolidated

financial statements of Parent and each Subsidiary dated as of June 30,

2001 heretofore delivered by Borrowers' Agent to Administrative Lender,

(a) present fairly in all material respects the financial condition and

results of operations of Parent and the Subsidiaries; (b) disclose all

liabilities of Parent and the Subsidiaries that are required to be reflected or

reserved against under GAAP, whether liquidated or unliquidated, fixed or

contingent; and (c) have been prepared in accordance with GAAP

consistently applied.  Except as

disclosed to Administrative Lender pursuant to Section 8.3, since the date

of such financial statements there has been no change or changes that have

resulted in a Material Adverse Effect.

 

6.6                  TAXES

 

Each Borrower and

Subsidiary has filed, or caused to be filed, all federal, state, local and

foreign tax returns required to be filed by it, and has paid, or caused to be

paid, all taxes as are shown on such returns, or on any assessment received by

it, to the extent that such taxes have become due, except as otherwise

contested in good faith.  Borrower has

set aside proper amounts on its books, determined in accordance with GAAP, for

the payment of all taxes for the years that have not been audited by the

respective tax authorities and for taxes being contested by it.

 

6.7                  LITIGATION, LABOR CONTROVERSIES

 

There is no

pending or, to the knowledge of Borrower, threatened litigation, action,

proceeding, or labor controversy affecting any Borrower or Subsidiary, or any

of their respective properties, businesses, assets or revenues, which could

reasonably be expected to have a Material Adverse Effect.  As of the Closing Date, no Borrower or

Subsidiary is a party to, and has no obligations under, any collective

bargaining agreement.

 

6.8                  TITLE TO

PROPERTY, LIENS

 

Each Borrower and

Subsidiary has good, indefeasible, and merchantable title to and ownership of

the Collateral and its real property, free and clear of all Liens, except

Permitted Liens.

 

6.9                  ERISA

 

Each Borrower and

Subsidiary is in compliance in all material respects with the applicable

provisions of ERISA.  No Borrower or

Subsidiary has violated any provision of any Plan maintained or contributed to

by it in a manner that could reasonably be expected to result in a Material

Adverse Effect.  No "reportable

event" (as defined in Title IV of ERISA) has occurred and is

continuing with respect to any Plan initiated by it.

 

6.10                OTHER

OBLIGATIONS

 

No Borrower or

Subsidiary is in default with respect to (i) any of its Contractual

Obligations default of which could reasonably be expected to result in a

Material Adverse Effect or (ii) any Debt in excess of $1,000,000.

 

6.11                ENVIRONMENTAL

MATTERS

 

Each Borrower and

Subsidiary is in compliance in all material respects with all Environmental

Laws applicable to it, other than such noncompliance as in the aggregate could

not reasonably be expected to have a Material Adverse Effect.  No Borrower or Subsidiary has received

notice that it is the subject of any federal or state investigation evaluating

whether any Remedial Action is needed, except for such notices received that in

the aggregate do not refer to Remedial Actions that could reasonably be

expected to result in a Material Adverse Effect.  There have been no Releases by any Borrower or Subsidiary that

could result in a Material Adverse Effect.

 

6.12                NO BURDENSOME RESTRICTIONS; NO DEFAULTS

 

(a)           No Borrower or Subsidiary is a party

to any Contractual Obligation the compliance with which could reasonably be

expected to have a Material Adverse Effect or the performance of which, either

unconditionally or upon the happening of an event, will result in the creation

of a Lien (other than Permitted Liens) on its property or assets.

 

(b)           No facts or circumstances exist which

would constitute a breach of any obligation, representation or warranty of

Borrower hereunder if this Agreement were in effect immediately prior to

Borrower's execution hereof.

 

(c)           There is no Governmental Rule the

compliance with which by any Borrower or Subsidiary could reasonably be

expected to have a Material Adverse Effect.

 

6.13                NO OTHER

VENTURES

 

No Borrower or

Subsidiary is engaged in any joint purchasing arrangement, joint venture,

partnership or other joint enterprise with any other Person.

 

6.14                INSURANCE

 

All current

policies of insurance of any kind or nature owned by or issued to Borrower and

the Subsidiaries, including, without limitation, policies of fire, theft,

product liability, public liability, property damage, other casualty, employee

fidelity, workers' compensation and employee health and welfare insurance, are

in full force and effect and are of a nature and provide such coverage as is

sufficient and as is customarily carried by companies of its size and

character.  No Borrower or Subsidiary

has any reason to believe that it will be unable to comply with

Section 8.5.

 

6.15                FORCE

MAJEURE

 

No Borrower's or

Subsidiary's business or properties is currently suffering from the effects of

any fire, explosion, accident, strike, lockout or other labor dispute, drought,

storm, hail, earthquake, embargo, act of God or of the public enemy or other

casualty (whether or not covered by insurance), other than those the

consequences of which in the aggregate could not reasonably be expected to have

a Material Adverse Effect.

 

6.16                INTELLECTUAL

PROPERTY

 

Each Borrower and

Subsidiary owns or licenses or otherwise has the right to use all material

licenses, Permits, patents, patent applications, trademarks, trademark

applications, service marks, trade names, copyrights, copyright applications,

franchises, authorizations and other intellectual property rights and General

Intangibles that are necessary for the operation of its businesses, without

infringement upon or conflict with the rights of any other Person with respect

thereto, including, without limitation, all trade names, which infringement or

conflict could reasonably be expected to have a Material Adverse Effect.  No slogan or other advertising device,

product, process, method, substance, part or other material now employed, or

now contemplated to be employed, by any Borrower or Subsidiary infringes upon

or conflicts with any rights owned by any other Person, which infringement or

conflict could reasonably be expected to have a Material Adverse Effect, and no

claim or litigation regarding any of the foregoing is pending or, to its

knowledge, threatened, the existence of which could reasonably be expected to

have a Material Adverse Effect.  No

patent, invention, device, application, principle or any statute, law, rule,

regulation, standard or code is pending or, to its knowledge, proposed, other

than those the consequences of which in the aggregate could not have a Material

Adverse Effect.

 

6.17                CERTAIN

INDEBTEDNESS

 

The Disclosure

Letter identifies as of the Closing Date all Indebtedness of Parent and the

Subsidiaries which is either (a) Debt or (b) which is material to the

condition (financial or otherwise), business, performance, operations or

properties of Borrowers and which was incurred outside of the ordinary course

of the business.

 

6.18                SOLVENCY

 

Each

Obligor has received consideration that is the reasonably equivalent value of

the obligations and liabilities that it has incurred to Lenders.  Each Obligor is not insolvent as defined in

any applicable state or federal statute, nor will it be rendered insolvent by the

execution and delivery of this Agreement or the other Loan Documents.  No Obligor intends to, nor does it believe

that it will, incur debts beyond its ability to pay them as they mature.  Each Obligor has capital sufficient to carry

on its business and transactions and all business and transactions in which it

is about to engage.

 

6.19                CHIEF

EXECUTIVE OFFICE AND OTHER LOCATIONS

 

Borrower's chief

executive office and principal place of business is set forth in

Section 6.19 of the Disclosure Letter. 

Borrower's books and records are located at its chief executive office,

and the only other offices and/or locations where it keeps the Collateral

(except for inventory which is in transit) or conducts any of its business are

set forth in Section 6.19 of the Disclosure Letter.

 

6.20                FISCAL

YEAR

 

Parent's fiscal

year ends on the Saturday closest to December 31.

 

6.21                COMPLIANCE

WITH LAW

 

Each Borrower and

Subsidiary is in compliance with all Governmental Rules and law, except where

the failure to do so could not reasonably be expected to have a Material Adverse

Effect.

 

6.22                NO

SUBORDINATION

 

There is no

agreement, indenture, contract or instrument to which any Borrower or

Subsidiary is a party or by which it may be bound that requires the

subordination in right of payment of any of the Obligations to any other

obligation of it.

 

6.23                TRUTH, ACCURACY OF

INFORMATION

 

All factual

information furnished by each Borrower and Subsidiary to Administrative Lender

or any Lender in connection with the Loan Documents is accurate in all material

respects and does not contain any untrue statement of a material fact or omit

to state a material fact necessary in order to make the information furnished,

in light of the circumstances under which furnished, not misleading (it being

recognized that the projections and forecasts provided by Borrowers are not to

be viewed as facts and that actual results during the period covered by any

such projections and forecasts may differ from the projected or forecasted

results).

 

ARTICLE VII.              CONDITIONS

 

7.1                  CONDITIONS OF INITIAL EXTENSION OF

CREDIT

 

The obligation of Lenders to extend any credit

contemplated by this Agreement is subject to the fulfillment to Administrative

Lender's satisfaction of all of the following conditions:

 

(a)           Documentation.

Administrative Lender shall have received, in form and substance satisfactory

to it, each of the following duly executed:

 

(i)            this

Agreement, the Notes and such mortgages, deeds of trust and other security

instruments as Administrative Lender may require;

 

(ii)           from

each Obligor, a certificate of its secretary or assistant secretary dated as of

the Closing Date as to: 

(A) resolutions of its board of directors or other governing body

then in full force and effect authorizing the execution, delivery and

performance of each of the Loan Documents to be executed by it; (B) its

Organic Documents, a copy of each of which is attached; and (C) the

incumbency and signatures of those of its officers authorized to act with

respect to the Loan Documents to be executed by it;

 

(iii)          with

respect to each Obligor:  (A) from

the Secretary of State (or other appropriate governmental official) of its

jurisdiction of incorporation or organization, a good standing certificate or

certificate of existence, as applicable, and a certified copy of its filed

Organic Documents; and (B) a certificate of good standing as a foreign

corporation in each jurisdiction described in Section 6.1;

 

(iv)          the

opinion of Wilson Sonsini Goodrich & Rosati, P.C., counsel to Borrowers,

and of Richard Bond, Parent's general counsel, as to such matters as

Administrative Lender and each Lender shall reasonably require; and

 

(v)           such

other documents as Administrative Lender and each Lender may require.

 

(b)           Financial

Condition.  There is no

event or circumstance that can reasonably be expected to have a Material

Adverse Effect.

 

(c)           Fees and

Expenses.  Borrowers

shall have paid all fees and invoiced costs and expenses then due pursuant to

the terms of this Agreement.

 

(d)           Insurance.  Borrowers' Agent shall have delivered to

Administrative Lender evidence of the insurance coverage, including loss

payable endorsements, required pursuant to Section 8.5.

 

7.2                  CONDITIONS OF EACH EXTENSION OF CREDIT

 

The obligation of

each Lender to make any credit available under the Loan Documents (including

any Loan being made by such Lender on the Closing Date) shall be subject to the

further conditions precedent that:

 

(a)           the following statements shall be

true on the date such credit is advanced, both before and after giving effect

thereto and to the application of the proceeds therefrom, and the acceptance by

Borrowers' Agent of the proceeds of such credit shall constitute a

representation and warranty by Borrowers that on the date such credit is

advanced such statements are true:

 

(i)            the representations and warranties

of Borrowers contained in the Loan Documents are correct in all material

respects on and as of such date as though made on and as of such date or, as to

those representations and warranties limited by their terms to a specified

date, were correct in all material respects on and as of such date; and

 

(ii)           no Default is continuing or would

result from the credit being advanced;

 

(b)           advancing such credit on such date

does not violate any Governmental Rule and is not enjoined, temporarily,

preliminarily or permanently;

 

(c)           Administrative Lender shall have

received such additional documents, information and materials as any Lender,

through Administrative Lender, may reasonably request; and

 

(d)           no event or circumstance exists that

could reasonably be expected to have a Material Adverse Effect.

 

ARTICLE VIII.             AFFIRMATIVE COVENANTS

 

Borrowers covenant that so long as Lenders remain

committed to extend credit to Borrowers pursuant to the terms hereof and until

performance and payment in full, in cash, of all Obligations and termination of

the Commitments, Borrowers shall:

 

8.1                  PAYMENTS

 

Pay all principal, interest, fees and other

liabilities due under any of the Loan Documents at the times and place and in

the manner specified therein.

 

8.2                  ACCOUNTING RECORDS

 

Keep, and cause each Subsidiary to keep, accurate

books and records of its financial affairs sufficient to permit the preparation

of financial statements therefrom in accordance with GAAP.

 

8.3                  INFORMATION AND REPORTS

 

Provide to Administrative Lender all of the following,

in form and detail reasonably satisfactory to Administrative Lender and with

sufficient copies for distribution to all Lenders:

 

(i)            as

soon as available but not later than 100 days after and as of the end of each

fiscal year of Parent, a copy of the annual unqualified audit report for such

fiscal year for Parent and the Subsidiaries, including therein consolidated

balance sheets of Parent and the Subsidiaries as of the end of such fiscal year

and consolidated statements of earnings and cash flow of Parent and the

Subsidiaries for such fiscal year, in each case certified in a manner

acceptable to Administrative Lender by independent public accountants

acceptable to Administrative Lender, together with a report from such

accountants to the effect that, in making the examination necessary for the

signing of such annual report by such accountants, they have not become aware

of any Default that has occurred and is continuing, or, if they have become

aware of such Default, describing such Default and the steps, if any, of which

they are aware being taken to cure it;

 

(ii)           as

soon as available but not later than 50 days after and as of the end of each of

Parent's first three fiscal quarters, nor later than 100 days after and as of

the end of each of Parent's fourth fiscal quarters, consolidated and

consolidating balance sheets of Parent and the Subsidiaries as of the end of

such fiscal quarter and consolidated and consolidating statements of earnings

and cash flow of Parent and the Subsidiaries for such fiscal quarter and for

fiscal year-to-date, together with a comparison of Parent's financial condition

for such quarter and year-to-date with the corresponding quarter and

year-to-date in Parent's immediately preceding fiscal year;

 

(iii)          contemporaneously

with the delivery of each financial statement required hereby, a certificate of

Parent's principal financial officer substantially in the form of Exhibit F

attached hereto (A) certifying that such financial statements fairly present in

accordance with GAAP such balance sheet as of the end of such quarter/year and

income and cash flow for such quarter/year and year-to-date (subject to normal

year-end adjustments and the absence of footnotes in the case of quarterly

financial statements), (B) stating that no Default existed at any time

during the period covered by such statement, except for those events or

conditions, if any, described in such certificate in reasonable detail together

with a statement of any action taken or proposed to be taken with respect

thereto, and (C) setting forth the calculations required to establish

compliance by Borrowers with the covenants set forth in Article X;

 

(iv)          not

later than the end of each of Parent's fiscal years beginning with the fiscal

year ending in 2001, or sooner if available, Borrowers' Agent shall furnish to

Administrative Lender detailed projections setting forth Parent's projected

consolidated income and cash flow for Parent's next fiscal year and for each of

Parent's fiscal years through the Maturity Date and Parent's projected

consolidated balance sheet as of the end of each such fiscal year, together

with a certificate of Parent's principal financial officer setting forth the

assumptions on which such projections are based;

 

(v)           promptly

after the sending or filing thereof, copies of all reports which Borrower sends

to any of its securityholders, and all reports and registration statements

which any Borrower or Subsidiary files with the Securities and Exchange

Commission or any national securities exchange;

 

(vi)          a

Borrowing Base Certificate not later than 30 days after and as of the end of

each of Parent's fiscal quarters and not later than 30 days after and as of the

end of each month in which the outstanding principal balance of the Revolving

Loans at any time exceeds 50% of the Borrowing Base; and

 

(vii)         from

time to time such other information as Administrative Lender may reasonably

request.

 

 

8.4                  COMPLIANCE

 

Comply in all material respects, and cause each

Subsidiary to comply in all material respects, with all Governmental Rules,

Contractual Obligations, commitments, instruments, licenses, Permits and

franchises, other than such noncompliance the consequences of which in the

aggregate could not reasonably be expected to have a Material Adverse Effect.

 

8.5                  INSURANCE

 

(a)           Maintain,

and cause each Subsidiary to maintain, insurance with insurance companies

reasonably acceptable to Administrative Lender with respect to its properties

and business (including business interruption and extra expense endorsements)

against such casualties and contingencies and of such types, with such

deductibles and in such amounts as is customary in the case of similar

businesses.  With respect to the

insurance maintained by Borrower: 

(i) such insurance shall contain a lender's loss payable

endorsement acceptable to Administrative Lender and shall name Administrative

Lender as an additional named insured; (ii) the policies or a certificate

thereof signed by the insurer shall be delivered to Administrative Lender within

ten Business Days after the issuance or renewal of the policies to Borrower;

(iii) each such policy shall provide that such policy may not be amended

(except to increase coverage) or canceled without thirty days prior notice to

Administrative Lender; and (iv) at least five days before the expiration

of a policy, Borrowers' Agent shall deliver to Administrative Lender a binder

(or other evidence reasonably acceptable to Administrative Lender) indicating

that such policy has been renewed or that a substitute for such policy will be

issued effective upon the expiration of such policy.  If Borrowers' Agent fails to comply with the foregoing,

Administrative Lender may (but shall not be required to) procure such insurance

and add the cost thereof to the Revolving Loans.

 

(b)           Maintain,

and cause each Subsidiary to maintain, in full force and effect such liability

and other insurance with respect to its activities as is customary in the case

of similar businesses or as may be reasonably required by Administrative Lender.  Such liability insurance maintained by

Borrower shall name Administrative Lender as an additional insured with respect

to the activities of Borrower and shall be provided by insurer(s) reasonably

acceptable to Administrative Lender.

 

(c)           The

following is inserted pursuant to ORS 746.201:

 

WARNING

 

                Unless

Borrowers provide Administrative Lender with evidence of the insurance coverage

as required by this Agreement, Administrative Lender may purchase insurance at

Borrowers' expense to protect Administrative Lender's interest.  This insurance may, but need not, also

protect Borrowers' interest.  If the

collateral becomes damaged, the coverage Administrative Lender purchases may not

pay any claim Borrowers make or any claim made against Borrowers.  Borrowers may later cancel this coverage by

providing evidence that Borrowers have obtained property coverage elsewhere.

 

                Borrowers

are responsible for the cost of any insurance purchased by Administrative

Lender.  The cost of this insurance may

be added to Borrowers' contract or loan balance.  If the cost is added to Borrowers' contract or loan balance, the

interest rate on the underlying contract or loan will apply to this added

amount.  The effective date of coverage

may be the date Borrowers' prior coverage lapsed or the date Borrowers failed

to provide proof of coverage.

 

                The coverage Administrative Lender purchases may be

considerably more expensive than insurance Borrowers can obtain on its own and

may not satisfy any need for property damage coverage or any mandatory

liability insurance requirements imposed by applicable law.

 

8.6                  FACILITIES

 

Keep, and cause

each Subsidiary to keep, all properties useful or necessary to its business in

good repair and condition, and from time to time make necessary repairs, renewals

and replacements thereto so that such property shall be fully and efficiently

preserved and maintained, except where the failure to do so could not

reasonably be expected to have a Material Adverse Effect.

 

8.7                  TAXES AND OTHER LIABILITIES

 

Pay and discharge,

and cause each Subsidiary to pay and discharge, when due any and all

indebtedness, obligations, assessments and taxes, both real or personal,

including without limitation Federal and state income taxes and state and local

property taxes and assessments, except such as Borrower may in good faith

contest or as to which a bona fide dispute may arise, and for which Borrowers

have made provision for adequate reserves in accordance with GAAP, except where

the failure to do so could not reasonably be expected to have a Material

Adverse Effect.

 

8.8                  LITIGATION

 

Promptly give

notice in writing to Administrative Lender of any litigation pending or

threatened in writing against any Borrower or Subsidiary with a claim in excess

of $5,000,000 in the aggregate for Parent and all Subsidiaries.

 

8.9                  NOTICE TO ADMINISTRATIVE LENDER

 

(a)           Promptly (but in no event more than

two Business Days after a Responsible Officer has knowledge of the occurrence

of each such event or matter) cause Borrowers' Agent to give notice to

Administrative Lender in reasonable detail of: 

(i) the occurrence of any Default; (ii) any termination or

cancellation of any insurance policy which any Borrower or Subsidiary is

required to maintain, unless such policy is replaced without any break in

coverage with an equivalent or better policy; (iii) any uninsured or

partially uninsured loss or losses through liability or property damage, or

through fire, theft or any other cause affecting the property of any Borrower

or Subsidiary in excess of an aggregate of $10,000,000 during any twelve month

period; (iv) any change in the Organic Documents of any Borrower or

Subsidiary; (v) the occurrence of any adverse development with respect to

any litigation, action, proceeding, or labor controversy described in Section

6.7 or the commencement of any labor controversy, litigation, action,

proceeding of the type described in Section 6.7 together with copies of

all documentation relating thereto; or (vi) the occurrence of any event

that could have a Material Adverse Effect.

 

(b)           As soon as possible and in any event

within ten days after Borrower knows or has reason to know that any

"reportable event" (as defined in Title IV of ERISA) that

triggers an obligation to file a notice with the PBGC with respect to any Plan

has occurred, cause Borrowers' Agent to deliver to Administrative Lender a

statement of the President or principal financial officer of Parent setting

forth details as to such reportable event and the action which Borrowers

propose to take with respect thereto, together with a copy of the notice of

such reportable event to the PBGC.

 

(c)           Promptly, upon receipt (but in no

event more than ten Business Days after receipt) of a notice by Borrower, any

affiliate of any Borrower or any administrator of any Plan that the PBGC has

instituted proceedings to terminate a Plan or to appoint a trustee to

administer a Plan, cause Borrowers' Agent to provide to Administrative Lender a

copy of such notice.

 

8.10                CONDUCT

OF BUSINESS

 

Except as

otherwise permitted by this Agreement, (a) conduct, and cause each

Subsidiary to conduct, its business in the ordinary course and (b) use,

and cause each Subsidiary to use, its reasonable efforts in the ordinary course

and consistent with past practice to (i) preserve its business and the

goodwill and business of the customers, advertisers, suppliers and others with

whom it has business relations and (ii) keep available the services and

goodwill of its present employees. 

Notwithstanding the foregoing, any Borrower may liquidate or merge with

and into Parent.

 

8.11                PRESERVATION

OF CORPORATE EXISTENCE, ETC.

 

Except to the

extent that the failure to do so could not reasonably be expected to have a

Material Adverse Effect, preserve and maintain, and cause each Subsidiary to

preserve and maintain, all licenses, Permits, governmental approvals, rights,

privileges, franchises and General Intangibles necessary for the conduct of its

business, and its corporate existence and rights (charter and statutory).

 

8.12                ACCESS

 

(a)           At such reasonable times as

determined by Administrative Lender and upon at least two Business Days prior

notice from Administrative Lender (unless a Default shall have occurred and be

continuing, in which case no prior notice is necessary), permit Lender and/or

any of Lender's agents or representatives, to (i) examine and make copies

of and abstracts from each Borrower's and Subsidiary's records and books of

account, (ii) visit each Borrower's and Subsidiary's properties, (iii)

discuss each Borrower's and Subsidiary's affairs, finances and accounts with

any of its officers or directors who may then be reasonably available,

(iv) communicate directly with each Borrower's and Subsidiary's

independent certified public accountants, (v) arrange for verification of

Borrower's Rights to Payment under reasonable procedures directly with the

obligors thereon or by other methods, and (vi) examine and inspect each

Borrower's and Subsidiary's assets. 

Each Borrower and Subsidiary shall authorize its independent certified

public accountants to disclose to Lender any and all financial statements and

other information of any kind, including, without limitation, copies of any

management letter, work papers or the substance of any oral information that

such accountants may have with respect to the business, financial condition,

results of operations or other affairs of each Borrower and Subsidiary.

 

(b)           Borrower shall execute and deliver at

the request of Administrative Lender such instruments as may be necessary for

Administrative Lender or any Lender to obtain such information concerning the

business of each Borrower and Subsidiary as Administrative Lender or any Lender

may reasonably require from accountants, service bureaus or others having

custody of or maintaining records or assets of any Borrower or Subsidiary,

provided that the foregoing shall not (and is not intended to) require any

Borrower or Subsidiary to take any action that would constitute a waiver of any

Borrower's or Subsidiary's attorney/client privilege.

 

8.13                PERFORMANCE AND COMPLIANCE WITH OTHER

COVENANTS

 

Perform and

observe, and cause each Subsidiary to perform and observe, all the terms,

covenants and conditions required to be performed and observed by it under its

Contractual Obligations, and do all things necessary to preserve and to keep

unimpaired its rights under such Contractual Obligations, other than such

failures the consequences of which in the aggregate could not reasonably be

expected to have a Material Adverse Effect.

 

8.14                FISCAL YEAR; ACCOUNTING PRACTICES

 

Notify

Administrative Lender at least 30 days in advance of any action any Borrower or

Subsidiary intends to take to change (i) its fiscal year or (ii) its

method of accounting, or any accounting practice used by it, or the application

of GAAP in a manner inconsistent with the financial statements previously

delivered by it to Administrative Lender.

 

8.15                ENVIRONMENTAL

 

(a)           Promptly give notice to

Administrative Lender upon a Responsible Officer obtaining knowledge of

(i) any claim, injury, proceeding, investigation or other action,

including a request for information or a notice of potential environmental

liability, by or from any Governmental Authority or any third-party claimant

that could result in any Borrower or Subsidiary incurring Environmental Liabilities

and Costs that could reasonably be expected to have a Material Adverse Effect

or (ii) the discovery of any Release at, on, under or from any real

property, facility or equipment owned or leased by any Borrower or Subsidiary

in excess of reportable or allowable standards or levels under any applicable

Environmental Law, or in any manner or amount that could result in any Borrower

or Subsidiary incurring Environmental Liabilities and Costs that could

reasonably be expected to have a Material Adverse Effect.

 

(b)           Upon discovery of the presence on any

property owned or leased by any Borrower or Subsidiary of any Contaminant that

reasonably could be expected to result in Environmental Liabilities and Costs

that could reasonably be expected to have a Material Adverse Effect, take all

Remedial Action required by applicable Environmental Law.

 

8.16                LIENS

 

Keep the

Collateral and all of its real property free and clear of all Liens, except

Permitted Liens.

 

8.17                FUTURE SUBSIDIARIES

 

Upon any Person

becoming a Subsidiary after the Closing Date, notify Administrative Lender of

such event, and execute and deliver, and cause such Subsidiary to execute and

deliver, such additional Loan Documents as Administrative Lender may reasonably

require, including such as are necessary to cause any such Subsidiary which is

not a Foreign Subsidiary to become a "Borrower."

 

8.18                USE OF

PROCEEDS

 

Use the proceeds

of the Loans solely for Borrowers' general working capital and corporate

purposes.

 

8.19                FURTHER

ASSURANCES

 

At

Administrative Lender's request at any time and from time to time, duly execute

and deliver, and cause each Subsidiary to execute and deliver, such further

agreements, documents and instruments, and do or cause to be done such further

acts as may reasonably be necessary or proper to evidence, perfect, maintain

and enforce the security interests and the priority thereof in the Collateral

and to otherwise effectuate the provisions or purposes of the Loan Documents,

at Borrowers' expense.  Administrative

Lender may at any time and from time to time request a certificate from

Borrowers' Agent representing that all conditions precedent to the advancement

of credit contained herein are satisfied. 

In the event of such request by Administrative Lender, each Lender may

cease to make any further advancements of credit until Administrative Lender

has received such certificate and Administrative Lender has determined that

such conditions are satisfied.

 

ARTICLE IX.                NEGATIVE

COVENANTS

 

Borrowers covenant that so long as Lenders remain

committed to extend credit to Borrowers pursuant to the terms hereof and until

performance and payment in full, in cash, of all Obligations and termination of

the Commitments, Borrowers will not:

 

9.1                  LIENS

 

Create or suffer to exist, or permit any Subsidiary to

create or suffer to exist, any Lien upon or with respect to any of its

properties (including, without limitation any real property), whether now owned

or hereafter acquired, or assign any right to receive income, except Permitted

Liens.

 

9.2                  INDEBTEDNESS

 

Create or suffer to exist, or permit any Subsidiary to

create or suffer to exist, any Debt or other Indebtedness that is not Debt,

except:

 

(a)           the

Obligations;

 

(b)           current

liabilities in respect of taxes, assessments and governmental charges or levies

incurred, or liabilities for labor, materials, inventory, services, supplies

and rentals incurred, or for goods or services purchased, in the ordinary

course of business consistent with past practice and industry practice in

respect of arm's length transactions;

 

(c)           Debt

outstanding on the Closing Date and referenced on Section 6.17 of the

Disclosure Letter and all renewals, extensions, refinancing or refunding of

such Indebtedness in a principal amount which does not exceed the principal

amount outstanding immediately before such refinancing, together with all

prepayment fees, penalties and expenses in respect of the Indebtedness being

renewed, extended, refinanced or refunded, provided each such renewal,

extension, refinancing or refunding is on terms and conditions no less

favorable to the creditors than the Indebtedness being renewed, extended,

refinanced or refunded;

 

(d)           Debt

subordinated in writing to the Obligations on terms acceptable to Required

Lenders in favor of the prior payment in full in cash of the Obligations;

 

(e)           purchase

money Debt (including Capitalized Leases and Other Leases) to finance the

purchase of fixed assets (including equipment); provided that (i) the

total of all such Indebtedness (exclusive of such Indebtedness for the purchase

of chassis and the Indebtedness referred to in clause (c) above) shall not

exceed an aggregate principal amount of $5,000,000 at any one time outstanding;

(ii) such Indebtedness when incurred shall not exceed the purchase price

of the assets financed; (iii) no such Indebtedness shall be refinanced for a

principal amount in excess of the principal balance outstanding thereon at the

time of such refinancing; and (iv) no Default exists at the time such

Indebtedness is incurred;

 

(f)            Indebtedness

under Interest Rate Contracts, Commodity Contracts and foreign exchange

agreements permitted under Section 9.13;

 

(g)           Repurchase

Obligations;

 

(h)           Debt

of any Borrower to another Borrower to the extent such Debt is permitted under

Section 9.5;

 

(i)            Indebtedness

incurred in the ordinary course of business for the purchase of chassis;

 

(j)            other

Indebtedness not to exceed 20% of Tangible Net Worth at any time, provided that

no Default exists or is created by incurrence of such Indebtedness; and

 

(k)           Contingent Obligations in connection

with Approved Dealer Financing Agreements.

The foregoing notwithstanding, in no event may

Contingent Obligations of Borrowers in respect of ORA at any time exceed

$11,500,000.

 

9.3                  RESTRICTED

PAYMENTS, REDEMPTIONS

 

Do any of the

following at any time a Default is continuing or if after giving effect to any

such action a Default would be caused by such action:

 

(a)           declare or make any dividend payment

or other distribution of assets, properties, cash, rights, obligations or securities

on account or in respect of any of its Stock or Stock Equivalents except

(i) dividends paid to Borrower or (ii) dividends paid by Parent

solely in Stock or Stock Equivalents of Parent; or

 

(b)           purchase, redeem or otherwise acquire

for value any of Parent's Stock or Stock Equivalents, except that

(i) Parent may convert any of its convertible securities of the type in

existence on the Closing Date into other securities pursuant to the terms of

such convertible securities or otherwise in exchange therefor and (ii) for

so long as a Default is not continuing and would not be caused by such action,

Parent may repurchase stock from employees or former employees of Borrowers in

accordance with the terms of repurchase agreements between Borrowers and their

employees or former employees.

 

9.4                  MERGERS,

STOCK ISSUANCES, SALE OF ASSETS, ETC.

 

Except as

permitted in Section 9.5(h) and (i):

 

(a)           Merge or consolidate with, or permit

any Subsidiary to merge or consolidate with, any Person or acquire all or

substantially all of the Stock or Stock Equivalents of any Person; provided any

Borrower may liquidate or dissolve voluntarily into, and may merge with and

into, or have its stock otherwise acquired by Parent and any Subsidiary other

than a Borrower may liquidate or dissolve voluntarily into, and may merge with

and into, or have its stock otherwise acquired by Parent or any other

Subsidiary that is not a Foreign Subsidiary;

 

(b)           Acquire all or substantially all, or

permit any Subsidiary to acquire all or substantially all of (i) the

assets of any Person or (ii) the assets constituting the business of a

division, branch or other unit operation of any Person; provided any Subsidiary

may acquire all or substantially all of the assets of (or the assets constituting

the business of a division, branch or other unit operation of) any other

Subsidiary that is not a Foreign Subsidiary; or

 

(c)           Sell, convey, transfer, lease or

otherwise dispose of, or permit any Subsidiary to sell, convey, transfer, lease

or otherwise dispose of, any of its assets or any interest therein to any

Person, or permit or suffer any other Person to acquire any interest in any of

its assets, except (i) Permitted Liens, (ii) as otherwise permitted

under item (a) or (b) above, or (iii) the sale or disposition of inventory

in the ordinary course of business and/or assets which have become obsolete,

unneeded or are replaced in the ordinary course of business.

 

9.5                  INVESTMENTS

 

Make, incur,

assume or suffer to exist any Investment in any other Person, except, without

duplication:

 

(a)           Investments existing on the Closing

Date and identified in Section 9.5 of the Disclosure Letter;

 

(b)           Cash Equivalent Investments (provided

that any Investment which when made complies with the requirements of the

definition of the term "Cash Equivalent Investment" may continue to

be held notwithstanding that such Investment if made thereafter would not

comply with such requirements);

 

(c)           Investments permitted as Indebtedness

pursuant to Section 9.2;

 

(d)           Investments consisting of employee

relocation loans and other loans to employees, officers or directors for the

purchase of equity securities of Parent;

 

(e)           in the ordinary course of business,

Investments by Borrower or any Subsidiary in any Subsidiary that is not a

Foreign Subsidiary (or, with the prior written consent of Administrative Lender

(which consent will not be unreasonably withheld), any Subsidiary that is a

Foreign Subsidiary), by way of contributions to capital or loans or advances,

provided that immediately before and after giving effect thereto no Default is

continuing;

 

(f)            Investments (including debt

obligations) received in connection with the bankruptcy or reorganization of

customers or suppliers in settlement of obligations of, or disputes with, such

Persons arising in the ordinary course of business;

 

(g)           Investments arising under Interest

Rate Contracts, Commodity Contracts and foreign exchange agreements permitted

hereunder;

(h)           subject to the dollar limitations set

forth below, any acquisition of (1) all or substantially all of the Stock

or Stock Equivalents of any Person (whether by purchase or merger),

(2) all or substantially all of the assets of any Person or (3) all

or substantially all of the assets constituting the business of a division, branch

or other unit operation of any Person; provided that immediately before and

after giving effect thereto no Default is continuing and provided further, that

(A) after combining Parent's consolidated actual and projected financial

performance with the actual and projected financial performance of the

"Entity" (as defined below) on a pro forma, consolidated basis in a

manner acceptable to Administrative Lender, Administrative Lender is satisfied

that no Default would have occurred or will occur as a result of such acquisition,

(B) the Entity is located in and organized under the laws of Canada, a

jurisdiction in Canada, the United States or a jurisdiction in the United

States, (C) the Entity is not a Foreign Subsidiary or, if it is or would

be a Foreign Subsidiary, not without first obtaining the written consent of

Administrative Lender, which consent will not be unreasonably withheld and

(D) such acquisition is a consensual acquisition and not a hostile

take-over or other non-negotiated acquisition. 

"Entity" means the entity which is the subject of such

acquisition or which is the seller of assets in connection with such

acquisition; and

 

(i)            subject to the dollar limitations

set forth below, other Investments provided that immediately before and after

giving effect thereto no Default is continuing.

 

The aggregate

consideration paid in cash or property (other than common Stock and common

Stock Equivalents of Parent) for all acquisitions and other Investments

permitted under clauses (h) and (i) above shall not (after taking into account

any losses incurred on Investments made under clause (i)) at any time exceed

20% of Tangible Net Worth.  The

foregoing notwithstanding, in no event may Investments of Borrowers in ORA at

any time exceed $10,000,000.

 

9.6                  CHANGE IN NATURE OF BUSINESS

 

Directly or

indirectly engage, or permit any Subsidiary to directly or indirectly engage,

in any business activity other than the type of business activities in which

Borrowers are currently engaged and activities reasonably related thereto.

 

9.7                  PLANS

 

(a)           Adopt or become obligated to

contribute to, or permit any Subsidiary to adopt or become obligated to

contribute to, any Plan subject to Title IV or any multi-employer Plan or

any other Plan subject to Section 412 of the Internal Revenue Code (except

for any such Plan listed on the Disclosure Letter on the Closing Date),

(b) establish or become obligated with respect to, or permit any

Subsidiary to establish or become obligated to contribute to, any new welfare

benefit Plan, or modify any existing welfare benefit Plan, which is reasonably

likely to result in an increase of the present value of future liabilities for

post-retirement life insurance and medical benefits, or (c) establish or

become obligated to contribute to, or permit any Subsidiary to establish or

become obligated to contribute to, any new unfunded pension Plan, or modify any

existing unfunded pension Plan, which is reasonably likely to result in an

increase in the present value of future unfunded liabilities under all such

plans.

 

9.8                  CANCELLATION OF INDEBTEDNESS OWED TO IT

 

Cancel, or permit

any Subsidiary to cancel, any claim or Indebtedness owed to it except for

legitimate business purposes in the reasonable judgment of Borrowers and in the

ordinary course of business.

 

9.9                  MARGIN

REGULATIONS

 

Use, or permit any

Subsidiary to use, the proceeds of any Loan to purchase or carry any margin

stock (within the meaning of Regulation U of the Board of Governors of the

Federal Reserve System).

 

9.10                ENVIRONMENTAL

 

Permit any lessee

or any other Person to dispose of any Contaminant by placing it in or on the

ground or waters of any property owned or leased by any Borrower or Subsidiary,

except in material compliance with Environmental Law or the terms of any Permit

or other than those that in the aggregate could not reasonably be expected to

have a Material Adverse Effect.

 

9.11                TRANSACTIONS WITH AFFILIATES

 

Enter, or permit

any Subsidiary to enter, into any transaction directly or indirectly with or

for any affiliate of Borrower (other than another Borrower or any Subsidiary

that is not a Foreign Subsidiary) except (a) in the ordinary course of

business on a basis no less favorable to such affiliate than would be obtained

in a comparable arm's length transaction with a Person not an affiliate of

Borrower or (b) any transaction involving assets that are not material to

the business and operations of Borrowers or the Subsidiaries.

 

9.12                NEW COLLATERAL LOCATION; NAME CHANGE

 

Open any new

location or change its name, or permit any Subsidiary to do so, unless

(a) Borrowers' Agent gives Administrative Lender (i) 30 days prior

notice of the intended name change, (ii) 30 days prior notice of the

intended opening of such new location, and (b) Borrowers execute and

Borrowers' Agent delivers to Administrative Lender such agreements, documents

and instruments as Administrative Lender deems reasonably necessary or

desirable to protect its interests in the Collateral.

 

9.13                NO SPECULATIVE TRANSACTIONS

 

Engage in, or

permit any Subsidiary to engage in, any Commodity Contract, Interest Rate

Contract or foreign exchange agreement, except for hedging purposes with

respect to transactions engaged in by Borrowers in the ordinary course of

business and not for speculative purposes.

 

ARTICLE X.                 FINANCIAL

COVENANTS

 

10.1                LEVERAGE

RATIO

 

As of the end of each fiscal quarter ending in 2001,

Parent shall maintain a Leverage Ratio not greater than 2.00:1.  As of the end of each fiscal quarter ending

after 2001 and before July 1, 2002, Parent shall maintain a Leverage Ratio

not greater than 1.75:1.  As of the end

of each fiscal quarter ending after June 30, 2002, Parent shall maintain a

Leverage Ratio not greater than 1.50:1.

 

10.2                CURRENT

RATIO

 

As of the end of each fiscal quarter, Parent shall

maintain a Current Ratio not less than 1.1:1.

 

10.3                FIXED CHARGE COVERAGE RATIO

 

As of the end of each fiscal quarter, Parent shall

maintain a Fixed Charge Coverage Ratio not less than 1.5:1.

 

10.4                TANGIBLE

NET WORTH

 

Parent will not permit its Tangible Net Worth as of

the end of any fiscal quarter to be less than the total of (i) 90% of Tangible

Net Worth as of September 29, 2001 plus (ii) 50% of the sum of

Parent's consolidated net income for each fiscal quarter since

September 29, 2001 (exclusive of any fiscal quarter in which Parent's

consolidated net income is less than zero).

 

ARTICLE XI.                EVENTS OF DEFAULT

 

11.1                EVENTS OF DEFAULT

 

The occurrence of

any of the following shall constitute an "Event of Default" under

this Agreement:

 

(a)           any Obligor shall fail to pay when

due any principal amount payable under the Loan Documents, shall fail to pay

any interest payable under the Loan Documents within 10 days of the due date

therefor, or shall fail to pay any other amount payable under the Loan

Documents within 3 days of the due date therefor;

 

(b)           any financial statement or

certificate furnished to Administrative Lender or any Lender in connection

with, or any representation or warranty made by any Obligor under any of the

Loan Documents shall prove to be false or misleading in any material respect

when furnished or made;

 

(c)           Borrowers or Borrowers' Agent shall

fail to provide any certificate, report or other information which it is

required to provide pursuant to Section 8.3 or Section 8.9 on the

date specified in Section 8.3 or Section 8.9; provided that unless

Borrowers and Borrowers' Agent have previously failed to provide any required

certificate, report or other information by the required date on two prior

occasions within the preceding 12 months such failure shall be considered an

Event of Default only if Borrowers and Borrowers' Agent fail to provide such

certificate, report or other information within five Business Days (two

Business Days with respect to Section 8.9(a)) of the earlier of

(i) the date an officer of Borrower has knowledge of the failure to so

provide such certificate, report or other information, or (ii) the date

Administrative Lender, at the request of a Lender, notifies Borrowers' Agent of

such failure;

 

(d)           any default by Borrowers in the

performance of or compliance with any obligation, agreement or other provision

contained in Sections 5.2(a), 8.5, 8.10, 8.11, 8.12, 8.14, 8.16, 8.17,

9.1, 9.2, 9.3, 9.4, 9.5, 9.6 and 9.12 and contained in Article X;

 

(e)           any default by any Obligor in the

performance of or compliance with any obligation, agreement or other provision

contained in any Loan Document (other than those referred to in subsections (a)

through (d) above) for 30 days after notice thereof has been given to

Borrowers' Agent by Administrative Lender;

 

(f)            any breach(es) by any Obligor in the

payment or performance of any other obligation(s) under the terms of any

contract(s) or instrument(s) (other than any of the Loan Documents) evidencing

Indebtedness in excess of $5,000,000 in the aggregate if such breach(es)

has/have not been cured to the satisfaction of the affected creditor(s) or

waived by such creditor(s) within any applicable cure period provided under the

contract(s) or instrument(s);

 

(g)           any judgment(s) or order(s) for the

payment of money in excess of $5,000,000 in the aggregate shall be rendered

against one or more Obligors and Subsidiaries and either (i) enforcement

proceedings shall have been commenced by any creditor upon any such judgment or

order; or (ii) there shall be any period of 10 consecutive days during

which a stay of enforcement of any such judgment or order, by reason of a

pending appeal or otherwise, shall not be in effect;

 

(h)           any Obligor becomes insolvent, or

suffers or consents to or applies for the appointment of a receiver, trustee,

custodian or liquidator of itself or any of its property, or is generally

unable to or fails to pay its debts as they become due, or makes a general

assignment for the benefit of creditors; any Obligor files a voluntary petition

in bankruptcy, or seeks to effect a plan or other arrangement with creditors or

any other relief under the Bankruptcy Code or under any state or other Federal

law granting relief to debtors, whether now or hereafter in effect; or any

involuntary petition or proceeding pursuant to the Bankruptcy Code or any other

applicable state or Federal law relating to bankruptcy, reorganization or other

relief for debtors is filed or commenced against any Obligor and is not

dismissed, stayed or vacated within 60 days thereafter or any Obligor files an

answer admitting the jurisdiction of the court and the material allegations of

any such involuntary petition; any Obligor is adjudicated a bankrupt, or an

order for relief is entered by any court of competent jurisdiction under the

Bankruptcy Code or any other applicable state or Federal law relating to

bankruptcy, reorganization or other relief for debtors; or any Obligor takes

any corporate, partnership or company action authorizing, or in furtherance of,

any of the foregoing;

(i)            if any of the following events

occur:  (1) any Plan incurs any

"accumulated funding deficiency" (as defined in ERISA) whether waived

or not, (2) Parent or any affiliate of Parent engages in any "prohibited

transaction" (as defined in ERISA), (3) any Plan is terminated,

(4) a trustee is appointed by an appropriate United States district court

to administer any Plan, or (5) the PBGC institutes proceedings to

terminate any Plan or to appoint a trustee to administer any Plan;

 

(j)            the dissolution or liquidation of

any Obligor, or any Obligor or its directors or stockholders shall take action

seeking to effect the dissolution or liquidation of any Obligor;

 

(k)           any Change in Control; or

 

(l)            any Loan Document, or any Lien

granted thereunder, shall (except in accordance with its terms), in whole or in

part, terminate, cease to be effective or cease to be the legally valid,

binding and enforceable obligation of any Obligor party thereto; any Obligor

shall, directly or indirectly, contest in any manner such effectiveness, validity,

binding nature or enforceability; or any Lien securing any Obligation shall, in

whole or in part, cease to be a perfected first priority Lien, subject only to

those exceptions expressly permitted by such Loan Document.

 

11.2                REMEDIES

(a)           During the continuance of any Event

of Default (other than an Event of Default referred to in

Section 11.1(h)), Administrative Lender may, with the consent of the

Required Lenders, or shall, upon instructions from the Required Lenders, by

notice to Borrowers' Agent, (i) terminate the obligations of Lenders to

extend any further credit under any of the Loan Documents, and

(ii) declare all or any part of the Obligations to be immediately due and

payable without presentment, demand, protest or any other notice of any kind,

all of which are hereby expressly waived by Borrowers, and/or take such

enforcement action as is permitted under this Section.  Upon the occurrence or existence of any

Event of Default described in Section 11.1(h), immediately and without

notice, (A) the obligations, if any, of Lenders to extend any further

credit under any of the Loan Documents shall automatically cease and terminate,

and (B) all indebtedness of Borrowers under the Loan Documents shall

automatically become immediately due and payable, without presentment, demand,

protest or any other notice of any kind, all of which are hereby expressly

waived by Borrowers.  Immediately after

taking any action under this Section, Administrative Lender shall notify each

Lender of such action.

(b)           During the continuance of an Event of

Default, Administrative Lender, in addition to any other rights and remedies

contained in the Loan Documents, shall have all of the rights and remedies of a

secured party under the Code and all other applicable law, all of which rights

and remedies shall be cumulative and nonexclusive to the extent permitted by

law.  Administrative Lender may cause

the Collateral to remain on Borrower's premises, at Borrowers' expense, pending

sale or other disposition thereof. 

Administrative Lender shall have the right to conduct such sales on

Borrower's premises or elsewhere, at Borrowers' expense, on such occasion(s) as

Administrative Lender may see fit, and Borrowers, at Administrative Lender's

request, will, at Borrowers' expense, assemble the Collateral and make it

available to Administrative Lender at such place(s) as Administrative Lender

may reasonably designate from time to time. 

Any sale, lease or other disposition by Administrative Lender of the

Collateral, or any part thereof, may be for cash or other value.  Borrowers shall execute and deliver, or

cause to be executed and delivered, such instruments, documents, assignments,

deeds, waivers, certificates and affidavits and take such further action as

Administrative Lender shall reasonably require in connection with such sale,

and Borrower hereby constitutes Administrative Lender as its attorney-in-fact

to execute any such instrument, document, assignment, deed, waiver, certificate

or affidavit on behalf of Borrower and in its name.  At any sale of the Collateral, the Collateral to be sold may be

sold in one lot as an entirety or in separate lots as Administrative Lender may

determine.  Administrative Lender shall

not be obligated to make any sale of any Collateral if it determines not to do

so, regardless of the fact that notice of sale was given.  Administrative Lender may, without notice or

publication, adjourn any public or private sale or cause the sale to be

adjourned from time to time by announcement at the time and place fixed for

sale, and such sale may, without further notice, be made at the time and place

to which it is so adjourned.  In case

any sale of Collateral is made on credit or for future delivery, the Collateral

so sold may be retained by Administrative Lender until the sale price is paid,

but Administrative Lender shall not incur any liability if any purchaser fails

to pay for any Collateral so sold and, in case of any such failure, such

Collateral may be sold again.  At any public

sale, any Lender (i) may bid for or purchase the Collateral offered for sale

free (to the extent permitted by law) from any rights of redemption, stay or

appraisal on the part of Borrower with respect to the Collateral, (ii) make

payment on account thereof by using any claim then due and payable to such

Lender from Borrower as a credit against the purchase price, and (iii) upon

compliance with the terms of sale, hold, retain and dispose of such property

without further accountability to Borrower therefor.  Borrowers acknowledge that portions of the Collateral may be

difficult to preserve and dispose of and may be subject to complex maintenance

and management; accordingly, Administrative Lender shall have the widest

possible latitude in the exercise of its rights and remedies hereunder.

 

(c)           Administrative Lender is hereby

granted a license and right to use, without charge upon the occurrence and

during the continuance of an Event of Default and until the Obligations are

fully and finally paid in cash and the Commitments terminated, Borrowers' labels,

patents, copyrights, rights of use of any name, trade secrets, trade names,

trademarks, service marks, advertising material, General Intangibles and any

other property of a similar nature in completing the production, advertising

for sale and sale of any Collateral.

(d)           Any notice required to be given by

Administrative Lender with respect to any of the Collateral, which notice is

given pursuant to Section 13.1 and deemed received pursuant to

Section 13.1 at least five Business Days before a sale, lease, disposition

or other intended action by Administrative Lender with respect to any of the

Collateral, shall constitute fair and reasonable notice to Borrowers of any

such action.  A public sale in the

following fashion shall be conclusively presumed to be reasonable:  (i) the sale is held in a county where

any part of the Collateral is located or in which Borrower has a place of

business; (ii) the sale is conducted by auction, but it need not be by a

professional auctioneer; (iii) any Collateral is sold as is and without

any preparation for sale; and (iv) Borrowers' Agent is given notice of

such public sale pursuant to the preceding sentence.

(e)           Upon the occurrence and during the

continuance of an Event of Default, Administrative Lender shall have, with

respect to Rights to Payment, all rights and powers to:  (i) direct any and all account debtors

to make all payments in respect of the Rights to Payment directly to

Administrative Lender or otherwise demand payment of any or all of the Rights

to Payment; (ii) enforce payment of any or all of the Rights to Payment by

legal proceedings or otherwise; (iii) exercise Borrower's rights and remedies

with respect to any actions or proceedings brought to collect a Right to

Payment; (iv) sell or assign any Right to Payment upon such terms, for

such amount and at such time or times as Administrative Lender deems advisable;

(v) settle, adjust, compromise, extend or renew a Right to Payment; (vi)

discharge or release any Right to Payment; and (vii) prepare, file and sign

Borrower's name on any proof of claim in bankruptcy or any similar document

against an account debtor, and to otherwise exercise the rights granted herein.

 

(f)            Administrative Lender shall have no

obligation (i) to preserve any rights to the Collateral against any

Person, (ii) to make any demand upon or pursue or exhaust any rights or

remedies against Borrowers or others with respect to payment of the

Obligations, (iii) to pursue or exhaust any rights or remedies with

respect to any of the Collateral or any other security for the Obligations, or

(iv) to marshal any assets in favor of Borrower or any other Person

against or in payment of any or all of the Obligations.

(g)           Borrowers recognize that federal

and/or state securities and other laws may limit the flexibility desired to

achieve an otherwise commercially reasonable disposition of Collateral, and in

the event of potential conflict between such laws and what in other

circumstances might constitute commercial reasonableness, it is intended that

consideration of such laws will prevail over attempts to achieve such

commercial reasonableness.  In

connection with any sale or other disposition of Collateral, compliance by

Administrative Lender with the written advice of its counsel concerning the

potential effect of any such law will not be cause for Borrower, or any other

Person, to claim that such sale or other disposition was not commercially

reasonable.

 

(h)           Borrowers shall pay to Administrative

Lender (for distribution to Lenders, as appropriate), on demand and as part of

the Obligations, all costs and expenses, including court costs and costs of

sale, incurred by Administrative Lender or any Lender in exercising any of its

rights or remedies hereunder, and all costs and expenses incurred in connection

with any review of any part of the Collateral.

 

11.3                ADMINISTRATIVE LENDER AS BORROWERS'

ATTORNEY

Borrower

hereby appoints Administrative Lender or any other Person whom Administrative

Lender may designate, as Borrower's attorney, with power during the continuation

of an Event of Default:  to indorse

Borrower's name on any checks, notes, acceptances, money orders, drafts or

other forms of payment or security that may come into Administrative Lender's

possession; to sign Borrower's name on any invoice or bill of lading relating

to any Right to Payment, on drafts against customers, on schedules and

assignments of Rights to Payment, on notices of assignment, financing

statements and other public records, and on notices to customers; to notify the

post office authorities to change the address for delivery of Borrower's mail

to an address designated by Administrative Lender; to receive, open and process

all mail addressed to Borrower; to ask for, demand, sue for, collect, receive,

receipt and give aquittance for any and all moneys due or to become due with

respect to any Collateral; to settle, compromise, prosecute or defend any

action, claim or proceeding with respect to Collateral; to sell, assign,

pledge, transfer and make any agreement with respect to or otherwise deal with

the Collateral; and to do all things necessary to perfect Administrative

Lender's security interest in the Collateral, to preserve and protect the

Collateral and to otherwise carry out this Agreement; provided, however, that

nothing contained in this Section will be construed as requiring or obligating

Administrative Lender to take any action. 

Provided Administrative Lender acts in a reasonable manner, Borrower

ratifies and approves all acts of such attorney, and neither Administrative

Lender nor the attorney will be liable for any acts or omissions nor for any

error of judgment or mistake of fact or law. 

This power being coupled with an interest is irrevocable until the

Obligations have been fully satisfied and indefeasibly paid in cash and the

Commitments terminated.

 

ARTICLE XII.              ADMINISTRATIVE

LENDER

 

12.1                ACTIONS

Each Lender hereby appoints U.S. Bank as

Administrative Lender and authorizes U.S. Bank to perform the functions of

Administrative Lender under the Loan Documents.  Each Lender authorizes Administrative Lender to act on behalf of

such Lender under the Loan Documents and, in the absence of other written

instructions from the Required Lenders received from time to time by

Administrative Lender (with respect to which Administrative Lender agrees that

it will comply, except as otherwise provided in this Section or as otherwise

advised by counsel), to exercise such powers thereunder as are specifically

delegated to or required of Administrative Lender by the terms thereof,

together with such powers as may be reasonably incidental thereto.  Each Lender hereby indemnifies (which

indemnity shall survive any termination of this Agreement) Administrative

Lender ratably from and against any and all liabilities, obligations, losses,

damages, claims, costs or expenses of any kind or nature whatsoever which may

at any time be imposed on, incurred by, or asserted against Administrative

Lender in any way relating to or arising out of the Loan Documents, including

reasonable attorneys' fees (whether incurred at the trial or appellate level,

in an arbitration or administrative proceeding, in bankruptcy, (including,

without limitation, any adversary proceeding, contested matter or motion) or

otherwise), and as to which Administrative Lender is not reimbursed by

Borrowers; provided, however, that no Lender shall be liable for the payment of

any portion of such liabilities, obligations, losses, damages, claims, costs or

expenses which are determined by a court of competent jurisdiction in a final

proceeding to have resulted solely from Administrative Lender's gross

negligence or willful misconduct. 

Administrative Lender shall not be required to take any action under any

Loan Document, or to prosecute or defend any suit in respect of any Loan

Document, unless it is indemnified hereunder to its satisfaction.  If any indemnity in favor of Administrative

Lender shall be or become, in Administrative Lender's determination,

inadequate, Administrative Lender may call for additional indemnification from

Lenders and cease to do the acts indemnified against hereunder until such

additional indemnity is given.

 

12.2                RELIANCE BY ADMINISTRATIVE LENDER

 

Administrative Lender shall be entitled to rely upon

any certificate, notice or other document (including any cable, telegram, fax,

or telex) or telephonic notice believed by it in Good Faith to be genuine and

correct and to have been signed, sent or made by or on behalf of the proper

person or persons, and upon advice and statements of legal counsel (including

Borrower's counsel), independent accountants and other experts selected by

Administrative Lender with reasonable care. 

As to any matters not expressly provided for by this Agreement,

Administrative Lender shall not be required to take any action or exercise any

discretion, but shall be required to act or to refrain from acting upon

instructions of the Required Lenders and shall in all cases be fully protected

by Lenders in acting, or in refraining from acting, under any Loan Document in

accordance with the instructions of the Required Lenders, and such instructions

of the Required Lenders and any action taken or failure to act pursuant thereto

shall be binding on all Lenders.

 

12.3                EXCULPATION

Neither Administrative

Lender nor any of its directors, officers, employees or agents shall be liable

to any Lender for any action taken or omitted to be taken by it under any Loan

Document, or in connection herewith or therewith, except for its own willful

misconduct or gross negligence, nor responsible for any recitals or warranties

therein, nor for the effectiveness, enforceability, validity or due execution

of any Loan Document, nor for the creation, perfection or priority of any Liens

purported to be created by any Loan Document, or the validity, genuineness,

enforceability, existence, value or sufficiency of any collateral security, nor

to make any inquiry respecting the performance by Obligors of their obligations

under any Loan Document.  Any such

inquiry which may be made by Administrative Lender shall not obligate it to make

any further inquiry or to take any action. 

Administrative Lender shall be entitled to rely upon advice of counsel

concerning legal matters and upon any notice, consent, certificate, statement

or writing which Administrative Lender believes to be genuine and to have been

presented by a proper Person.

 

12.4                SUCCESSOR

Administrative Lender may

resign as such at any time upon at least 30 days prior notice to Borrowers'

Agent and all Lenders.  If

Administrative Lender at any time shall resign, the Required Lenders may

appoint another Lender as a successor Administrative Lender which shall

thereupon become Administrative Lender hereunder.  If no successor Administrative Lender shall have been so

appointed by the Required Lenders, and shall have accepted such appointment,

within 30 days after the retiring Administrative Lender's giving notice of

resignation, then the retiring Administrative Lender may, on behalf of Lenders,

appoint a successor Administrative Lender, which shall be one of the Lenders or

a commercial banking institution organized under the laws of the United States

(or any State thereof) or a U.S. branch or agency of a commercial banking

institution, and having a combined capital and surplus of at least

$500,000,000.  Upon the acceptance of

any appointment as Administrative Lender hereunder by a successor

Administrative Lender, such successor Administrative Lender shall give

Borrowers' Agent notice of such acceptance, shall be entitled to receive from

the retiring Administrative Lender such documents of transfer and assignment as

such successor Administrative Lender may reasonably request, and shall

thereupon succeed to and become vested with all rights, powers, privileges and

duties of the retiring Administrative Lender, and the retiring Administrative

Lender shall be discharged from its duties and obligations under the Loan

Documents.  After any retiring

Administrative Lender's resignation hereunder as Administrative Lender, the

provisions of (a) this Article XII shall inure to its benefit as to any actions

taken or omitted to be taken by it while it was Administrative Lender under

this Agreement; and (b) Section 13.2 and Section 13.3 shall continue to

inure to its benefit.

 

12.5                LOANS BY ADMINISTRATIVE

LENDER; OTHER ACTIONS

 

Administrative Lender shall have the same rights and

powers with respect to the Loans made by it or any of its affiliates as any

other Lender and may exercise such rights and powers as if it were not

Administrative Lender.  Administrative Lender

and each Lender and its respective affiliates may accept deposits from, lend

money to, and generally engage in any kind of business with any Borrower or

Subsidiary or affiliate of Borrower as if it were not the Administrative Lender

or a Lender, provided that the forgoing shall not be deemed to relieve Borrower

of any of its obligations under the Loan Documents.

 

12.6                CREDIT DECISIONS

 

Each Lender acknowledges that it has made its own

credit decision to extend its commitments hereunder independently of

Administrative Lender and each other Lender, and based on such Lender's review

of the financial information of Borrowers, this Agreement, the other Loan

Documents (the terms and provisions of which being satisfactory to such Lender)

and such other documents, information and investigations as such Lender has

deemed appropriate.  Each Lender also

acknowledges that it will continue to make its own credit decisions as to

exercising or not exercising from time to time any rights and privileges

available to it under the Loan Document independently of Administrative Lender

and each other Lender and based on such other documents, information and

investigations as it shall deem appropriate at any time.

 

ARTICLE XIII.             MISCELLANEOUS

 

13.1                NOTICES

Except

as specified otherwise herein, all notices, requests and demands which any

party is required or may desire to give to any other party under this Agreement

must be in writing.  Each notice to be

given to Administrative Lender or any Lender shall be addressed to Administrative

Lender and each Lender at its address or fax number set forth as the

"Address for Notices" for Administrative Lender or such Lender in

Schedule I hereto, or to such other address or fax number as

Administrative Lender or any Lender may designate for itself by notice to all

other parties.  Each notice to be given

to Borrowers' Agent or Borrower shall be addressed to Borrowers' Agent at the

following address or fax number:

 

	

  To Borrowers' Agent:

  	

   

  	

  Monaco Coach Corporation

  
	

   

  	

   

  	

  91320 Industrial Way

  
	

   

  	

   

  	

  Coburg, Oregon 97408

  
	

   

  	

   

  	

  Attn:  Chief

  Financial Officer Fax:  (541) 302-3835

  

or to such other

address or fax number as Borrowers' Agent may designate for itself by notice to

all other parties.  Each such notice,

request and demand shall be deemed given or made as follows:  (a) three Business Days following deposit in

the United States mails, with first class postage prepaid, (b) the next

Business Day after such notice was delivered to a regularly scheduled overnight

delivery, or (c) upon receipt of notice given by fax, mailgram, telegram,

telex, or personal delivery.

 

13.2                COSTS, EXPENSES, ATTORNEYS' FEES

 

Borrowers shall

pay immediately upon demand the full amount of all payments, advances, charges,

costs and expenses, including reasonable attorneys' fees (whether incurred at

the trial or appellate level, in an arbitration or administrative proceeding,

in bankruptcy (including, without limitation, any adversary proceeding,

contested matter or motion) or otherwise), incurred by Administrative Lender

and/or any Lender in connection with (a) the negotiation and preparation

of the Loan Documents, (b) the enforcement, preservation or protection (or

attempted enforcement, preservation or protection) of Administrative Lender's

and/or any Lender's rights (except in a dispute solely between Lenders), including,

without limitation, periodic collateral examinations, and/or the collection of

any amounts which become due under any of the Loan Documents, and (c) the

prosecution or defense of any action in any way related to any of the Loan

Documents, including without limitation, any action for declaratory relief, and

including any of the foregoing incurred in connection with any bankruptcy

proceeding relating to Borrower.

 

13.3                INDEMNIFICATION

 

(a)           To the fullest extent permitted by

law, Borrowers hereby agree to protect, indemnify, defend and hold harmless

each of Administrative Lender and Lenders and each of their respective

officers, directors, shareholders, employees, agents, attorneys and affiliates

(collectively, "Indemnitees") from and against any liabilities, losses,

damages or expenses of any kind or nature and from any suits, claims or demands

(including in respect of or for reasonable attorneys' fees (whether incurred at

the trial or appellate level, in an arbitration or administrative proceeding,

in bankruptcy (including, without limitation, any adversary proceeding,

contested matter or motion) or otherwise) and other expenses, including the

allocated costs and expenses of internal counsel) arising on account of or in

connection with any matter or thing or action or failure to act by Indemnitees,

or any of them, arising out of or relating to any Loan Document, including

without limitation any use by Borrower of any proceeds of credit advanced,

except to the extent such liability arises from the willful misconduct or gross

negligence of the Indemnitees (collectively, the "Indemnified

Liabilities").

 

(b)           Upon receiving knowledge of any suit,

claim or demand asserted by a third party that Administrative Lender and/or any

Lender believes is covered by this indemnity, such Indemnitee shall give

Borrowers' Agent notice of the matter and an opportunity to defend it, at

Borrowers' sole cost and expense, with legal counsel satisfactory to such

Lender.  Such Lender may also require

Borrowers to defend the matter.  Any failure

or delay of such Lender to notify Borrowers' Agent of any such suit, claim or

demand shall not relieve Borrowers of their obligations under this Section, but

shall reduce such obligations to the extent of any increase in those

obligations caused solely by an unreasonable failure or delay in providing such

notice.  Borrowers may not settle or

otherwise compromise any claim with respect to any Indemnified Liability unless

the settlement includes an unconditional release of the Indemnitee from all

liability on claims that are the subject of such settlement and may not settle

or otherwise compromise any claim with respect to any Indemnified Liability,

other than a claim for money damages, without the prior written consent of the

Indemnitee, which consent shall not be unreasonably withheld.

 

(c)           If and to the extent that the

foregoing undertaking may be unenforceable for any reason Borrowers shall make

the maximum contribution permissible under applicable law to the payment and

satisfaction of each of the Indemnified Liabilities.

 

(d)           This Section shall survive the

payment in full and performance of all of Borrowers' other Obligations.

 

13.4                WAIVERS, AMENDMENTS

Any

term, covenant, agreement or condition of any Loan Document may be amended or

waived if such amendment or waiver is in writing and is signed by the Required

Lenders (or by Administrative Lender with written consent of the Required

Lenders), Borrowers' Agent and any other party thereto; provided, however, that

any amendment, waiver or consent which affects the rights or duties of

Administrative Lender, L/C Bank or Swingline Lender must be in writing and be

signed also by the affected Administrative Lender, L/C Bank or Swingline

Lender; and provided further, that any amendment, waiver or consent which

effects any of the following changes must be in writing and signed by all

Lenders (or by Administrative Lender with the written consent of all Lenders):

(a) increases the maximum amount of credit available hereunder;

(b) extends the maturity date of any Loan; (c) reduces the principal

of, or interest (including default rate interest) on, any Loan or any fees or

other amounts payable for the account of Lenders hereunder; (d) postpones

or conditions any date fixed for any payment of the principal of, or interest

on, any Loan or any fees or other amounts payable for the account of Lenders

hereunder; (e) waives or amends this Section; (f) amends the

definition of Required Lenders or any provision of this Agreement requiring

approval of the Required Lenders or some other specified amount of Lenders;

(g) increases or decreases the commitment or the Ratable Portion of any

Lender (other than through an assignment under Section 13.5);

(h) waives any of the conditions set forth in Article VII; (i) releases

any material Collateral; or (j) amends any guaranty of the Obligations (or

releases any guarantor of its obligations thereunder).  The foregoing notwithstanding, any increase

or decrease in the Ratable Portion of any Lender and any increase in the

Revolving Loan Commitment or Term Loan Commitment of any Lender must be in

writing and signed by such Lender. 

Unless otherwise specified in such waiver or consent, a waiver or

consent given hereunder shall be effective only in the specific instance and

for the specific purpose for which given.

13.5                SUCCESSORS AND ASSIGNS

 

(a)           Binding Effect.  The Loan Documents shall be binding upon and

inure to the benefit of Borrowers, Administrative Lender, Lenders and their

respective successors and permitted assigns, except that Borrower may not

assign or transfer any of its rights or obligations under any Loan Document

without the prior written consent of Administrative Lender and each

Lender.  All references in this

Agreement to any Person shall be deemed to include all successors and assigns

of such Person.

 

(b)           Participations.  Any Lender may, in the ordinary course of

its business and in accordance with applicable law, at any time sell to one or

more banks or other financial institutions ("Participants")

participating interests in any obligations owing to such Lender under the Loan

Documents.  In the event of any such

sale, (i) such Lender's obligations under the Loan Documents to the other

parties to the Loan Documents shall remain unchanged, (ii) such Lender

shall remain solely responsible for the performance thereof and (iii)

Borrowers, Borrowers' Agent and Administrative Lender shall continue to deal

solely and directly with such Lender in connection with such Lender's rights

and obligations under the Loan Documents. 

Participants shall have no rights under the Loan Documents except as

provided below.  No Lender shall sell

any participating interest under which the Participant shall have any right to

vote on any amendment, consent or waiver of this Agreement or any other Loan

Document; provided, however, that any agreement under which any Lender sells a

participating interest to a Participant may require the selling Lender to

obtain the consent of such Participant in order for such Lender to agree or

consent to any amendment of a type specified in items (a)-(j) of

Section 13.4.  No agreement under

which any Lender sells a participating interest to a Participant may permit the

Participant to transfer, pledge, assign, sell participations in or otherwise

encumber its participating interest.  If

any amount outstanding under the Loan Documents is due and unpaid, each

Participant shall have all the rights of a "Lender" under

Section 13.6 in respect of its participating interest in amounts owing

under the Loan Documents to the same extent as if the amount of its

participating interest were owing directly to it as a Lender under the Loan

Documents; provided, however, that such rights of setoff shall be subject to

the obligation of such Participant to share with Lenders, and Lenders agree to share

with such Participant, as provided in Section 3.9(b) hereof.  Borrowers also agree that any Lender that

has transferred all or part of its interests in the Obligations to one or more

Participants shall, notwithstanding any such transfer, be entitled to the full

benefits accorded such Lender under Sections 3.10 and 3.12 hereof, as if such

Lender had not made such transfer. 

Without limiting the foregoing, no Participant shall be entitled to

costs, expenses or attorneys' fees under Section 13.2 or Section 13.3.

 

(c)           Assignments.  Any Lender may, in the ordinary course of

its business and in accordance with applicable law, at any time, sell and

assign to any Lender, any affiliate of a Lender or any other bank or financial

institution (individually, an "Assignee") all or any portion of its

rights and obligations under the Loan Documents (such a sale and assignment to

be referred to herein as an "Assignment") pursuant to an Assignment

and Assumption Agreement in the form of Exhibit G attached hereto

(an "Assignment Agreement") executed by each Assignee and such

assignor Lender (an "Assignor") and delivered to Administrative

Lender for its acceptance and recording in the Register (as defined below);

provided, however, that:  (i) each

Assignment shall be in a minimum amount of $5,000,000; (ii) if the

Assignment is not an assignment of Assignor's entire commitment, Assignor

maintains a minimum commitment of $5,000,000; and (iii) each Assignment which

is not to a Lender or an affiliate thereof, shall be made only with the written

consent of Administrative Lender (and, in the absence of a Default, Borrowers'

Agent), which consent(s) shall not be unreasonably withheld.  Upon the execution, delivery, acceptance and

recording of each Assignment Agreement, from and after the effective date set

forth therein, (A) each Assignee shall be a Lender with a commitment as set

forth in Section 1 of such Assignment Agreement and shall have the rights,

duties and obligations of a Lender under the Loan Documents, and (B) the Assignor

shall be a Lender with a commitment as set forth in Section 1 of such

Assignment Agreement, or, if the commitment of the Assignor has been reduced to

zero, the Assignor shall cease to be a Lender; provided, however, that each

Assignor shall nevertheless be entitled to the indemnification rights contained

in Section 13.3 hereof for any events, acts or omissions occurring before

the effective date of its Assignment. 

Each Assignment Agreement shall be deemed to amend Schedule I

hereto to the extent necessary to reflect the addition of each Assignee and the

resulting adjustment of commitments arising from the purchase by each Assignee

of all or a portion of the rights and obligations of an Assignor under this

Agreement and the other Loan Documents.

 

(d)           Register.  Administrative Lender shall maintain at

Administrative Lender's Office a copy of each Assignment Agreement delivered to

and accepted by Administrative Lender and a register ("Register") for

the recordation of the names and addresses of Lenders and the commitment of

each Lender from time to time.  The

entries in the Register shall be conclusive and binding for all purposes,

absent manifest error, and Borrowers, Administrative Lender and Lenders may

treat each entity whose name is recorded in the Register as a Lender hereunder

for all purposes of this Agreement.  The

Register shall be available for inspection by Borrowers' Agent or any Lender at

any reasonable time and from time to time upon reasonable prior notice.

 

(e)           Registration.  Upon its receipt of an Assignment Agreement

executed by an Assignor and an Assignee (and, in the case of an Assignee that

is not then a Lender or an affiliate of a Lender, by Borrowers' Agent and

Administrative Lender) together with payment by such Assignee to Administrative

Lender of a registration and processing fee of $3,500, Administrative Lender

shall (i) promptly accept such Assignment Agreement and (ii) on the

effective date of such Assignment record the information contained therein in

the Register and give notice of such acceptance and recordation to Lenders and

Borrowers' Agent.  Administrative Lender

may, from time to time at its election, prepare and deliver to Lenders and

Borrowers' Agent a revised Schedule I reflecting the names,

addresses and respective commitments of all Lenders then parties hereto.

 

(f)            Federal

Reserve Bank. 

Notwithstanding the foregoing provisions of this Section, any Lender may

at any time pledge or assign all or any portion of such Lender's rights under

this Agreement and the other Loan Documents to a Federal Reserve Bank; provided,

however, that no such pledge or assignment will release such Lender from

such Lender's obligations hereunder or under any other Loan Document.

 

13.6                SETOFF

 

In addition to any rights and remedies of Lenders provided

by law, each Lender shall have the right, with the prior consent of

Administrative Lender (which consent will not be unreasonably withheld) but

without prior notice to Borrower, any such notice being expressly waived by

Borrower to the extent permitted by applicable law, during the continuance of

an Event of Default to setoff and apply against any indebtedness, whether

matured or unmatured, of Borrower to such Lender any amount owing from such

Lender or any affiliate thereof to Borrower at any time during the continuation

of an Event of Default.  This right of

setoff may be exercised by such Lender against Borrower or against any trustee

in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver

or execution, judgment or attachment creditor of Borrower or against anyone

else claiming through or against Borrower or such trustee in bankruptcy, debtor

in possession, assignee for the benefit of creditors, receiver, or execution,

judgment or attachment creditor, notwithstanding the fact that such right of

setoff shall not have been exercised by such Lender prior to the occurrence of

an Event of Default.  Each Lender agrees

promptly to notify Borrower after any such setoff and application made by such

Lender, provided that the failure to give such notice shall not affect the

validity of such setoff and application.

 

13.7                NO WAIVER; CUMULATIVE REMEDIES

 

No failure on the part of Administrative Lender or any

Lender to exercise, and no delay in exercising, any right, power, privilege or

remedy under any Loan Document shall operate as a waiver thereof; nor shall any

single or partial exercise of any such right, power, privilege or remedy

preclude any other or further exercise thereof or the exercise of any other

right, power, privilege or remedy.  The

rights and remedies under the Loan Documents are cumulative and not exclusive

of any rights, powers, privileges and remedies that may otherwise be available

to Administrative Lender or any Lender.

 

13.8                ENTIRE

AGREEMENT

 

The Loan Documents constitute the entire agreement

among Borrowers, Administrative Lender and Lenders with respect to the Loans

and the Letters of Credit and supersede all prior negotiations, communications,

discussions, correspondence and agreements concerning the subject matter

hereof.  This Agreement cannot be

changed orally or by the conduct of the parties and may be amended or modified

only in writing signed by the party against whom enforcement is sought.

 

13.9                NO THIRD PARTY BENEFICIARIES

 

This Agreement is made and entered into for the sole

protection and benefit of the parties hereto and their respective permitted

successors and assigns, and no other person or entity shall be a third party

beneficiary of, or have any direct or indirect cause of action or claim in

connection with, this Agreement or any other of the Loan Documents to which it

is not a party.

 

13.10              CONFIDENTIALITY

 

Lenders shall hold

all non–public information (which has been identified as such by

Borrowers' Agent) obtained pursuant to the requirements of this Agreement in

accordance with their customary procedures for handling confidential

information of this nature and in accordance with safe and sound banking

practices and in any event may make disclosure to any of their examiners,

affiliates, outside auditors, counsel and other professional advisors in

connection with this Agreement or as reasonably required by any bona fide transferee,

participant or assignee or as required or requested by any Governmental

Authority or pursuant to legal process; provided, however, that (a) unless

specifically prohibited by applicable law or court order, each Lender shall

notify Borrowers' Agent of any request by any Governmental Authority (other

than any such request in connection with an examination of the financial condition

of such Lender by such Governmental Authority) for disclosure of any such

non-public information prior to disclosure of such information, (b) prior

to any such disclosure pursuant to this Section, each Lender shall require any

such bona

fide transferee, participant and assignee receiving a disclosure of

non–public information to agree in writing (i) to be bound by this

Section and (ii) to require such Person to require any other Person to

whom such Person discloses such non–public information to be similarly

bound by this Section, and (c) except as may be required by an order of a

court of competent jurisdiction and to the extent set forth therein, no Lender

shall be obligated or required to return any materials furnished by any

Borrower or Subsidiary.

 

13.11              TIME

 

Time is of the essence of each and every provision of

this Agreement and each other of the Loan Documents.

 

13.12              SEVERABILITY

OF PROVISIONS

 

If any provision of this

Agreement shall be prohibited by or invalid under applicable law, such provision

shall be ineffective only to the extent of such prohibition or invalidity

without invalidating the remainder of such provision or any remaining

provisions of this Agreement.

 

13.13              GOVERNING LAW

 

This Agreement shall be governed by and construed in

accordance with the laws of the State of Oregon.

 

13.14              SUBMISSION

TO JURISDICTION

 

EACH OF BORROWER, ADMINISTRATIVE LENDER AND LENDERS

HEREBY:  (A) SUBMITS TO THE EXCLUSIVE

JURISDICTION OF THE COURTS OF THE STATE OF OREGON AND THE FEDERAL COURTS OF THE

UNITED STATES FOR THE DISTRICT OF OREGON FOR THE PURPOSE OF ANY ACTION OR

PROCEEDING ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS; (B) AGREES

THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND

DETERMINED IN SUCH COURTS; (C) IRREVOCABLY WAIVES (TO THE FULL EXTENT PERMITTED

BY APPLICABLE LAW) ANY OBJECTION WHICH IT NOW OR HEREAFTER MAY HAVE TO THE

LAYING OF VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY OF THE

FOREGOING COURTS, AND ANY OBJECTION ON THE GROUND THAT ANY SUCH ACTION OR

PROCEEDING IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM; AND (D)

AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE

CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT

OR IN ANY OTHER MANNER PERMITTED BY LAW.

 

13.15              WAIVER

OF JURY TRIAL

 

EACH OF BORROWER, ADMINISTRATIVE LENDER AND LENDERS,

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES

ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, COUNTERCLAIM OR OTHER

LITIGATION IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER

OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS OR EVENTS REFERENCED HEREIN OR

THEREIN OR CONTEMPLATED HEREBY OR THEREBY, WHETHER WITH RESPECT TO CONTRACT

CLAIMS, TORT CLAIMS OR OTHERWISE.  THIS

WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR

MODIFICATIONS TO THIS AGREEMENT AND/OR ANY OTHER OF THE LOAN DOCUMENTS.  A COPY OF THIS SECTION MAY BE FILED WITH ANY

COURT AS WRITTEN EVIDENCE OF THE WAIVER OF THE RIGHT TO TRIAL BY JURY AND THE

CONSENT TO TRIAL BY COURT.

 

13.16              COUNTERPARTS

 

This Agreement may be executed in any number of

identical counterparts, any set of which signed by all the parties hereto shall

be deemed to constitute a complete, executed original for all purposes.  Delivery of an executed signature page of

this Agreement by fax shall be effective as delivery of a manually executed

counterpart hereof.

 

13.17              OREGON STATUTORY NOTICE

 

UNDER

OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDER AFTER

OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT

FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S

RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY THE LENDER

TO BE ENFORCEABLE.

 

[INTENTIONALLY

LEFT BLANK]

 

IN

WITNESS WHEREOF, this Amended and Restated Credit Agreement

has been duly executed as of the date first written above.

 

	

   

  	

   

  	

  MONACO COACH

  CORPORATION

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  
	

   

  
	

  ROYALE COACH BY MONACO,

  INC

  	

   

  	

  MCC ACQUISITION

  CORPORATION

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

   

  
	

  Title:

  	

   

  	

   

  	

  Title:

  	

   

  
	

   

  
	

  DEUTSCHE FINANCIAL

  SERVICES CORPORATION

  	

   

  	

  WELLS FARGO BANK,

  NATIONAL ASSOCIATION

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

   

  
	

  Title:

  	

   

  	

   

  	

  Title:

  	

   

  
	

   

  
	

  UNION BANK OF

  CALIFORNIA, N.A

  	

   

  	

  BANK OF AMERICA, N.A.

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

   

  
	

  Title:

  	

   

  	

   

  	

  Title:

  	

   

  
	

   

  
	

  WASHINGTON MUTUAL BANK

  	

   

  	

  U.S. BANK NATIONAL ASSOCIATION

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

   

  
	

  Title:

  	

   

  	

   

  	

  Title:

  	

   

  
	

   

  
											

 

SCHEDULE I

 

1. 

Revolving Loan Commitments:

 

	

  U.S. Bank National

  Association  -  $24,181,818.18 (34.54545455%)

  
	

   

  
	

  Deutsche Financial

  Services Corporation  -  $7,636,363.64 (10.90909091%)

  
	

   

  
	

  Washington Mutual

  Bank  -  $10,818,181.82 (15.45454545%)

  
	

   

  
	

  Wells Fargo Bank,

  National Association  -  $10,818,181.82 (15.45454545%)  

  
	

   

  
	

  Union Bank of

  California, N.A.  -  $8,909,090.91 (12.72727273%)

  
	

   

  
	

  Bank of America,

  N.A.  -  $7,636,363.64 (10.90909091%)

  
	

   

  

 

2. 

Term Loan Commitments:

 

	

  U.S. Bank National

  Association  -  $13,818,181.82 (34.54545455%)

  
	

   

  
	

  Deutsche Financial

  Services Corporation  -  $4,363,636.36 (10.90909091%)

  
	

   

  
	

  Washington Mutual

  Bank  -  $6,181,818.18 (15.45454545%)

  
	

   

  
	

  Wells Fargo Bank,

  National Association  -  $6,181,818.18 (15.45454545%)  

  
	

   

  
	

  Union Bank of

  California, N.A.  -  $5,090,909.09 (12.72727273%)

  
	

   

  
	

  Bank of America,

  N.A.  -  $4,363,636.36 (10.90909091%)

  
	

   

  

 

3. 

Applicable Lending Office and Address for Notices for each Lender:

 

	

  U.S. Bank

  National Association

  Oregon Commercial Banking

  800 Willamette Street, 3rd Floor

  PO Box 10553

  Eugene, Oregon  97440

  Attn:  Ken Carson

  Telephone:  (541) 465-4127

  Fax:  (541) 342-6712

  Email: kenneth.carson@usbank.com

  	

   

  

 

	

  

  Deutsche

  Financial Services Corporation

  2625 S. Plaza Drive, Suite 201

  Tempe, AZ  85282

  Attn: Timothy Wass, Vice President

  Telephone:  (480) 449-7124

  Fax:  (480) 829-3963

  Email: timothy.wass@db.com

   

  Wells Fargo

  Bank, National Association

  99 E. Broadway, 2nd Floor

  Eugene, OR  97440

  Attn: Kathy Lucier, Vice President

  Telephone:  (541) 465-5965

  Fax:  (541) 465-5764

  Email: lucierki@wellsfargo.com

   

  Washington

  Mutual Bank

  1201 Third Avenue, WMT 1445

  Seattle, WA  98101

  Attn: Bruce Kendrex, Vice President

  Telephone:  (206) 377-3888

  Fax:  (206) 377-3812

  Email: bruce.kendrex@wamu.net

   

  Union Bank of

  California, N.A.

  407 SW Broadway

  Portland, OR  97205

  Attn:  Tom Marks, Vice President

  Telephone:  (503) 225-3693

  Fax:  (503) 225-2846

  Email: thomas.marks@uboc.com

   

  Bank of America,

  N.A.

  121 SW Morrison, #1700

  Portland, OR  97204

  Attn: Robert Davison, Senior Vice President

  Telephone:  (503) 279-2809

  Fax:  (503) 275-1391

  Email: robert.a.davison@bankofamerica.com

  	

   

  

 

SCHEDULE II

 

Pricing Schedule

 

	

   

  	

   

  	

  Level I

  	

   

  	

  Level II

  	

   

  	

  Level III

  	

   

  	

  Level IV

  
	

  LIBOR Margin –

  Revolving Loans

  	

   

  	

  125

  	

   

  	

  150

  	

   

  	

  175

  	

   

  	

  200

  
	

  Prime Margin –

  Revolving Loans

  	

   

  	

  0

  	

   

  	

  0

  	

   

  	

  0

  	

   

  	

  25

  
	

  LIBOR Margin – Term

  Loans

  	

   

  	

  150

  	

   

  	

  175

  	

   

  	

  200

  	

   

  	

  225

  
	

  Prime Margin – Term

  Loans

  	

   

  	

  0

  	

   

  	

  0

  	

   

  	

  0

  	

   

  	

  25

  
	

  Fee Percentage

  	

   

  	

  25

  	

   

  	

  25

  	

   

  	

  37.5

  	

   

  	

  50

  

 

For purposes of this Pricing Schedule, the following

terms have the following meanings:

 

"Level I" applies on any day if, on

such day, the applicable Leverage Ratio is less than 1.00:1.

 

"Level II" applies on any day if, on

such day, the applicable Leverage Ratio is equal to or greater than 1.00:1 and

less than 1.25:1.

 

"Level III" applies on any day if, on

such day, the applicable Leverage Ratio is equal to or greater than 1.25:1 and

less than 1.50:1.

 

"Level IV" applies on any day if, on

such day, the applicable Leverage Ratio is 1.50:1 or greater.

 

For purposes of this Pricing Schedule, the Leverage

Ratio shall be calculated once every quarter based on the financial information

most recently reported by Borrowers' Agent pursuant to Section 8.3 of the

Agreement; provided, however, that the Leverage Ratio shall not

be computed on the financial information most recently reported by Borrowers'

Agent until the later of the first day of the month after receipt of such

information or five Business Days after the receipt thereof, and if the most

recent report required pursuant to Section 8.3 has not been delivered, or

if Administrative Lender reasonably objects to the accuracy of such report

within five Business Days after the receipt thereof, the next higher Level from

the Level then in effect shall apply until such time as the delinquent report

is delivered or Administrative Lender's objections are resolved to

Administrative Lender's reasonable satisfaction.

 

The foregoing notwithstanding, until such time as the

financial information required by Section 8.3 of the Agreement has been

provided for the quarter ending September 30, 2001 and the Leverage Ratio

as of the end of such quarter determined, Level III shall apply.

 

SCHEDULE III

 

Existing Letters

of Credit

 

	

  L/C Number:

  SLCPPDX00806 

  
	

  Type: Irrevocable

  Standby Letter of Credit 

  
	

  Beneficiary: Hartford

  Fire Insurance Company, Hartford CT 

  
	

  Amount: $500,000.00 

  
	

  Expiry: 8/28/02 

  
	

   

  
	

  L/C Number:

  SLCPPDX00807 

  
	

  Type: Irrevocable

  Standby Letter of Credit 

  
	

  Beneficiary:

  Connecticut Surety Insurance Agency, Inc., Hartford CT 

  
	

  Amount: $149,975.00 

  
	

  Expiry: 8/28/02 

  
	

   

  

 

EXHIBIT A

TO

AMENDED AND RESTATED CREDIT AGREEMENT

 

Borrowing

Base Certificate

of

Monaco Coach Corporation et al.

 

As of:

___________________

 

	

  Aggregate RV A/R balance

  	

  ___________________

  	

   

  
	

   

  	

   

  	

   

  
	

  Ineligible RV A/R:

  	

   

  	

   

  
	

  Over 60 days

  	

  (_________________)

  	

   

  
	

  Excess concentration

  	

  (_________________)

  	

   

  
	

  Cross-Ineligibles

  	

  (_________________)

  	

   

  
	

  Affiliates

  	

  (_________________)

  	

   

  
	

  International

  	

  (_________________)

  	

   

  
	

  Other

  	

  (_________________)

  	

   

  
	

  Eligible A/R

  	

  ___________________

  	

   

  
	

  85% of Eligible A/R

  	

   

  	

  ____________________

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  50% of Eligible Raw Materials

  	

  ___________________

  	

   

  
	

  Lesser of 90% of Eligible Finished

  Goods or $50,000,000

  	

  

  ___________________

  	

   

  
	

  Secured Chassis Accounts Payable

  	

  (__________________)

  	

   

  
	

  Inventory Availability

  	

  ___________________

  	

  ___________________

  
	

   

  	

  

  	

   

  
	

  Borrowing Base 

  	

   

  	

  ____________________

  
	

  Outstanding Revolving Loans

  	

   

  	

  (_________________)

  
	

  Outstanding Swing Loans

  	

   

  	

  (_________________)

  
	

  Outstanding Letters of Credit

  	

   

  	

  (_________________)

  
	

  Available Credit

  	

   

  	

  ____________________

  

 

CERTIFICATE

 

                The undersigned

Chief Financial Officer of Monaco Coach Corporation hereby certifies to

Administrative Lender that: 

(i) the foregoing information is true, accurate and complete as of

the close of business on ________, _____; (ii) the undersigned is familiar

with Borrowers' businesses and financial affairs and has access to all of

Borrowers' business records material to the compilation and determination of the

information set forth above; and (iii) this Certificate is being delivered

to Administrative Lender pursuant to the Amended and Restated Credit Agreement

among Borrowers, U.S. Bank, National Association as Administrative Lender, and

the lenders named therein for the purpose of inducing Lenders to extend credit

to Borrowers.

DATED:  __________, ______.

 

	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Chief Financial Officer

  
							

 

EXHIBIT B

TO

AMENDED AND RESTATED CREDIT AGREEMENT

 

FORM OF PROMISSORY

NOTES

 

Revolving Loans

Promissory Note

 

	

  $70,000,000

  	

   

  	

  September 28,

  2001

  

 

FOR VALUE RECEIVED, the undersigned, MONACO COACH

CORPORATION, a Delaware corporation, ROYALE COACH BY MONACO, INC., an Indiana

corporation, and MCC ACQUISITION CORPORATION, a Delaware corporation, (each

individually referred to as "Borrower" and all collectively referred

to as "Borrowers") hereby jointly and severally promise to pay to the

order of U.S. BANK NATIONAL ASSOCIATION as Administrative Lender for the

ratable benefit of the Lenders ("Administrative Lender") on the Revolver

Maturity Date, or at such earlier time as is provided in that certain Amended

and Restated Credit Agreement among Borrowers, U.S. Bank National Association

(as Administrative Lender) and the lenders named therein dated as of

September 28, 2001, (as amended, modified or supplemented from time to

time, the "Credit Agreement"), the principal sum of Seventy Million

Dollars ($70,000,000), or such lesser amount as shall equal the aggregate

outstanding principal balance of all Revolving Loans made by Lenders to

Borrowers pursuant to the Credit Agreement.

 

This promissory note is one of the promissory notes

referred to in, and subject to the terms of, the Credit Agreement.  Capitalized terms used herein shall have the

respective meanings assigned to them in the Credit Agreement.

 

Borrower further promises to pay interest on the

outstanding principal balance hereof at the interest rates, and payable on the

dates, set forth in the Credit Agreement. 

All payments of principal and interest hereunder shall be made to

Administrative Lender in lawful money of the United States and in same day or

immediately available funds.

 

Administrative Lender is authorized but not required

to record the date and amount of each advance made hereunder, the date and

amount of each payment of principal and interest hereunder, and the resulting

unpaid principal balance hereof, in Administrative Lender's internal records,

and any such recordation shall be prima facie evidence of the accuracy of the

information so recorded; provided however, that Administrative Lender's failure

to so record such amounts shall not limit or otherwise affect Borrower's

obligations hereunder and under the Credit Agreement to repay the principal

hereof and interest hereon.

 

Borrowers shall pay all costs of collection, including

reasonable attorneys' fees (whether incurred at the trial or appellate level,

in an arbitration or administrative proceeding, in bankruptcy (including,

without limitation, any adversary proceeding, contested matter or motion) or

otherwise).  No delay or failure on the

part of Administrative Lender to exercise any of its rights hereunder shall be

deemed a waiver of such rights or any other right of Administrative Lender nor

shall any delay, omission or waiver on any one occasion be deemed a bar to or

waiver of such rights or any other right on any future occasion.  Borrowers and every surety, indorser and

guarantor of this Note waive presentment, demand, protest, notice of intention

to accelerate, notice of acceleration, notice of nonpayment and all other

notices of every kind, and agree that their liability under this Note shall not

be affected by any renewal, postponement or extension in the time of payment

hereof, by any indulgence granted by any holder hereof with respect hereto, or

by any release or change in any security for the payment of this Note, and they

hereby consent to any and all renewals, extensions, indulgences, releases or

changes, regardless of the number of such renewals, extensions, indulgences,

releases or changes.

 

The Credit Agreement provides, among other things, for

acceleration (which in certain cases shall be automatic) of the maturity hereof

upon the occurrence of certain stated events, in each case without presentment,

demand, protest or further notice of any kind, all of which are hereby

expressly waived by Borrowers.

 

Borrowers' obligations evidenced by this promissory

note are secured by the collateral described in the Loan Documents.  The Loan Documents describe the rights of

Administrative Lender with respect to the collateral.

 

In the event of any conflict between the terms of this

promissory note and the terms of the Credit Agreement, the terms of the Credit

Agreement shall control.

 

This promissory note shall be governed by and

construed in accordance with the laws of the State of Oregon.

 

UNDER

OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY ANY LENDER OR

ADMINISTRATIVE LENDER AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER

CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR

SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS

CONSIDERATION AND BE SIGNED BY SUCH LENDER OR ADMINISTRATIVE LENDER TO BE

ENFORCEABLE.

 

	

   

  	

   

  	

  MONACO COACH

  CORPORATION

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  
	

   

  
	

  ROYALE COACH BY MONACO,

  INC.

  	

   

  	

  MCC ACQUISITION

  CORPORATION

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

   

  	

  By:

  	

   

  
	

  Title:

  	

   

  	

   

  	

   

  	

  Title:

  	

   

  
	

   

  

 

Term Loans

Promissory Note

 

	

  $40,000,000

  	

   

  	

  September 28,

  2001

  

 

FOR VALUE RECEIVED, the undersigned, MONACO COACH

CORPORATION, a Delaware corporation, ROYALE COACH BY MONACO, INC., an Indiana

corporation, and MCC ACQUISITION CORPORATION, a Delaware corporation, (each

individually referred to as "Borrower" and all collectively referred

to as "Borrowers") hereby jointly and severally promise to pay to the

order of U.S. BANK NATIONAL ASSOCIATION as Administrative Lender for the

ratable benefit of the Lenders ("Administrative Lender") in the

manner and at the times provided in that certain Amended and Restated Credit

Agreement among Borrowers, U.S. Bank National Association (as Administrative

Lender) and the lenders named therein dated as of September 28, 2001, (as

amended, modified or supplemented from time to time, the "Credit

Agreement"), the principal sum of Forty Million Dollars ($40,000,000).

 

This promissory note is one of the promissory notes referred

to in, and subject to the terms of, the Credit Agreement.  Capitalized terms used herein shall have the

respective meanings assigned to them in the Credit Agreement.

 

Borrower further promises to pay interest on the

outstanding principal balance hereof at the interest rates, and payable on the

dates, set forth in the Credit Agreement. 

All payments of principal and interest hereunder shall be made to

Administrative Lender in lawful money of the United States and in same day or

immediately available funds.

 

Administrative Lender is authorized but not required

to record the date and amount of each payment of principal and interest

hereunder, and the resulting unpaid principal balance hereof, in Administrative

Lender's internal records, and any such recordation shall be prima facie

evidence of the accuracy of the information so recorded; provided however, that

Administrative Lender's failure to so record such amounts shall not limit or

otherwise affect Borrower's obligations hereunder and under the Credit

Agreement to repay the principal hereof and interest hereon.

 

Borrowers shall pay all costs of collection, including

reasonable attorneys' fees (whether incurred at the trial or appellate level,

in an arbitration or administrative proceeding, in bankruptcy (including,

without limitation, any adversary proceeding, contested matter or motion) or

otherwise).  No delay or failure on the

part of Administrative Lender to exercise any of its rights hereunder shall be

deemed a waiver of such rights or any other right of Administrative Lender nor

shall any delay, omission or waiver on any one occasion be deemed a bar to or

waiver of such rights or any other right on any future occasion.  Borrowers and every surety, indorser and

guarantor of this Note waive presentment, demand, protest, notice of intention

to accelerate, notice of acceleration, notice of nonpayment and all other

notices of every kind, and agree that their liability under this Note shall not

be affected by any renewal, postponement or extension in the time of payment

hereof, by any indulgence granted by any holder hereof with respect hereto, or

by any release or change in any security for the payment of this Note, and they

hereby consent to any and all renewals, extensions, indulgences, releases or changes,

regardless of the number of such renewals, extensions, indulgences, releases or

changes.

 

The Credit Agreement provides, among other things, for

acceleration (which in certain cases shall be automatic) of the maturity hereof

upon the occurrence of certain stated events, in each case without presentment,

demand, protest or further notice of any kind, all of which are hereby

expressly waived by Borrowers.

 

Borrowers' obligations evidenced by this promissory

note are secured by the collateral described in the Loan Documents.  The Loan Documents describe the rights of

Administrative Lender with respect to the collateral.

 

In the event of any conflict between the terms of this

promissory note and the terms of the Credit Agreement, the terms of the Credit

Agreement shall control.

 

This promissory note shall be governed by and

construed in accordance with the laws of the State of Oregon.

 

UNDER

OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY ANY LENDER OR

ADMINISTRATIVE LENDER AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER

CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR

SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS

CONSIDERATION AND BE SIGNED BY SUCH LENDER OR ADMINISTRATIVE LENDER TO BE ENFORCEABLE.

 

	

   

  	

   

  	

  MONACO COACH

  CORPORATION

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  
	

   

  
	

  ROYALE COACH BY MONACO,

  INC.

  	

   

  	

  MCC ACQUISITION

  CORPORATION

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

   

  	

  By:

  	

   

  
	

  Title:

  	

   

  	

   

  	

   

  	

  Title:

  	

   

  
	

   

  

 

Swing Loans

Promissory Note

 

	

  $10,000,000

  	

   

  	

  September 28,

  2001

  

 

FOR VALUE RECEIVED, MONACO COACH CORPORATION, a

Delaware corporation, ROYALE COACH BY MONACO, INC., an Indiana corporation, and

MCC ACQUISITION CORPORATION, a Delaware corporation, (each individually

referred to as "Borrower" and all collectively referred to as

"Borrowers") hereby jointly and severally promise to pay to the order

of U.S. BANK NATIONAL ASSOCIATION ("Lender") on the Revolver Maturity

Date, or at such earlier time as is provided in that certain Amended and

Restated Credit Agreement among Borrowers, U.S. Bank National Association (as

Administrative Lender and as Swingline Lender) and the lenders named therein

dated as of September 28, 2001, (as amended, modified or supplemented from

time to time, the "Credit Agreement"), the principal sum of Ten

Million Dollars ($10,000,000), or such lesser amount as shall equal the

aggregate outstanding principal balance of all Swing Loans made by Lender to

Borrowers pursuant to the Credit Agreement.

 

This promissory note is one of the promissory notes

referred to in, and subject to the terms of, the Credit Agreement.  Capitalized terms used herein shall have the

respective meanings assigned to them in the Credit Agreement.

 

Borrower further promises to pay interest on the

outstanding principal balance hereof at the interest rates, and payable on the

dates, set forth in the Credit Agreement. 

All payments of principal and interest hereunder shall be made to

Administrative Lender in lawful money of the United States and in same day or

immediately available funds.

 

Lender is authorized but not required to record the

date and amount of each advance made hereunder, the date and amount of each

payment of principal and interest hereunder, and the resulting unpaid principal

balance hereof, in Lender's internal records, and any such recordation shall be

prima facie evidence of the accuracy of the information so recorded; provided

however, that Lender's failure to so record such amounts shall not limit or

otherwise affect Borrower's obligations hereunder and under the Credit

Agreement to repay the principal hereof and interest hereon.

 

Borrowers shall pay all costs of collection, including

reasonable attorneys' fees (whether incurred at the trial or appellate level,

in an arbitration or administrative proceeding, in bankruptcy (including,

without limitation, any adversary proceeding, contested matter or motion) or

otherwise).  No delay or failure on the

part of Lender to exercise any of its rights hereunder shall be deemed a waiver

of such rights or any other right of Lender nor shall any delay, omission or

waiver on any one occasion be deemed a bar to or waiver of such rights or any

other right on any future occasion. 

Borrowers and every surety, indorser and guarantor of this Note waive

presentment, demand, protest, notice of intention to accelerate, notice of

acceleration, notice of nonpayment and all other notices of every kind, and

agree that their liability under this Note shall not be affected by any

renewal, postponement or extension in the time of payment hereof, by any

indulgence granted by any holder hereof with respect hereto, or by any release

or change in any security for the payment of this Note, and they hereby consent

to any and all renewals, extensions, indulgences, releases or changes,

regardless of the number of such renewals, extensions, indulgences, releases or

changes.

 

The Credit Agreement provides, among other things, for

acceleration (which in certain cases shall be automatic) of the maturity hereof

upon the occurrence of certain stated events, in each case without presentment,

demand, protest or further notice of any kind, all of which are hereby

expressly waived by Borrowers.

 

Borrowers' obligations evidenced by this promissory

note are secured by the collateral described in the Loan Documents.  The Loan Documents describe the rights of

Administrative Lender, Lender and any other holder hereof with respect to the

collateral.

 

In the event of any conflict between the terms of this

promissory note and the terms of the Credit Agreement, the terms of the Credit

Agreement shall control.

 

This promissory note shall be governed by and

construed in accordance with the laws of the State of Oregon.

 

UNDER

OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDER AFTER

OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT

FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S

RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY THE LENDER

TO BE ENFORCEABLE.

 

	

   

  	

   

  	

  MONACO COACH

  CORPORATION

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  
	

   

  
	

  ROYALE COACH BY MONACO,

  INC.

  	

   

  	

  MCC ACQUISITION

  CORPORATION

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

   

  	

  By:

  	

   

  
	

  Title:

  	

   

  	

   

  	

   

  	

  Title:

  	

   

  
	

   

  

 

EXHIBIT C

TO

AMENDED AND RESTATED CREDIT AGREEMENT

 

Notice of

Authorized Representatives

 

U.S. Bank National

Association

Oregon Commercial Banking

800 Willamette Street, 3rd Floor

PO Box 10553

Eugene, Oregon  97440

Attn:  Ken Carson

 

Reference is made to that certain Amended and Restated

Credit Agreement among Monaco Coach Corporation, a Delaware corporation, Royale

Coach By Monaco, Inc., an Indiana corporation, and MCC Acquisition Corporation,

a Delaware corporation, (each individually referred to as a

"Borrower" and all collectively referred to as

"Borrowers"), U.S. Bank National Association (as Administrative

Lender) and the lenders named therein dated as of September 28, 2001, (as

amended, modified or supplemented from time to time, the "Credit

Agreement").  Capitalized terms

used herein shall have the respective meanings assigned to them in the Credit

Agreement.

 

Borrowers' Agent hereby represents to Administrative

Lender that the following persons are the Authorized Representatives, as

defined in the Credit Agreement, and that the signatures opposite their names

are their true signatures:

 

	

  Name and Office

  	

   

  	

  Signature

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  

 

Administrative Lender is authorized to rely on this

Notice of Authorized Representatives until such time, if any, as Borrowers'

Agent has delivered to Administrative Lender, and Administrative Lender has

received, a duly executed Notice of Authorized Representatives in substitution

hereof.  This Notice of Authorized

Representatives cancels and supersedes any Notice of Authorized Representatives

at any time prior to the date hereof delivered by Borrowers' Agent to

Administrative Lender.

 

IN WITNESS WHEREOF, Borrowers' Agent hereby confirms that

it has caused this Notice of Authorized Representatives to be duly executed as

of ______________.

 

	

   

  	

   

  	

  MONACO COACH

  CORPORATION

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  
	

   

  
					

 

EXHIBIT D

TO

AMENDED AND RESTATED CREDIT AGREEMENT

 

Notice of

Borrowing

 

U.S. Bank National Association

Agency Services Group

1420 Fifth Ave., 9th Floor

P.O. Box 720

Seattle, WA.  98111-0720

Attn:  Young Hahn

Fax:  (206) 587-7022

 

Reference is made to that certain Amended and Restated

Credit Agreement among Monaco Coach Corporation, a Delaware corporation, Royale

Coach By Monaco, Inc., an Indiana corporation, and MCC Acquisition Corporation,

a Delaware corporation, (each individually referred to as a

"Borrower" and all collectively referred to as

"Borrowers"), U.S. Bank National Association (as Administrative

Lender) and the lenders named therein dated as of September 28, 2001, (as

amended, modified or supplemented from time to time, the "Credit

Agreement").  Capitalized terms

used herein shall have the respective meanings assigned to them in the Credit Agreement.

 

1.             Pursuant

to Section 3.1 of the Credit Agreement, Borrowers' Agent, on behalf of

Borrowers, hereby requests Revolving Loans upon the following terms:

 

(a)           The

aggregate principal amount is to be $___________.

 

(b)           The

date of borrowing is to be _________.

 

(c)           $________

of the Loans are to be Prime Rate Loans, and $________ of the Loans are to be

LIBOR Loans with a Fixed Rate Term of _______________months.

 

2.             Borrowers'

Agent, on behalf of Borrowers, hereby certifies to Administrative Lender and

Lenders that, on the date of this Notice of Borrowing and after giving effect

to the requested disbursement (including the use of the proceeds thereof):

 

(a)           Borrowers'

representations and warranties in the Loan Documents are correct in all

material respects as if made on the date hereof;

 

(b)           no

Default is continuing or would result from the requested Loans being made; and

 

(c)           no

event or circumstance exists that can reasonably be expected to have a Material

Adverse Effect.

 

The party signing below on behalf of Borrowers' Agent

is an Authorized Representative and has caused this Notice of Borrowing to be

duly executed on behalf of Borrowers as of ______________.

 

	

   

  	

   

  	

  MONACO COACH

  CORPORATION

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  
	

   

  
					

 

EXHIBIT E

TO

AMENDED AND RESTATED CREDIT AGREEMENT

 

Notice of

Conversion or Continuation

 

U.S. Bank National

Association

Agency Services Group

1420 Fifth Ave., 9th Floor

P.O. Box 720

Seattle, WA.  98111-0720

Attn:  Young Hahn

Fax:  (206) 587-7022

 

Reference is made to that certain Amended and Restated

Credit Agreement among Monaco Coach Corporation, a Delaware corporation, Royale

Coach By Monaco, Inc., an Indiana corporation, and MCC Acquisition Corporation,

a Delaware corporation, (each individually referred to as a

"Borrower" and all collectively referred to as

"Borrowers"), U.S. Bank National Association (as Administrative

Lender) and the lenders named therein dated as of September 28, 2001, (as

amended, modified or supplemented from time to time, the "Credit Agreement").  Capitalized terms used herein shall have the

respective meanings assigned to them in the Credit Agreement.

 

1.             Pursuant

to Section 3.6 of the Credit Agreement, Borrowers' Agent, on behalf of

Borrowers, hereby requests [the continuation of all or part of outstanding

LIBOR Loans with Fixed Rate Terms ending on ___________] [the conversion of all

or part of its outstanding Prime Rate Loans], as follows:

 

(a)           The

Loans to which this Notice applies are $_______ of Revolving Loans and

$_________ of Term Loans.

 

(b)           The

effective date of continuation and/or conversion is to be ___________.

 

(c)           The

aggregate amount of [said outstanding LIBOR Loans that are Revolving Loans to

be continued as] [said outstanding Prime Rate Loans that are Revolving Loans to

be converted to] LIBOR Loans, and each requested Fixed Rate Term, are:

 

 

	

  Amount

  	

   

  	

  Fixed Rate Term

  
	

  $

  	

   

  	

   

  	

   

  	

  months

  
	

  $

  	

   

  	

   

  	

   

  	

  months

  

 

(d)           The

aggregate amount of said outstanding LIBOR Loans that are Revolving Loans to be

continued as Prime Rate Loans is $___________.

 

(e)           The

aggregate amount of [said outstanding LIBOR Loans that are Term Loans to be

continued as] [said outstanding Prime Rate Loans that are Term Loans to be

converted to] LIBOR Loans, and each requested Fixed Rate Term, are:

 

	

  Amount

  	

   

  	

  Fixed Rate Term

  
	

  $

  	

   

  	

   

  	

   

  	

  months

  
	

  $

  	

   

  	

   

  	

   

  	

  months

  

 

(d)           The

aggregate amount of said outstanding LIBOR Loans that are Term Loans to be

continued as Prime Rate Loans is $___________.

 

2.             Borrowers'

Agent, on behalf of Borrowers, hereby certifies to Administrative Lender and

Lenders that, on the date of this Notice of Conversion or Continuation, no

Default has occurred and is continuing.

 

The party signing below on behalf of Borrowers' Agent

is an Authorized Representative and has caused this Notice of Conversion or

Continuation to be duly executed on behalf of Borrowers as of _____________.

 

	

   

  	

   

  	

  MONACO COACH

  CORPORATION

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  
	

   

  
					

 

EXHIBIT F

TO

AMENDED AND RESTATED CREDIT AGREEMENT

 

Certificate of

Chief Financial Officer

 

U.S. Bank National

Association

Oregon Commercial Banking

800 Willamette Street, 3rd Floor

PO Box 10553

Eugene, Oregon  97440

Attn:  Ken Carson

and each Lender

 

This certificate is furnished pursuant to Section 8.3

of that certain Amended and Restated Credit Agreement among Monaco Coach

Corporation, a Delaware corporation, Royale Coach By Monaco, Inc., an Indiana

corporation, and MCC Acquisition Corporation, a Delaware corporation, (each

individually referred to as a "Borrower" and all collectively

referred to as "Borrowers"), U.S. Bank National Association (as

Administrative Lender) and the lenders named therein dated as of

September 28, 2001, (as amended, modified or supplemented from time to

time, the "Credit Agreement"). 

Capitalized terms used herein shall have the respective meanings

assigned to them in the Credit Agreement.

 

The undersigned hereby certifies that:

 

(1)           the

financial statements of Borrowers attached hereto for the [quarter] [year]

ending _________________, ____ were prepared in accordance with GAAP and fairly

present in all material respects Borrowers' balance sheet as of the end of such

[quarter] [year] and income and cash flow for such [quarter] [year] and

year-to-date (subject to normal year end adjustments and without notes); 

 

(2)           [no

Default existed at any time during such [quarter] [year]] [no Default existed

at any time during such [quarter] [year] except for the events described below

and a detailed statement of the action which Borrowers [have taken] [propose to

take] with respect to each such event is set forth the description of such

event below]; and

 

(3)           the

calculation demonstrating Borrowers' compliance with the covenants set forth in

Article X is attached hereto.

 

Dated:__________, ____.

 

	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

   

  	

  Chief Financial Officer

  
					

 

EXHIBIT G

TO

AMENDED AND RESTATED CREDIT AGREEMENT

Assignment and

Assumption Agreement

 

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT

("Agreement") is entered into as of ____________, between

___________________ ______________________ ("Assignor") and

________________________ ("Assignee").

 

WHEREAS, Assignor is a Lender under that certain

Amended and Restated Credit Agreement among Monaco Coach Corporation, a

Delaware corporation, Royale Coach By Monaco Corporation, an Indiana

corporation, and MCC Acquisition Corporation, a Delaware corporation, (each

individually referred to as "Borrower" and all collectively referred

to as "Borrowers"), U.S. Bank National Association (as Administrative

Lender) and the lenders named therein dated as of September 28, 2001, (as

amended, modified or supplemented from time to time, the "Credit

Agreement").  Capitalized terms

used but not defined in this Agreement shall have the meanings set forth in the

Credit Agreement.  

 

WHEREAS, it is the intention of Assignor and Assignee

that (a) Assignor assign to Assignee [all] [a portion] of Assignor's rights and

obligations under the Credit Agreement, (b) Assignee assume all such assignment

obligations of Assignor, and (c) Assignor be released from such assigned

obligations.

 

NOW, THEREFORE, in consideration of the mutual

agreements herein contained, the parties hereto agree as follows:

 

1.             Assignment.  Effective on the Assignment

Effective Date (as defined in Section 3 hereof), Assignor, without recourse and

without representation or warranty (except as expressly provided in Section 6

hereof), hereby assigns to Assignee the Assigned Rights and Obligations (as

defined below).

 

[The "Assigned Rights and Obligations" means

all of Assignor's rights and obligations under the Credit Agreement on the

Assignment Effective Date.]

 

[The "Assigned Rights and Obligations"

means:  [a $__________ portion]

[_________%] of Assignor's share of the Loans, Letter of Credit Obligations and

Total Commitments on the Assignment Effective Date; and all of Assignor's other

rights and obligations under the Credit Agreement that are attributable to such

share.]

 

2.             Assumption.  Effective on the Assignment

Effective Date, Assignee hereby accepts the foregoing assignment of, and hereby

assumes from Assignor all of, the Assigned Rights and Obligations.

 

3.             Effectiveness.  This Agreement shall become

effective on such date as shall be selected by Assignor (the "Assignment

Effective Date"), which date shall be on or as soon as practicable after

the execution and delivery of counterparts of this Agreement by Assignor,

Assignee, Administrative Lender and Borrowers' Agent on behalf of

Borrowers.  Assignor shall promptly

notify Assignee, Administrative Lender and Borrowers' Agent in writing of the Assignment Effective Date.

 

4.             Payments on Assignment Effective

Date.  In

consideration of the assignment by Assignor to, and the assumption by Assignee

of, the Assigned Rights and Obligations, on the Assignment Effective Date:  (a) Assignee shall pay to Assignor the

principal amount of all Loans made by Assignor pursuant to the Credit Agreement

that are attributable to the Assigned Rights and Obligations and outstanding on

the Assignment Effective Date; (b) each of Assignor and Assignee shall pay to

the other such amounts (if any) as are specified in any written agreement or

exchange of letters between them; and (c) Assignee shall pay to Administrative

Lender an assignment processing and recordation fee of $_________.

 

5.             Allocation and Payment of Interest and Fees.  

 

(a)           Administrative

Lender shall pay to Assignee all interest, commitment fees and other amounts

not constituting principal that are paid by or on behalf of Borrowers pursuant

to the Loan Documents and are attributable to the Assigned Rights and

Obligations ("Borrower Amounts") which accrue on and after the

Assignment Effective Date.  If Assignor

receives or collects any such Borrower Amounts, Assignor shall promptly pay

them to Assignee.  

 

(b)           Administrative

Lender shall pay to Assignor all Borrower Amounts that accrue before the

Assignment Effective Date.  If Assignee

receives or collects any such Borrower Amounts, Assignee shall promptly pay

them to Assignor.

 

6.             Representations and Warranties.  

 

(a)           Each

of Assignor and Assignee represents and warrants to the other party as follows:

 

                (i)            it

has full power and authority, and has taken all action necessary, to execute

and deliver this Agreement and to fulfill its obligations under, and to

consummate the transactions contemplated by, this Agreement;

 

                (ii)           the

making and performance of this Agreement and all documents required to be executed

and delivered by it pursuant hereto do not and will not violate any law or

regulation applicable to it;

 

                (iii)          this

Agreement has been duly executed and delivered by, and constitutes a legal,

valid and binding obligation of, it, enforceable in accordance with its terms;

and

 

                (iv)          all

approvals, authorizations or other actions by, or filings with, any

governmental authority necessary for the validity or enforceability of its

obligations under this Agreement have been made or obtained.

 

(b)           Assignor

represents and warrants to Assignee that Assignor owns the Assigned Rights and

Obligations, free and clear of all liens or other encumbrances.

 

(c)           Assignee

represents and warrants to Assignor as follows:

 

                (i)            Assignee

has made and shall continue to make its own independent investigation of the

financial condition, affairs and creditworthiness of Borrowers, and the value

of any Collateral now or hereafter securing any of the obligations,

indebtedness, liabilities or undertakings under the Loan Documents, in

connection with Assignee's assumption of the Assigned Rights and Obligations;

and

 

                (ii)           Assignee

has received a copy of the Loan Documents and such other documents, financial

statements and information as Assignee deems appropriate to make its own credit

analysis and decision to enter into this Agreement.

 

7.             No Assignor Responsibility.  Assignor makes no representation or warranty

and assumes no responsibility to Assignee for:

 

(a)           the

execution by any party other than Assignor, or the effectiveness, genuineness,

validity, enforceability, collectibility or sufficiency of the Loan Documents;

 

(b)           any

representations, warranties, recitals or statements made in the Loan Documents

or in any financial statement or other statement, instrument, report, certificate

or any other document made or furnished or made available by or on behalf of

Borrowers to Assignor or Assignee in connection with the Loan Documents and the

transactions contemplated thereby;

 

(c)           the

performance or observance of any of the terms, conditions, provisions,

covenants or agreements contained in any of the Loan Documents or the existence

or possible existence of any default or event of default under the Loan

Documents; or

 

(d)           the

accuracy or completeness of any information provided to Assignee, whether by

Assignor or by or on behalf of Borrowers.

Assignor shall have no initial or continuing duty or

responsibility to make any investigation of the financial condition, affairs or

creditworthiness of Borrowers, or the value of any Collateral, in connection

with the assignment of the Assigned Rights and Obligations hereunder, or to

provide Assignee with any credit or other information with respect thereto,

whether coming into Assignor's possession before the date hereof or at any time

or times thereafter.

 

8.             Assignee Bound By Credit

Agreement. 

Effective on the Assignment Effective Date, Assignee:  (a) shall be deemed to be a party to and

"Lender" under the Credit Agreement; (b) agrees to be bound by the Credit

Agreement to the same extent as it would have been if it had been an original

Lender party thereto; and (c) agrees to perform in accordance with their

respective terms all obligations which are required under the Loan Documents to

be performed by it as a Lender. 

Assignee appoints and authorizes Administrative Lender to take such

actions as Administrative Lender on Assignee's behalf and to exercise such

powers under the Loan Documents as are delegated to Administrative Lender by

the terms thereof, together with such powers as are reasonably incidental

thereto.

 

9.             Assignor Released From Credit

Agreement. 

Effective on the Assignment Effective Date, Assignor shall be released

from the Assigned Rights and Obligations; provided, however, that Assignor

shall retain all of its rights to indemnification under the Loan Documents for

any events, acts or omissions occurring before the Assignment Effective Date.

 

[10.          Foreign Withholding.  

 

(a)           Assignee

represents and warrants to Administrative Lender, Borrowers and Assignor that,

under applicable law and treaties, Assignee is entitled to receive all payments

under the Loan Documents and this Agreement payable to it, without deduction or

withholding of any taxes imposed by the United States or any political

subdivision thereof.

 

(b)           On

or before the Assignment Effective Date, Assignee shall deliver to each of

Borrowers' Agent and Administrative Lender two executed copies of valid and

properly completed:  (i) United States

Internal Revenue Service Form 1001 or 4224 certifying that Assignee is entitled

to receive payments under the Credit Agreement and the Loan Documents payable

to it, without deduction or withholding of any United States federal income

taxes; or (ii) Internal Revenue Service Form W-8 or W-9 establishing an

exemption from United States backup withholding tax.  If any such form is found to be incomplete or incorrect, or must

be replaced (on the same or a successor form) in order to maintain its

effectiveness, Assignee shall execute and deliver to each of Borrowers' Agent

and Administrative Lender two executed copies of a valid, complete and correct

replacement form.]

[11.]        General.  

 

(a)           This

Agreement constitutes the entire understanding of the parties with respect to

the subject matter hereof and supersedes all prior and current understandings

and agreements, whether written or oral (other than with respect to any fees

payable as provided in Section 4 hereof).

 

(b)           No

term or provision of this Agreement may be amended, waived or terminated

orally, but only by an instrument signed by the parties hereto.

 

(c)           This

Agreement may be executed in one or more counterparts.  Each set of executed counterparts shall be

an original.  Executed counterparts may

be delivered by facsimile transmission.

 

(d)           Assignor

may at any time and from time to time grant to others pursuant to the Loan

Documents assignments of or participations in all or part of Assignor's share

of the Loans, Letter of Credit Obligations and Total Commitments, but not with

respect to the Assigned Rights and Obligations.

 

(e)           This

Agreement shall be binding upon and inure to the benefit of the parties hereto

and their respective successors and assigns. 

Neither Assignor nor Assignee may assign or transfer any of its rights

or obligations under this Agreement without the prior written consent of the

other.  The preceding sentence shall not

limit the right of Assignee to grant to others assignments of or participations

in all or part of the Assigned Rights and Obligations to the extent permitted

by the terms of the Loan Documents.

 

(f)            All

payments to Assignor or Assignee hereunder shall, unless otherwise specified by

the party entitled thereto, be made in United States Dollars, in immediately

available funds, and to the address or account specified on the signature pages

of this Agreement.  The address of

Assignee for notice purposes under the Credit Agreement shall be as specified

on the signature pages of this Agreement.

 

(g)           If

any provision of this Agreement is held invalid, illegal or unenforceable, the

remaining provisions hereof will not be affected or impaired in any way.

 

(h)           Each

party shall bear its own expenses in connection with the preparation and

execution of this Agreement.

 

(i)            This

Agreement shall be governed by and construed in accordance with the laws of the

State of Oregon.

 

IN WITNESS WHEREOF, the parties hereto have executed

this Agreement as of the date first above written.

 

	

   

  	

   

  	

  ASSIGNOR:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Name:

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Assignor's

  Notice Instructions:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Attn:

  	

   

  
	

   

  	

   

  	

  Ref:

  	

   

  
	

   

  	

   

  	

  Telephone:

  	

  (___) __________

  
	

   

  	

   

  	

  Facsimile:  

  	

  (___) __________

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Assignor's Payment Instructions:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  ABA No.

  	

   

  
	

   

  	

   

  	

  Account No.

  	

   

  	

   

  
	

   

  	

   

  	

  Attn:

  	

   

  
	

   

  	

   

  	

  Ref:

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  ASSIGNEE:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Name:

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Assignee's

  Notice Instructions:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Attn:

  	

   

  	

   

  
	

   

  	

   

  	

  Ref:

  	

   

  	

   

  
	

   

  	

   

  	

  Telephone: 

  	

  (___) __________

  
	

   

  	

   

  	

  Facsimile:  

  	

  (___) __________

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Assignee's

  Payment Instructions:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  ABA No.

  	

   

  
	

   

  	

   

  	

  Account No.

  	

   

  
	

   

  	

   

  	

  Attn:

  	

   

  
	

   

  	

   

  	

  Ref:

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  ACKNOWLEDGED

  AND AGREED:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  ADMINISTRATIVE LENDER:

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Name:

  	

   

  
	

   

  	

   

  	

  Title:Prepared by MERRILL CORPORATION

severance and change of

control AGREEMENT

 

THIS severance

and change of control AGREEMENT ("Agreement") is made and

entered into as of September 26, 2001, by and between Provell, Inc., a

Minnesota corporation (the "Company"), and George S. Richards, an individual

and resident of the state of Minnesota ("Executive").

 

RECITALS

 

A.            These Recitals shall be and hereby are incorporated as

essential terms of this Agreement, and describe (i) the general nature and

reasons for the Company's desire to enter into this Agreement and (ii)

Executive's rights and obligations under this Agreement.  Any interpretation or construction of this

Agreement shall be considered in light of these Recitals.

 

B.            Executive is currently the Chairman of the Board of the

Company and is employed as the Company's Chief Executive Officer and, as such,

is a key executive of the Company.

 

C.            The Board of Directors of the Company believes that it is

imperative to diminish the inevitable distraction to Executive that arises by

virtue of the personal uncertainties and risks created by any pending or

threatened Change in Control (as defined herein) of the Company.

 

D.            The Company believes that it is important that it receive

certain assurances with respect to its Confidential Information and Executive's

Work Product (each as defined herein) and that the Company receive certain

protections with respect to Executive's activities following termination of his

employment and is willing to offer Executive the compensation, bonuses and

other benefits set forth in this Agreement in order to obtain such assurances

and protections.

 

NOW, THEREFORE, in consideration of the premises and

for other good and valuable consideration, the receipt and sufficiency of which

are hereby acknowledged, the Company and Executive agree as follows:

 

ARTICLE 1

 

definitions

 

1.1           Annual Bonus.  For purposes of this Agreement, "Annual

Bonus" means the greater of (i) $475,000, (ii) the targeted annual bonus

amount, as established by the Board of Directors from time to time, then in effect

at the time a Severance Payment is due under this Agreement or (iii) the

average of the two most recent annual bonuses actually paid to Executive at the

time a Severance Payment is due under this Agreement.

 

1.2           Base Salary.  For purposes of this Agreement, "Base

Salary" means the greater of:  (i)

$475,000, (ii) Executive's annual base salary, as established by the Board of

Directors from time to time, then in effect at the time a Severance Payment is

due under this Agreement, or (iii) the average annual base salary paid to

Executive over the twenty-four (24) months preceding the time a Severance

Payment is due under this Agreement calculated by dividing the total base

salary paid to Executive over such twenty-four (24) months by two (2).

 

1.3           Cause.  For purposes of this Agreement,

"Cause" means commission by Executive of any of the following:  (i) Executive repeatedly fails to perform

substantially the material duties specified for the position to which Executive

has been elected, which failure is willful and deliberate and which failure is

not corrected within 30 days following receipt by Executive of written notice

from the Company’s Board of Directors which notice specifically describes the

actions which the Board of Directors deems to constitute a failure by Executive

to substantially perform his material duties; (ii) Executive engages in conduct

which Executive knows at the time of its commission is materially injurious to

the Company; (iii) Executive is convicted of, or pleads NOLO CONTENDERE to (A)

any felony (other than any felony arising out of negligence), or (B) any crime

or offense involving dishonesty with respect to the Company; or (iv) Executive

knowingly provides materially false information concerning the Company to the

Board of Directors of the Company, any governmental body or regulatory agency

or any lender or other financing source or proposed financing source of the

Company.

 

1.4           Change of Control.  For purposes of this Agreement, "Change

of Control" means:

 

(a)           any "Person" or "Persons"

(as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange

Act of 1934, as amended (the “Exchange Act”)) (other than the Company, any

employee benefit plan of the Company or any entity which reports beneficial

ownership of the Company's outstanding securities on Schedule l3G pursuant to

Regulation Section 240.l3d-l promulgated under the Exchange Act ) becomes a

“Beneficial Owner” (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange

Act), directly or indirectly, of securities of the Company representing 35% or

more of the voting power of all of the Company's then outstanding securities;

or

 

(b)           the sale, transfer, lease, exchange,

conveyance or other disposition (pursuant to a sale of assets, a merger or

consolidation or similar transaction), in one or a series of related

transactions, of all or substantially all of the assets of the Company; or 

 

(c)           a merger, consolidation or similar

transaction to which the Company is a party, if the individuals and entities

who were shareholders of the Company, as applicable, immediately prior to the

effective date of such merger, consolidation or similar transaction do not have

the same proportionate ownership of common stock of the surviving corporation

immediately following the effective date of such merger, consolidation or

similar transaction; 

 

(d)           the adoption by the Company of a plan

providing for its liquidation or dissolution; or

 

(e)           the Continuing Directors (as defined

below) cease to constitute a majority of the Company’s Board of Directors.

 

(f)            Any references in this Agreement to

the date or the time of the Change of Control shall mean:  (i) with respect to subsection (a) above,

the date such Person enters into an agreement or understanding pursuant to which

such Person will as a result of such agreement or understanding become a

beneficial owner of 35% or more of the Company's voting shares; (ii) with

respect to subsections (b) and (c) above, the closing date for such sale of

assets, merger, consolidation or similar transaction; (iii) with respect to

subsection (d) above, the date such plan is approved by the shareholders of the

Company, and (iv) with respect to subsection (e) above, the date on which the

Continuing Directors cease to constitute a majority of the Board of Directors.

 

1.4A        Continuing

Directors.  For purposes of this

Agreement, “Continuing Directors” shall mean any person who is a member of the

Board of Directors of the Company, who is not an Acquiring Person (as

hereinafter defined) or an Affiliate or Associate (as hereinafter defined) of

an Acquiring Person, or a representative of an Acquiring Person or of any such

Affiliate or Associate, and who (a) was a member of the Board of Directors on

the date of this Agreement as first written above or (b) subsequently becomes a

member of the Board of Directors, if such person’s initial nomination for

election or initial election to the Board of Directors is recommended or

approved by a majority of the Continuing Directors.  For purposes of this Section 1.4A:  “Acquiring Person” shall mean any Person who or which, together

with all Affiliates and Associates of such Person, is the Beneficial Owner of

10% or more of the shares of Common Stock of the Company then outstanding, but

shall not include the Company, any subsidiary of the Company or any executive

benefit plan of the Company or of any subsidiary of the Company or any entity

holding shares of Common Stock organized, appointed or established for, or

pursuant to the terms of, any such plan; and “Affiliate” and “Associate” shall

have the respective meanings ascribed to such terms in Rule 12b–2

promulgated under the Exchange Act.

 

1.5           Good Reason.  For purposes of this Agreement, "Good

Reason" means termination of Executive’s employment by Executive in the

event that the Company:  (i) ceases to

employ Executive as the Company's Chief Executive Officer; (ii) reduces the

scope of Executive's authority or responsibility without Executive’s consent;

(iii) reduces Executive's base salary or the amount of annual bonus for which

Executive is eligible without Executive’s consent, (iv) materially reduces any

other benefits to which Executive is entitled; (v) requires Executive's

principal place of employment to be anywhere other than the Company's principal

executive offices, or there is a relocation of the Company's principal

executive offices outside of the Minneapolis/St. Paul, Minnesota metropolitan

area; or (vi) otherwise fails to perform its obligations under this Agreement.

 

1.6           Severance Payment.  For purposes of this Agreement, "Severance

Payment" means the amount calculated by multiplying the sum of Executive's

Base Salary plus Annual Bonus by two and adding $593,750 to the product thus

obtained:  

 

(Base Salary + Annual Bonus) x 2 + $593,750 =

Severance Payment.

 

1.7           Termination

Date.  For purposes of this

Agreement, "Termination Date" means the date on which Executive

ceases to be an employee of the Company.

 

ARTICLE 2

 

severance and Phantom

appreciation payments

 

2.1           Severance.  The Company shall pay to Executive the

Severance Payment (less appropriate payroll withholding as required by law)

upon the earliest to occur of the following: 

(i) a Change of Control (provided Executive is employed by the Company

at the time of the Change of Control), (ii) a termination of Executive's

employment by the Company without Cause, or (iii) termination of Executive's

employment by Executive for Good Reason.

 

2.2           Phantom Appreciation Payment.  In addition to the Severance Payment, if the

Company has a Change of Control during the term of this Agreement, the Company

shall pay to Executive upon such Change of Control a bonus (less appropriate

payroll withholding as required by law) as calculated below (the "Phantom

Appreciation Payment").  Notwithstanding

the foregoing, Executive shall only be entitled to the Phantom Appreciation

Payment if Executive is employed by the Company at the time of the Change of

Control or, within six (6) months prior to such Change of Control, Executive

was terminated by the Company without Cause or Executive terminated his

employment for Good Reason.  The Phantom

Appreciation Payment is calculated as follows:

 

•              Tier I Calculation.  In the event the price per share of the

Company's common stock at the time of a Change of Control is less than $4.00,

the Phantom Appreciation Payment will be an amount equal to the sum of

Executive's Base Salary plus Annual Bonus multiplied by 50% (the product thus

obtained to be referred to herein as the "Tier I Balance").

 

•              Tier II Calculation.  In the event the price per share of the Company's

common stock at the time of a Change of Control is equal to or greater than

$4.00 but is less than $5.00, the Phantom Appreciation Payment will be an

amount equal to the sum of Executive's Base Salary plus Annual Bonus multiplied

by 50% (the product thus obtained to be referred to herein as the "Tier II

Balance") plus an amount calculated by multiplying such Tier II Balance by

a fraction, the numerator of which is the difference between the price per

share on the date of the Change of Control and $4.00 and the denominator of

which is $1.00.  

 

•              Tier III Calculation.  Subject to the Ceiling (as defined below),

in the event that the price per share of the Company's common stock at the time

of a Change of Control is equal to or greater than $5.00, the Company shall pay

to Executive a bonus in the amount equal to the sum of Executive's Base Salary

plus Annual Bonus (the sum thus obtained to be referred to herein as the

"Tier III Balance") plus an amount calculated by multiplying 75% of

such Tier III Balance by a fraction, the numerator of which is the difference

between the price per share on the date of the Change of Control and $5.00 and

the denominator of which is $2.00.  

 

•              Ceiling.  In no event will the Phantom Appreciation

Payment due under this Section 2.2 exceed the Tier III Balance multiplied by

1.75 (the "Ceiling").  

 

•              Price per Share Calculation.  For purposes of this Section 2.2, the

"price per share" on the date of the Change of Control means the

greater of (i) average closing price of the Company's common stock as reported

by the NASDAQ Stock Market for the ten (10) trading days ending the day

immediately prior to the Change of Control, or (ii) the price per share to be

paid for the Company's common stock by a third party purchaser as set forth in

the purchase or reorganization agreement, if any, that gives rise to the Change

of Control.

 

2.3           Disability, and Medical/Dental

Coverage; No Unpaid Vacation or Sick Leave.  In addition to any Severance Payment Executive may be entitled to

receive under Section 2.1 above, and any Phantom Appreciation Payment under

Section 2.2 above, if Executive's employment is terminated upon a change of

control, the Company shall continue to provide to Executive the same disability

and medical/dental coverage provided to Executive immediately prior to the

Executive's Termination Date.  Such

coverage shall be provided by the Company at its sole cost until the second

anniversary of the Termination Date. 

Executive may, in his sole discretion, continue health insurance

benefits under COBRA laws in effect on the Termination Date.  Executive acknowledges that the number of

months of health insurance benefits available under this Section 2.3 exceed by

six (6) months the number of required months under current law.  In addition, Executive shall for 2 years

following the Termination Date continue to participate in the Company’s

Executive Medical Reimbursement Plan. 

Executive shall not be deemed to have and shall not be paid for any unpaid

vacation or sick leave upon his termination of employment for any reason,

voluntary or involuntary.

 

2.4           Other Termination Benefits.  In addition to the benefits described above,

upon termination (whether voluntary or involuntary) of Executive’s employment

with the Company, Executive shall be entitled to receive the following

benefits:

 

(a)           The Company shall pay to Executive

(i) the full base salary earned by him and unpaid through the Termination Date,

at the rate in effect at the time written notice of termination (voluntary or

involuntary) was given; provided, however, that such rate shall not be less

than $475,000 per year, (ii) and any amount earned by Executive as a bonus with

respect to the fiscal year of the Company preceding the termination of his

employment if such bonus has not theretofore been paid to Executive.

 

(b)           The Company shall also pay to

Executive all legal fees and all expenses incurred by Executive as a result of

such termination of employment (including without limitation all fees and

expenses, if any, incurred by Executive in successfully seeking to obtain or

enforce any right or benefit provided to Executive by this Agreement whether by

arbitration or otherwise); and

 

(c)           Executive shall not be required to

mitigate the amount of any payment provided for in this Section 2.4 by seeking

other employment or otherwise.  The

amount of any payment or benefit provided in this Section 2.4 shall not be

reduced by any compensation earned by Executive as a result of any employment

by another employer.

 

For the avoidance

of doubt, Executive acknowledges that the Company shall be under no obligation

to provide Executive with an automobile or an automobile allowance at any time

after the Termination Date pursuant to any term of this Agreement.

 

2.5           Payment.  All amounts due under Sections 2.1, 2.2, 2.3

and 2.4 of this Agreement shall be paid to Executive no later than the close of

business on the earlier to occur of the Termination Date or the date of the

Change of Control.

 

ARTICLE 3

 

certain additional

payments by the company

 

3.1           Gross-Up Payment.  Anything to the contrary notwithstanding, in

the event it shall be determined that any payment, distribution or benefit made

or provided by the Company to or for the benefit of Executive (whether pursuant

to this Agreement or otherwise) (a "Payment"), would be subject to

the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as

amended (the "Code"), or any interest or penalties with respect to

such excise tax (such excise tax, together with any such interest and penalties,

being collectively referred to as the "Excise Tax"), then the Company

shall pay Executive in cash an amount (the "Gross-Up Payment") such

that, after payment by Executive of all taxes (including any payroll or FICA

taxes, and any interest or penalties imposed with respect to all such taxes),

including but not limited to income taxes, determined at the maximum effective

rate applicable thereto (and any interest and penalties imposed with respect

thereto), and the Excise Tax imposed upon the Gross-Up Payment, Executive

retains an amount of the Gross-Up Payment equal to the Excise Tax imposed on

the Payments. An example of the calculation of the Gross-Up Payment is attached

hereto as Exhibit A.

 

3.2           Determination of Gross-Up Payment.  Subject to Section 3.3, all determinations

required to be made under this Article 3, including whether a Gross-Up Payment

is required and the amount of the Gross-Up Payment, shall be made by the firm

of independent public accountants selected by the Company to audit its financial

statements for the year immediately preceding the Change in Control (the

"Accounting Firm").  The

Accounting Firm shall provide detailed supporting calculations to the Company

and Executive within thirty (30) days after the Termination Date.  In the event that the Accounting Firm is

serving as accountant or auditor for the individual, entity or group effecting

the Change in Control, Executive may appoint another nationally recognized

accounting firm to make the determinations required under this Article 3 (which

accounting firm shall then be referred to as the "Accounting

Firm").  All fees and expenses of

the Accounting Firm in connection with the work it performs pursuant to this

Article 3 shall be promptly paid by the Company.  Any Gross-Up Payment (as determined pursuant to this Article 3)

shall be paid by the Company to Executive within five (5) days of the receipt

of the Accounting Firm's determination. 

If the Accounting Firm determines that no Excise Tax is payable by

Executive, it shall furnish Executive with a written opinion that failure to

report the Excise Tax on Executive's applicable federal income tax return would

not result in the imposition of a negligence or a similar penalty.  Any determination by the Accounting Firm

shall be binding upon the Company and Executive.  As a result of the uncertainty in the application of Section 4999

of the Code at the time of the initial determination by the Accounting Firm, it

is possible that Gross-Up Payments which will not have been made by the Company

should have been made ("Underpayment").  In the event that the Company exhausts its remedies pursuant to

Section 3.3, and Executive is thereafter required to make a payment of Excise

Tax, the Accounting Firm shall promptly determine the amount of the Underpayment

that has occurred and any such Underpayment shall be paid by the Company to

Executive within five (5) days after such determination.

 

3.3           Contest.  Executive shall notify the Company in

writing of any claim made by the Internal Revenue Service that, if successful,

would require the Company to pay a Gross-Up Payment.  Such notification shall be given as soon as practicable but no

later than ten (10) business days after Executive knows of such claim and shall

apprise the Company of the nature of such claim and the date on which such

claim is requested to be paid. 

Executive shall not pay such claim prior to the expiration of the 30-day

period following the date on which Executive gives such notice to the Company

(or such shorter period ending on the date that any payment of taxes with

respect to such claim is due).  If the

Company notifies Executive in writing prior to the expiration of such period

that it desires to contest such claim, Executive shall:

 

(a)           give the Company any information

reasonably requested by the Company relating to such claim;

 

(b)           take such action in connection with

contesting such claim as the Company shall reasonably request in writing from

time to time, without limitation, accepting legal representation with respect

to such claim by an attorney selected, and paid, by the Company and reasonably

acceptable to Executive;

 

(c)           cooperate with the Company in good

faith in order to effectively contest such claim; and

 

(d)           permit the Company to participate in

any proceedings relating to such claim, provided that the Company shall bear

and pay directly all costs and expenses (including additional interest and

penalties) incurred in connection with such contest and shall indemnify and

hold Executive harmless, on an after-tax basis, for any Excise Tax or income

tax, including interest and penalties with respect thereto, imposed as a result

of such representation and payment of costs and expenses.  Without limitation on the foregoing

provisions of this Section 3.3, the Company shall control all proceedings taken

in connection with such contest.  At its

sole option, the Company may pursue or forego any and all administrative

appeals, proceedings, hearings and conferences with the taxing authority in respect

of such claim and may either direct Executive to pay the tax claimed and sue

for a refund or contest the claim in any permissible manner.  Executive agrees to prosecute such contest

to a determination before any administrative tribunal, in a court of initial

jurisdiction and in one or more appellate courts, as the Company shall

determine, provided that if the Company directs Executive to pay such claim and

sue for a refund, the Company shall advance the amount of such payment to

Executive, on an interest-free basis, from any Excise Tax or income tax,

including interest or penalties with respect thereto, imposed with respect to

such advance or with respect to any imputed income with respect to such

advance, and further provided that any extension of the statute of limitations

relating to payment of taxes for the taxable year of Executive with respect to

which such contested amount is claimed to be due is limited solely to such

contested amount.  Furthermore, the

Company's control of the contest shall be limited to issues with respect to

which a Gross-Up Payment would be payable hereunder, and Executive shall be

entitled to settle or contest, as the case may be, any other issue raised by

the Internal Revenue Service or any other taxing authority.

 

3.4           Refund.  If, after the receipt by Executive of an

amount advanced by the Company pursuant to Section 3.3, Executive becomes

entitled to receive any refund with respect to such claim, Executive shall

(subject to the Company's complying with the requirements of Section 3.3)

promptly pay to the Company the amount of such refund (together with any

interest paid or credited thereon after taxes applicable thereto).  If, after the receipt by Executive of an

amount advanced by the Company pursuant to Section 3.3, a determination is made

that Executive shall not be entitled to any refund with respect to such claim

and the Company does not notify Executive in writing of its intent to contest

such denial of refund prior to the expiration of thirty (30) days after such

determination, then such advance shall be forgiven and shall not be required to

be repaid and the amount of such advance shall offset, to the extent thereof,

the amount of Gross-Up Payment required to be paid.

 

ARTICLE 4

 

TERM and survival;

NOTICES TO EXECUTIVE

 

4.1           Term

and Survival.  The Company's obligation

under Article 2 to pay a Severance Payment upon a Change of Control and pay a

Phantom Appreciation Payment upon a Change of Control shall terminate on the

third anniversary date of this Agreement, provided, however, to

the extent any such obligation arose on or prior to such third anniversary date

due to a Change of Control occurring on or prior to the third anniversary date

and such obligation remains unperformed on the third anniversary date, such

obligation shall survive.  The Company's

obligation to continue certain benefits under Section 2.3 or pay a Severance

Payment under Section 2.1 upon a termination without Cause or termination for

Good Reason shall survive indefinitely. 

The rights and obligations of the parties with respect to Articles 5, 6

and 7 shall survive for the periods set forth in Articles 5, 6 and 7.

 

4.2           Notices

to Executive.  All notices to

Executive alleging any breach of any term of this Agreement or purporting to

terminate Executive’s employment with the Company shall be in writing,

addressed to Executive, labeled “Personal and Confidential,” and sent to the

address set forth for Executive in Section 10.9 hereof.  Any such notice shall describe, with

particularity, the conduct of Executive forming the basis for such alleged

breach or termination of employment. 

All such notices shall become effective on the 30th day

following delivery thereof to Executive if Executive has not substantially

cured the conduct identified in such notice.

 

ARTICLE 5

 

PROTECTION OF TRADE

SECRETS AND

CONFIDENTIAL information

 

5.1           Covenant to Protect Confidential

Information.  Executive acknowledges

that in connection with Executive's employment by the Company, Executive will

be brought into contact with Confidential Information (as defined below), and

Executive and the Company agree that in consideration of the covenants of the

Company pursuant to this Agreement that upon a Change of Control, termination

by the Executive for Good Reason, or termination with Cause:

 

(a)           Executive will not disclose to any

person or entity any Confidential Information after the Termination Date,

except to employees of the Company who, in the reasonable judgment of Executive

need such information for the performance of their duties, and attorneys,

accountants or other representatives of the Company as may be necessary or

appropriate in the ordinary course of performing Executive's duties as an

executive of the Company, or otherwise with the Company's express prior written

consent.

 

(b)           Executive will not disclose or transfer

any Confidential Information to any third party without the express prior

written consent of the Company (which consent shall not be unreasonably

hindered or delayed), except that Executive may make such disclosures to third

parties:  (i) in the ordinary course of

conducting the business of the Company, (ii) subject to a confidentiality

agreement in form and substance reasonably acceptable to the Company and (iii)

in compliance with orders, rules or regulations of judicial, regulatory or

self-regulatory organizations having jurisdiction over either the Company or

Executive.

 

(c)           Executive will deliver to the Company

promptly on the Termination Date, or at any other time that the Company may so

request, all memoranda, notes, records (including electronic data records),

reports and other documents (and all copies thereof) relating to the

Confidential Information which he may then possess or have within his control.

 

(d)           For purposes of this Agreement,

"Confidential Information" means any information which is proprietary

or unique to the business of the Company, including but not limited to trade

secret information, matters of a technical nature such as processes, devices,

techniques, data and formulas, research subjects and results, marketing

methods, plans and strategies, operations, products, revenues, expenses,

profits, sales, key personnel, customers, suppliers, pricing policies, any

information concerning the marketing and other business affairs and methods of

the Company which is not readily available in the Company's industry, and any

information the Company has indicated to Executive in an unambiguous writing is

confidential.

 

5.2           Termination of Obligation of

Confidentiality.  The

confidentiality obligations imposed by Section 5.1 shall cease to apply to

Confidential Information after the EARLIEST of the date on which the

Confidential Information which has been treated by the Company as Confidential

Information: (i) was known to Executive before it was obtained from the

Company; (ii) was publicly available on the date of first receipt from the

Company; (iii) has become generally known to the public in the United States

through no fault of Executive; (iv) has been disclosed to Executive free of any

obligation of confidentiality by a third party who, to the knowledge of

Executive, has the right to disclose the same and did not derive the

information from the Company; or (v) was independently developed by Executive

without the use of the Confidential Information; provided that, with respect to

clauses (i), (iv) and (v) only, such date must be established through Executive

providing the Company with written evidence clearly establishing such

exception.

 

5.3           Survival of Covenants.  The obligations of this Article 5 shall

indefinitely survive the termination of Executive's employment with the Company

and shall be binding upon any and all of Executive's assigns, executors,

administrators and other legal representatives.  However, notwithstanding anything to the contrary in this

Agreement, if the Company either breaches any covenant to pay or provide

benefits to Executive under Article 2 hereof, whether before or after the

Termination Date, in addition to all other remedies in equity or at law which

Executive may otherwise be entitled to pursue, the Executive’s obligations

under this Article 5 shall terminate and be of no further force or effect if

such breach has not been cured by the Company within five (5) calendar days

after the date of such breach.  The

Company understands and agrees that such termination under such circumstances

is reasonable and will not be deemed to be an election of remedies by

Executive, and that Executive shall be entitled to pursue all amounts and

benefits owed to him under Article 2 thereafter.

 

ARTICLE 6

 

work product

 

6.1           Work Product. Executive

acknowledges that Work Product (as defined below) belongs solely to the Company

upon a Change of Control, termination by the Executive for Good Reason, or

termination with Cause:

 

(a)           At the request of the Company,

Executive shall (i) assign  to the

Company all of his ownership in and rights to such Work Product, and (ii)

assist the Company, at the Company’s expense, as requested during and after

employment to evidence, perfect and enforce the rights of the Company in and

ownership of such Work Product by promptly executing and delivering to the

Company, the necessary written instruments and by performing such other acts as

may be necessary, in the opinion of the Company, so as to enable the Company to

obtain and maintain patent, copyright or other intellectual property rights in

such Work Product and so as to vest the entire right and title thereto in the

Company.

 

(b)           Pursuant to the provisions of Minn.

Stat. Section 181.78, the Company hereby notifies Executive that this Section

6.1 does not apply to an invention for which no equipment, supplies, facility

or trade secret information of the Company was used and which was developed

entirely on Executive's own time, and (i) which does not relate (A) directly to

the business of the Company, or (B) to the Company's actual or demonstrably

anticipated research or development, or (ii) which does not result from any

work performed by Executive for the Company.

 

(c)           For purposes of this Agreement,

"Work Product" means all inventions, creations, innovations,

improvements, technical information, systems, software developments, methods,

designs, analyses, drawings, reports, service marks, trademarks, tradenames,

logos and all similar or related information (whether patentable or

unpatentable) which relate to the Company's actual or anticipated business,

research and development or existing or future products or services which are

conceived, developed or made by Executive (whether or not during usual business

hours and whether or not alone or in conjunction with any other person) while

employed by the Company (including those conceived, developed or made prior to

the date of this Agreement), together with all patent applications, letters

patent, trademark, tradename and service mark applications or registrations, copyrights

and reissues thereof that may be granted for or upon any of the foregoing.

 

6.2           Survival of Covenants.  The obligations of this Article 6 shall

indefinitely survive the termination of Executive's employment with the Company

with respect to inventions or other discoveries conceived or otherwise

developed during Executive's employment and shall be binding upon any and all

of Executive's assigns, executors, administrators and other legal

representatives.  However,

notwithstanding anything to the contrary in this Agreement, if the Company

either breaches any covenant to pay or provide benefits to Executive under

Article 2 hereof, whether before or after the Termination Date, in addition to

all other remedies in equity or at law which Executive may otherwise be

entitled to pursue, the foregoing Work Product covenant shall terminate and be

of no further force or effect if such breach has not been cured by the Company

within five (5) calendar days after the date of such breach.  The Company understands and agrees that such

termination under such circumstances is reasonable and will not be deemed to be

an election of remedies by Executive, and that Executive shall be entitled to

pursue all amounts and benefits owed to him under Article 2 thereafter.

 

ARTICLE 7

 

NONCOMPETITION,

NONSOLICITATION AND NONDISPARAGEMENT

 

7.1           Noncompetition, Nonsolicitation

and Nondisparagement.  Executive

acknowledges and agrees with the Company that, during the course of Executive's

employment with the Company, Executive has had and will continue to have the

opportunity to develop relationships with existing employees, customers and

other business associates of the Company, which relationships constitute

goodwill of the Company, and Executive acknowledges and agrees that the Company

would be irreparably damaged if Executive were to take actions that would

damage or misappropriate such goodwill. 

Executive accordingly covenants and agrees that upon a Change of

Control, termination by the Executive for Good Reason or termination with

Cause: 

 

(a)           Executive acknowledges that the

Company currently conducts throughout the United States (the

"Territory") the Membership/Enhancement Services Business, as defined

below. Accordingly, in consideration of the covenants of the Company pursuant to

this Agreement, from the date hereof until the first anniversary of Executive's

Termination Date (the "Noncompete Period"), Executive shall not,

directly or indirectly, engage in, assist, give or lend funds to or otherwise

finance, be employed by or consult with, or have a financial or other interest

in, any “Competitor” (as defined below) which engages in the

Membership/Enhancement Services Business, whether for or by himself or as an

independent contractor, agent, stockholder, partner or joint venturer with any

such Competitor, provided that the aggregate ownership by Executive of no more

than two percent of the outstanding equity securities of any person, including

any Competitor, which securities are traded on a national or foreign securities

exchange, quoted on the Nasdaq Stock Market or other automated quotation system

shall not be deemed to be giving or lending funds to, otherwise financing or

having a financial interest in a Competitor. 

As used herein, the term, “Competitor” means those persons identified on

Exhibit B hereto and any company or any business unit of any company that

receives more than 75% of its annual revenues engaging in the

Membership/Enhancement Services Business. 

Also, as used herein, Membership/Enhancement Services Business means the

sale or marketing of memberships to clubs for which club members/customers pay

an annual membership fee which fee is automatically renewed unless the customer

cancels his/her/its membership.

 

(b)           Executive covenants and agrees that

during the Noncompete Period, Executive will not, directly or indirectly,

either for himself or for any other person (i) solicit or initiate contact with

any employee of the Company, or any former employee of the Company whose

employment with the Company terminated within six months of such solicitation

or contact, for the purpose of employing such individual, or (ii) make any

disparaging statements concerning the Company or its officers, directors or

employees, to any lessor, lessee, vendor, supplier, customer, distributor,

employee, consultant or other business associate of the Company, as such

relationship relates to the Company's conduct of the Membership/Enhancement

Services Business.  Notwithstanding the

foregoing, this Section 7.1(b) does not prohibit or restrict communicating with

or hiring employees or former employees of the Company who first initiate

contact with Executive or who respond to a general public solicitation of

employment such as a newspaper advertisement.

 

(c)           Executive understands that the

foregoing restrictions may limit Executive's ability to earn a livelihood in a

business similar to the business of the Company, but Executive nevertheless

believes that Executive has received and will receive sufficient consideration

and other benefits as provided hereunder to clearly justify such restrictions

which, in any event (given Executive's education, skills and ability),

Executive does not believe would prevent him from otherwise earning a living.

 

(d)           Notwithstanding anything to the

contrary in this Agreement, if the Company either breaches any covenant to pay

or provide benefits to Executive under Article 2 hereof, whether before or  after the Termination Date, in addition to

all other remedies in equity or at law which Executive may otherwise be

entitled to pursue, the foregoing noncompetition, nonsolicitation and

nondisparagement covenants shall 

terminate and be of no further force or effect if such breach has not

been cured by the Company within five (5) calendar days after the date of such

breach.  The Company understands and

agrees that such termination under such circumstances is reasonable and will

not be deemed to be an election of remedies by Executive, and that Executive

shall be entitled to pursue all amounts and benefits owed to him under Article

2 thereafter.

 

ARTICLE 8

 

remedies

 

8.1           Remedies.  In the event of the violation or threatened

violation by Executive of any of the covenants contained in this Agreement, in

addition to any other remedy available in law or in equity, the Company shall

have (i) the right and remedy of specific enforcement, including injunctive

relief, it being acknowledged and agreed that any such violation or threatened

violation may cause irreparable injury to the Company and that monetary damages

will not provide an adequate remedy, (ii) the right and remedy to withhold any

payments or benefits required to be made or provided to Executive hereunder

upon the material and continuing violation by Executive of any provisions of

Articles 5, 6 or 7 hereof, but without limiting Executive's obligations under

Articles  5 or 6 hereof, provided that

all such payments shall be promptly paid over to Executive if the arbitrators

referenced in Article 9 hereof determines that Executive did not violate such

provisions, and (iii)the right to any and all damages available as a matter of

law.

 

8.2           Reformation.  In furtherance and not in limitation of the

foregoing, should any duration or geographical restriction on business

activities covered under this Agreement or any other provision of this

Agreement be found by any court of competent jurisdiction to be less than fully

enforceable due to its breadth of restrictiveness or otherwise, Executive and

the Company intend that such court will enforce this Agreement to the full

extent that the court may find permissible by construing such provisions to

cover only that duration, extent or activity which may be enforceable.  Executive and the Company acknowledge the

uncertainty of the law in this respect and intend that this Agreement will be

given the construction that renders its provisions valid and enforceable to the

maximum extent permitted by law.

 

ARTICLE 9

 

arbitration

 

In the event of a dispute between the Company and

Executive regarding either party's failure to comply with the covenants contained

in this Agreement, it is the intention of the parties that the dispute shall be

resolved as expeditiously as possible, consistent with fairness to both

sides.  Accordingly, any such matters

shall be resolved by binding private arbitration before a single

arbitrator.  Within thirty (30) days of

receipt of such notice by the opposing party, the parties shall meet in good

faith to appoint a disinterested arbitrator. 

In the event the parties cannot agree upon the neutral arbitrator within

ten (10) days after their appointment, then the neutral arbitrator shall be

appointed by the Chief Judge of Hennepin County (Minnesota) District

Court.  Any arbitration proceeding

conducted hereunder shall be in the City of Minneapolis and shall follow the

procedures set forth in the Rules of Commercial Arbitration of the American

Arbitration Association, and both sides shall cooperate in as expeditious a

resolution of the proceeding as is reasonable under the circumstances.  The arbitrator shall apply the law of the

State of Minnesota.  The arbitrator

shall have the power to enter any relief he or she deems fair and just on any

claim, including interim and final equitable relief, along with any procedural

order that is reasonable under the circumstances.  Any award rendered by any such arbitrator, may be filed and a

judgment obtained in any court having jurisdiction over the parties unless the

relief granted in the award is delivered within ten (10) days of the

award.  Either party may request

arbitration by written notice to the other party.

 

ARTICLE 10

 

miscellaneous

 

10.1         No Funding of Severance.  Nothing contained in this Agreement or

otherwise shall require the Company to segregate, earmark or otherwise set

aside any funds or other assets to provide for any payments required to be made

under Articles 2 or 3 hereof, and the rights of Executive to any benefits

hereunder shall be solely those of a general, unsecured creditor of the

Company.

 

10.2         Beneficiaries.  In the event of Executive's death, any

amount or benefit payable or distributable to him pursuant to this Agreement

shall be paid to the beneficiary designated by Executive for such purpose in

the last written instrument received by the Company prior to Executive's death,

if any, or, if no beneficiary has been designated, to Executive's estate, but

such designation shall not be deemed to supersede any beneficiary designation

under any benefit plan of the Company.

 

10.3         Governing Law; Jurisdiction.  This Agreement shall be construed,

interpreted and enforced according to the statutes, rules of law and court

decisions of the State of Minnesota without regard to conflict of law

provisions.  Executive hereby submits to

the jurisdiction of, and waives any venue objections against, the State of

Minnesota and the federal courts of the United States located in such state in

respect of all actions arising out of or in connection with this Agreement, and

Executive consents to the personal jurisdiction of such courts for such

purposes.

 

10.4         Assignment and Survival.  This Agreement is binding upon the Company

and Executive and their permitted successors and assigns.  The obligations of Articles 5, 6, 7, 8, 9

and 10 of this Agreement will survive the termination of Executive's employment

with the Company.  The services rendered

by Executive to the Company under this Agreement are personal in nature and,

therefore, Executive may not delegate Executive's duties or obligations under

this Agreement.  The Company may assign

its rights and delegate its duties and obligations under this Agreement, with

Executive’s prior written consent (which may given or withheld in Executive’s

sole discretion).

 

10.5         No Waiver.  The failure of either the Company or

Executive to object to any conduct or violation of any of the covenants made by

the other under this Agreement will not be deemed a waiver of any rights or

remedies.  No waiver of any right or

remedy arising under this Agreement will be valid unless set forth in an

appropriate writing signed by both the Company and Executive.  This Agreement shall not give Executive any

right to be employed for any specific time or limit the Company's right to

terminate Executive's employment at any time, with or without Cause.  This Agreement shall not be deemed an employment

agreement and Executive may terminate his employment with the Company at any

time.

 

10.6         Modification.  This Agreement supersedes and replaces any

and all prior and written understandings, if any, between the parties relating

to the subject matter of this Agreement, including any previous employment

contract which is hereby revoked.  The

parties agree that this Agreement and the Exhibit attached hereto (a) set forth

the entire understanding and agreement between the parties with respect to the

subject matter of this Agreement and (b) is the complete and exclusive

statement of the terms and conditions thereof, and there are no other written

or oral agreements in regard to the subject matter of this Agreement.  This Agreement shall not be changed or modified

except by a written document signed by the parties hereto.

 

10.7         Unique Nature of Agreement.  The covenants made in, and the rights

conveyed by, this Agreement are of a unique and special nature to each of the

parties hereto.  Any violation of this

Agreement by either party may result in immediate and irreparable harm to the

other party hereto.  In such event, each

party acknowledges that this Agreement entitles the other to an injunction or

decree of specific performance from a court of equity in addition to other

rights or remedies which the such party may have at law or in equity.  Each party hereto hereby waives the right to

assert the defense that any such breach or violation can be adequately

compensated in damages and in an action at law.

 

10.8         Severability.  The covenants, provisions, and sections of

this Agreement are severable.  Subject

to the last sentence of this Section 10.8, if any portion of this Agreement is

held to be unlawful or unenforceable, the same will not affect any other

portion of this Agreement, and the remaining terms and conditions or portions

thereof will remain in full force and effect. 

Subject to the last sentence of this Section 10.8, this Agreement will

be construed in such case as if such unlawful or unenforceable portion had

never been contained in this Agreement, in order to effectuate the intentions

of the Company and Executive in executing this Agreement.  If, at any time, any term or provision, or

portion thereof, of Articles 2 or 3 is held to be unlawful or unenforceable,

the Company agrees to take such actions and to enter into such other agreements

or understandings with or for the benefit of Executive as are necessary, in

Executive’s judgment, to provide Executive with substantially the same benefits

as are set forth in such Articles; if the Company does not do so, for any

reason, then the parties understand that Articles 5,6, 7 and 8 shall be of no

further force or effect.

 

10.9         Notices.  All notices, demands and other

communications provided for hereunder shall be in writing and shall be given

either by personal delivery, via facsimile transmission (receipt telephonically

confirmed), by nationally recognized overnight courier (prepaid), or by

certified or registered first class mail, postage prepaid, return receipt

requested, sent to each party at its/his address as set forth below or such

other address or in such other manner as may be designated by such party in

written notice to each of the other parties. 

All such notices, demands and communications shall be effective when

personally delivered, one (1) business day after delivery to the overnight

courier, upon telephone confirmation of facsimile transmission or upon receipt

after dispatch by mail to the party to whom the same is given or made:

 

 

	

  If to Executive:

  	

   

  	

  George S. Richards

  
	

   

  	

   

  	

  13916 Emerald Ridge

  
	

   

  	

   

  	

  Minnetonka,

  MN  55305

  
	

   

  	

   

  	

   

  
	

  If to the

  Company:

  	

   

  	

  Provell, Inc.

  
	

   

  	

   

  	

  301 Carlson

  Parkway, Suite 201

  
	

   

  	

   

  	

  Minnetonka, MN 

  55305

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Attention:  Chief Financial Officer

  

 

IN WITNESS WHEREOF the following parties have executed

the above instrument the day and year first above written.

 

	

   

  	

  Provell,

  Inc.

  
	

   

  	

   

  
	

   

  	

  By

  	

   

  
	

   

  	

  Name

  	

   

  
	

   

  	

  Its

  	

   

  
	

   

  	

   

  
	

   

  	

  EXECUTIVE:

  
	

   

  	

   

  
	

   

  	

  George S. Richards

  
				

 

exhibit a

 

gross-up payment

calculation

 

Pursuant to Article 3 of the Severance and Change of

Control Agreement to which this Exhibit A is attached (the “Agreement”), a

gross-up payment shall be paid to the Executive by the Company within the time

period specified in the Agreement for the amount of excise tax incurred by the

Executive as a result of Internal Revenue Code Section 4999.  The following is an example of the result

intended by Article 4 3 of the Agreement.

Definition of terms:

 

G=           Gross-up payment due,

P=           Amount of the parachute payment,

B=           Base amount,

R=           Aggregate applicable Federal and

State (net of Federal benefit) income tax rate,

.2=           20% tax rate imposed by Internal

Revenue Code Section 4999

 

Example assumptions:

 

G=           X,

P=           $2,000,000,

B=           $500,000, and

R=           .45

 

Based upon the

assumptions listed, the gross-up payment is calculated as follows:

 

G=           (.2P - .2B) / (.8-R)

G=           [(.2($2,000,000) - .2($500,000)] /

(.8 - .45)

G=           ($400,000 - $100,000) / .35

G=           $300,000 / .35

G=           $857,143

 

EXHIBIT B

 

LIST OF

COMPETITORS

 

Memberworks, Inc.

 

Cendant’s

Membership Services Business Unit, known as Trilegiant

 

Encore Marketing

International Inc.

 

Signature

Marketing Group, Inc., currently owned by GE Financial Advisors

 

Brand Direct

Marketing, Inc.

 

Eubiquity,

currently owned by West Teleservices, Inc.

 

Metris Companies,

Inc.

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