Document:

Exhibit
10.1

THIRD AMENDED AND RESTATED CREDIT
AGREEMENT

Dated as of
January 5, 2007

Among

THE FINANCIAL
INSTITUTIONS NAMED HEREIN,

as the Lenders;

BANK OF AMERICA,
N.A.,

as the
Administrative Agent;

FLEETWOOD
ENTERPRISES, INC.,

as a Guarantor;

and

FLEETWOOD HOLDINGS
INC., and certain of its Subsidiaries,

as the Borrowers.

 

TABLE OF CONTENTS

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  1 LOANS AND LETTERS OF CREDIT

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.1

  	
   

  	
  Total
  Facility

  	
   

  	
  2

  
	
  1.2

  	
   

  	
  Revolving
  Loans

  	
   

  	
  3

  
	
  1.3

  	
   

  	
  Initial
  Term Loan

  	
   

  	
  7

  
	
  1.4

  	
   

  	
  Letters
  of Credit

  	
   

  	
  7

  
	
  1.5

  	
   

  	
  Bank
  Products

  	
   

  	
  11

  
	
  1.6

  	
   

  	
  Joint
  and Several Obligations; Contribution Rights

  	
   

  	
  12

  
	
  1.7

  	
   

  	
  Borrowing
  Agency Provisions

  	
   

  	
  16

  
	
  1.8

  	
   

  	
  Senior
  Indebtedness

  	
   

  	
  18

  
	
  1.9

  	
   

  	
  Delayed
  Draw Term Loan

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2 INTEREST AND FEES

  	
   

  	
  20

  
	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Interest

  	
   

  	
  20

  
	
  2.2

  	
   

  	
  Continuation and Conversion Elections

  	
   

  	
  21

  
	
  2.3

  	
   

  	
  Maximum Interest Rate

  	
   

  	
  22

  
	
  2.4

  	
   

  	
  Closing Fee

  	
   

  	
  23

  
	
  2.5

  	
   

  	
  Unused Line Fee

  	
   

  	
  23

  
	
  2.6

  	
   

  	
  Letter of Credit Fee

  	
   

  	
  23

  
	
  2.7

  	
   

  	
  [RESERVED]

  	
   

  	
  23

  
	
  2.8

  	
   

  	
  Substitution of Property

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3 PAYMENTS AND PREPAYMENTS

  	
   

  	
  25

  
	
   

  	
   

  	
   

  
	
  3.1

  	
   

  	
  Revolving Loans

  	
   

  	
  25

  
	
  3.2

  	
   

  	
  Termination of Facility

  	
   

  	
  25

  
	
  3.3

  	
   

  	
  Repayment of the Term Loan

  	
   

  	
  26

  
	
  3.4

  	
   

  	
  Prepayments of the Loans

  	
   

  	
  26

  
	
  3.5

  	
   

  	
  LIBOR Rate Loan Prepayments

  	
   

  	
  27

  
	
  3.6

  	
   

  	
  Payments by the Borrowers

  	
   

  	
  27

  
	
  3.7

  	
   

  	
  Payments as Revolving Loans

  	
   

  	
  28

  
	
  3.8

  	
   

  	
  Apportionment, Application and Reversal of Payments

  	
   

  	
  28

  
	
  3.9

  	
   

  	
  Indemnity for Returned Payments

  	
   

  	
  29

  
	
  3.10

  	
   

  	
  The Agent’s and Lenders’ Books and Records; Monthly
  Statements

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4 TAXES, YIELD PROTECTION AND ILLEGALITY

  	
   

  	
  30

  
	
   

  	
   

  	
   

  
	
  4.1

  	
   

  	
  Taxes

  	
   

  	
  30

  
	
  4.2

  	
   

  	
  Illegality

  	
   

  	
  31

  
	
  4.3

  	
   

  	
  Increased Costs and Reduction of Return

  	
   

  	
  32

  
	
  4.4

  	
   

  	
  Funding Losses

  	
   

  	
  32

  
	
  4.5

  	
   

  	
  Inability to Determine Rates

  	
   

  	
  33

  
	
  4.6

  	
   

  	
  Certificates of the Agent

  	
   

  	
  33

  
	
  4.7

  	
   

  	
  Survival

  	
   

  	
  34

  

 

 i
 

 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 BOOKS AND RECORDS; FINANCIAL INFORMATION;
  NOTICES

  	
   

  	
  34

  
	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
  Books and Records

  	
   

  	
  34

  
	
  5.2

  	
   

  	
  Financial Information

  	
   

  	
  34

  
	
  5.3

  	
   

  	
  Notices to the Lenders

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6 GENERAL WARRANTIES AND REPRESENTATIONS

  	
   

  	
  40

  
	
   

  	
   

  	
   

  
	
  6.1

  	
   

  	
  Authorization, Validity, and Enforceability of this
  Agreement and the Loan Documents

  	
   

  	
  40

  
	
  6.2

  	
   

  	
  Validity and Priority of Security Interest

  	
   

  	
  40

  
	
  6.3

  	
   

  	
  Organization and Qualification

  	
   

  	
  41

  
	
  6.4

  	
   

  	
  Corporate Name; Prior Transactions

  	
   

  	
  41

  
	
  6.5

  	
   

  	
  Subsidiaries and Affiliates

  	
   

  	
  41

  
	
  6.6

  	
   

  	
  Financial Statements and Projections

  	
   

  	
  41

  
	
  6.7

  	
   

  	
  Capitalization

  	
   

  	
  42

  
	
  6.8

  	
   

  	
  Solvency

  	
   

  	
  42

  
	
  6.9

  	
   

  	
  Debt

  	
   

  	
  42

  
	
  6.10

  	
   

  	
  Distributions

  	
   

  	
  42

  
	
  6.11

  	
   

  	
  Real Estate; Leases

  	
   

  	
  42

  
	
  6.12

  	
   

  	
  Proprietary Rights

  	
   

  	
  43

  
	
  6.13

  	
   

  	
  Trade Names

  	
   

  	
  43

  
	
  6.14

  	
   

  	
  Litigation

  	
   

  	
  43

  
	
  6.15

  	
   

  	
  Labor Disputes

  	
   

  	
  43

  
	
  6.16

  	
   

  	
  Environmental Laws

  	
   

  	
  44

  
	
  6.17

  	
   

  	
  No Violation of Law

  	
   

  	
  45

  
	
  6.18

  	
   

  	
  No Default

  	
   

  	
  45

  
	
  6.19

  	
   

  	
  ERISA Compliance

  	
   

  	
  45

  
	
  6.20

  	
   

  	
  Taxes

  	
   

  	
  46

  
	
  6.21

  	
   

  	
  Regulated Entities

  	
   

  	
  46

  
	
  6.22

  	
   

  	
  Use of Proceeds; Margin Regulations

  	
   

  	
  46

  
	
  6.23

  	
   

  	
  Copyrights, Patents, Trademarks and Licenses, etc

  	
   

  	
  46

  
	
  6.24

  	
   

  	
  No Material Adverse Change

  	
   

  	
  47

  
	
  6.25

  	
   

  	
  Full Disclosure

  	
   

  	
  47

  
	
  6.26

  	
   

  	
  Material Agreements

  	
   

  	
  47

  
	
  6.27

  	
   

  	
  Bank Accounts

  	
   

  	
  47

  
	
  6.28

  	
   

  	
  Governmental Authorization

  	
   

  	
  47

  
	
  6.29

  	
   

  	
  Senior Indebtedness

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7 AFFIRMATIVE AND NEGATIVE COVENANTS

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  Taxes and Other Obligations

  	
   

  	
  47

  
	
  7.2

  	
   

  	
  Legal Existence and Good Standing

  	
   

  	
  48

  
	
  7.3

  	
   

  	
  Compliance with Law and Agreements; Maintenance of
  Licenses

  	
   

  	
  48

  
	
  7.4

  	
   

  	
  Maintenance of Property; Inspection of Property

  	
   

  	
  48

  
	
  7.5

  	
   

  	
  Insurance

  	
   

  	
  49

  
	
  7.6

  	
   

  	
  Insurance and Condemnation Proceeds

  	
   

  	
  50

  

 

 ii
 

 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  7.7

  	
   

  	
  Environmental Laws

  	
   

  	
  50

  
	
  7.8

  	
   

  	
  Compliance with ERISA

  	
   

  	
  52

  
	
  7.9

  	
   

  	
  Mergers, Consolidations or Sales

  	
   

  	
  52

  
	
  7.10

  	
   

  	
  Distributions; Capital Change; Restricted
  Investments

  	
   

  	
  53

  
	
  7.11

  	
   

  	
  Transactions Affecting Collateral or Obligations

  	
   

  	
  55

  
	
  7.12

  	
   

  	
  Guaranties

  	
   

  	
  55

  
	
  7.13

  	
   

  	
  Debt

  	
   

  	
  55

  
	
  7.14

  	
   

  	
  Prepayment

  	
   

  	
  57

  
	
  7.15

  	
   

  	
  Transactions with Affiliates

  	
   

  	
  58

  
	
  7.16

  	
   

  	
  Investment Banking and Finder’s Fees

  	
   

  	
  59

  
	
  7.17

  	
   

  	
  Business Conducted

  	
   

  	
  59

  
	
  7.18

  	
   

  	
  Liens

  	
   

  	
  59

  
	
  7.19

  	
   

  	
  Sale and Leaseback Transactions

  	
   

  	
  59

  
	
  7.20

  	
   

  	
  New Subsidiaries

  	
   

  	
  59

  
	
  7.21

  	
   

  	
  Fiscal Year

  	
   

  	
  59

  
	
  7.22

  	
   

  	
  Capital Expenditures

  	
   

  	
  60

  
	
  7.23

  	
   

  	
  [RESERVED]

  	
   

  	
  60

  
	
  7.24

  	
   

  	
  Minimum EBITDA

  	
   

  	
  60

  
	
  7.25

  	
   

  	
  Bank Accounts

  	
   

  	
  60

  
	
  7.26

  	
   

  	
  Contribution of Management Fees

  	
   

  	
  61

  
	
  7.27

  	
   

  	
  Use of Proceeds

  	
   

  	
  61

  
	
  7.28

  	
   

  	
  Further Assurances; Mortgages

  	
   

  	
  61

  
	
  7.29

  	
   

  	
  Subordinated Debt; Trust Securities

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8 CONDITIONS OF LENDING

  	
   

  	
  63

  
	
   

  	
   

  	
   

  
	
  8.1

  	
   

  	
  Conditions Precedent to Making of Loans on the
  Closing Date

  	
   

  	
  63

  
	
  8.2

  	
   

  	
  Conditions Precedent to Each Loan

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9 DEFAULT; REMEDIES

  	
   

  	
  67

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.1

  	
   

  	
  Events of Default

  	
   

  	
  67

  
	
  9.2

  	
   

  	
  Remedies

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 10 TERM AND TERMINATION

  	
   

  	
  71

  
	
   

  	
   

  	
   

  
	
  10.1

  	
   

  	
  Term and Termination

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11 AMENDMENTS; WAIVERS; PARTICIPATIONS;
  ASSIGNMENTS; SUCCESSORS

  	
   

  	
  72

  
	
   

  	
   

  	
   

  
	
  11.1

  	
   

  	
  Amendments and Waivers

  	
   

  	
  72

  
	
  11.2

  	
   

  	
  Assignments; Participations

  	
   

  	
  75

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 12 THE AGENT

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.1

  	
   

  	
  Appointment and Authorization

  	
   

  	
  77

  
	
  12.2

  	
   

  	
  Delegation of Duties

  	
   

  	
  78

  

 

 iii
 

 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  12.3

  	
   

  	
  Liability of the Agent

  	
   

  	
  78

  
	
  12.4

  	
   

  	
  Reliance by the Agent

  	
   

  	
  78

  
	
  12.5

  	
   

  	
  Notice of Default

  	
   

  	
  79

  
	
  12.6

  	
   

  	
  Credit Decision

  	
   

  	
  79

  
	
  12.7

  	
   

  	
  Indemnification

  	
   

  	
  79

  
	
  12.8

  	
   

  	
  The Agent in Individual Capacity

  	
   

  	
  80

  
	
  12.9

  	
   

  	
  Successor Agent

  	
   

  	
  80

  
	
  12.10

  	
   

  	
  Withholding Tax

  	
   

  	
  80

  
	
  12.11

  	
   

  	
  Collateral Matters

  	
   

  	
  82

  
	
  12.12

  	
   

  	
  Restrictions on Actions by Lenders; Sharing of
  Payments

  	
   

  	
  83

  
	
  12.13

  	
   

  	
  Agency for Perfection

  	
   

  	
  84

  
	
  12.14

  	
   

  	
  Payments by the Agent to Lenders

  	
   

  	
  84

  
	
  12.15

  	
   

  	
  Settlement

  	
   

  	
  85

  
	
  12.16

  	
   

  	
  Letters of Credit; Intra-Lender Issues

  	
   

  	
  88

  
	
  12.17

  	
   

  	
  Concerning the Collateral and the Related Loan
  Documents

  	
   

  	
  91

  
	
  12.18

  	
   

  	
  Field Audit and Examination Reports; Disclaimer by
  Lenders

  	
   

  	
  91

  
	
  12.19

  	
   

  	
  Relation Among Lenders

  	
   

  	
  92

  
	
  12.20

  	
   

  	
  Co-Agents

  	
   

  	
  92

  
	
  12.21

  	
   

  	
  Collateral Priority

  	
   

  	
  92

  
	
  12.22

  	
   

  	
  Foreclosure/Environmental Reports

  	
   

  	
  92

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 13 MISCELLANEOUS

  	
   

  	
  92

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.1

  	
   

  	
  No Waivers; Cumulative Remedies

  	
   

  	
  92

  
	
  13.2

  	
   

  	
  Severability

  	
   

  	
  92

  
	
  13.3

  	
   

  	
  Governing Law; Choice of Forum; Service of Process

  	
   

  	
  93

  
	
  13.4

  	
   

  	
  WAIVER OF JURY TRIAL

  	
   

  	
  94

  
	
  13.5

  	
   

  	
  Survival of Representations and Warranties

  	
   

  	
  94

  
	
  13.6

  	
   

  	
  Other Security and Guaranties

  	
   

  	
  94

  
	
  13.7

  	
   

  	
  Fees and Expenses

  	
   

  	
  94

  
	
  13.8

  	
   

  	
  Notices

  	
   

  	
  95

  
	
  13.9

  	
   

  	
  Waiver of Notices

  	
   

  	
  96

  
	
  13.10

  	
   

  	
  Binding Effect

  	
   

  	
  96

  
	
  13.11

  	
   

  	
  Indemnity of the Agent and the Lenders by the
  Borrower

  	
   

  	
  97

  
	
  13.12

  	
   

  	
  Limitation of Liability

  	
   

  	
  97

  
	
  13.13

  	
   

  	
  Final Agreement

  	
   

  	
  98

  
	
  13.14

  	
   

  	
  Counterparts

  	
   

  	
  98

  
	
  13.15

  	
   

  	
  Captions

  	
   

  	
  98

  
	
  13.16

  	
   

  	
  Right of Setoff

  	
   

  	
  98

  
	
  13.17

  	
   

  	
  Confidentiality

  	
   

  	
  99

  
	
  13.18

  	
   

  	
  Conflicts with Other Loan Documents

  	
   

  	
  99

  
	
  13.19

  	
   

  	
  Reinstatement

  	
   

  	
  100

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 14 GUARANTY

  	
   

  	
  100

  
	
   

  	
   

  	
   

  
	
  14.1

  	
   

  	
  Guaranty

  	
   

  	
  100

  

 

 iv
 

 

ANNEXES, EXHIBITS
AND SCHEDULES 

	
  ANNEX A

  	
  -

  	
  DEFINED TERMS

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A-1

  	
  -

  	
  FORM OF REVOLVING LOAN NOTE

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A-2

  	
  -

  	
  FORM OF INITIAL TERM LOAN NOTE

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A-3

  	
  -

  	
  FORM OF DELAYED DRAW TERM LOAN NOTE

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
  -

  	
  [RESERVED]

  
	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
  -

  	
  FINANCIAL STATEMENTS

  
	
   

  	
   

  	
   

  
	
  EXHIBIT D

  	
  -

  	
  FORM OF NOTICE OF BORROWING

  
	
   

  	
   

  	
   

  
	
  EXHIBIT E

  	
  -

  	
  FORM OF NOTICE OF CONTINUATION/CONVERSION

  
	
   

  	
   

  	
   

  
	
  EXHIBIT F

  	
  -

  	
  FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1.1 

  	
  –

  	
  ASSIGNED CONTRACTS (ANNEX A – DEFINED TERMS)

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1.2

  	
  –

  	
  LENDERS’ COMMITMENTS (ANNEX A – DEFINED TERMS)

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.3

  	
  –

  	
  ORGANIZATIONS AND QUALIFICATIONS

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.4 

  	
  –

  	
  CORPORATE NAMES; PRIOR TRANSACTIONS

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.5

  	
  –

  	
  SUBSIDIARIES AND AFFILIATES

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.7

  	
  –

  	
  CAPITALIZATION

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.9

  	
  –

  	
  DEBT

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.11

  	
  –

  	
  REAL ESTATE(MORTGAGES); LEASES

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.12

  	
  –

  	
  PROPRIETARY RIGHTS

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.13

  	
  –

  	
  TRADE NAMES

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.14

  	
  –

  	
  LITIGATION

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.15

  	
  –

  	
  UNION CONTRACTS

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.16

  	
  –

  	
  ENVIRONMENTAL LAW

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.19

  	
  –

  	
  ERISA COMPLIANCE

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.27

  	
  –

  	
  BANK ACCOUNTS

  

 

 v
 

 

 

	
  SCHEDULE 7.9

  	
  –

  	
  ASSETS HELD FOR SALE

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 7.12

  	
  –

  	
  GUARANTIES

  
	
   

  	
   

  	
   

  
	
  SCHEDULE A

  	
  –

  	
  COLI POLICIES

  
	
   

  	
   

  	
   

  
	
  SCHEDULE B

  	
  –

  	
  NON FEE SIMPLE REAL ESTATE

  

 

 vi

 

THIRD AMENDED AND RESTATED CREDIT
AGREEMENT

This THIRD AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of January 5, 2007 (this “Agreement”), among the financial
institutions from time to time parties hereto (such financial institutions,
together with their respective successors and assigns, are referred to
hereinafter each individually as a “Lender” and collectively as the “Lenders”);
BANK OF AMERICA, N.A., with an office at 55 South Lake Avenue, Suite 900,
Pasadena, California 91101, as the administrative agent for the Lenders (in its
capacity as administrative agent, the “Agent”); FLEETWOOD ENTERPRISES,
INC., a Delaware corporation (“Fleetwood”), as a Guarantor; FLEETWOOD
HOLDINGS INC., a Delaware corporation (“Holdings”); and those
Subsidiaries of Holdings set forth on the signature pages hereto or which
become parties hereto hereafter in accordance with the requirements of this
Agreement (each of Holdings and each such Subsidiary individually, a “Borrower”
and, collectively, the “Borrowers”). 
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings ascribed thereto in Annex A, which is
attached hereto and incorporated herein; the rules of construction contained
therein shall govern the interpretation of this Agreement, and all Annexes,
Exhibits and Schedules attached hereto are incorporated herein by reference.

W  I  T  N  E
S  S  E  T  H:

WHEREAS, the First Amended and Restated Credit
Agreement amended and restated the Original Credit Agreement in its entirety on
May 14, 2004.

WHEREAS, the Second Amended and Restated Credit
Agreement amended and restated the First Amended and Restated Credit Agreement
in its entirety on July 1, 2005.

WHEREAS, pursuant to the Second Amended and Restated
Credit Agreement the Existing Lenders have extended credit in the form of,
among other things, Existing Loans.

WHEREAS, the Borrowers have requested the Lenders
continue to make available to the Borrowers a revolving line of credit for
loans and letters of credit in an aggregate amount not to exceed $185,000,000,
to make an initial term loan to the Borrowers in the aggregate principal amount
of $18,071,425, and to make a delayed draw term loan to the Borrowers in the
aggregate principal amount of $3,928,575, and which extension of credit the Borrowers
will use for the purposes permitted hereunder;

WHEREAS, Holdings and its Subsidiaries are
wholly-owned Subsidiaries of Fleetwood and all Borrowers are engaged in an
inter-related business enterprise with an identity of interests, and
accordingly the financing provided hereunder will directly and indirectly
benefit each of the Borrowers;

WHEREAS, neither Holdings nor its Subsidiaries would
be able to obtain sufficient working capital financing for their respective
businesses unless the individual Borrowers were jointly and severally liable
for the obligations of all Borrowers, and unless Fleetwood guarantees the
obligations of all Borrowers;

WHEREAS, the Loan Parties desire that (a) Lenders
continue the Existing Loans and Existing Commitments as Revolving Loans and
Revolving Credit Commitments hereunder 

 

and (b) Lenders agree to amend and restate the
Original Credit Agreement (as the same has been previously amended and restated
by the First Amended and Restated Credit Agreement and the Second Amended and
Restated Credit Agreement) in its entirety for the purpose of making the
amendments reflected herein.

WHEREAS, Lenders have agreed to amend and restate the
Original Credit Agreement (as the same has been previously amended and restated
by the First Amended and Restated Credit Agreement and the Second Amended and
Restated Credit Agreement) in its entirety for the purpose of making the
amendments reflected herein, which amendment and restatement shall become
effective on the Closing Date upon satisfaction of the conditions precedent set
forth herein.

WHEREAS, the Term Lenders have agreed to make an
initial term loan and a delayed draw term loan to the Borrowers upon the terms
and conditions set forth in this Agreement.

WHEREAS, the Borrowers desire to continue to guarantee
and secure all of the Obligations hereunder and under the other Loan Documents
to the extent so guaranteed and secured under the Second Amended and Restated
Credit Agreement and the Loan Documents, as in effect prior to the date hereof,
and as further provided herein.

WHEREAS, the Guarantors have agreed to continue to
guarantee and secure the Obligations hereunder and under the other Loan
Documents to the extent so guaranteed and secured under the Second Amended and
Restated Credit Agreement and the Loan Documents, as in effect prior to the
date hereof, and as further provided herein.

NOW, THEREFORE, in consideration of the mutual
conditions and agreements set forth in this Agreement, and for good and
valuable consideration, the receipt of which is hereby acknowledged, the
Lenders, the Agent, Fleetwood and the Borrowers hereby agree as follows:

ARTICLE 1

LOANS AND LETTERS OF CREDIT

1.1                                 Total Facility.  Subject to all of the terms and conditions of
this Agreement, the Lenders agree to make available a total credit facility of
up to $182,000,000 (the “Total Facility”) to the Borrowers from time to
time during the term of this Agreement; provided that the Total Facility
shall be increased to a total amount of up to $207,000,000 for the period from
and including December 1 through and including April 30 of each calendar
year.  The Total Facility shall be
composed of a revolving line of credit consisting of Revolving Loans and
Letters of Credit and the Initial Term Loan and Delayed Draw Term Loan
described herein.  On the Closing Date
(and effective as of the execution hereof by each Lender), the Lenders
(directly or through funding and settlement by the Agent) shall purchase and
assume the Revolving Credit Commitments (as defined in the Second Amended and
Restated Credit Agreement) and the Existing Loans from the Existing Lenders at
par, free and clear of adverse claims, participations or other encumbrances,
which Existing Commitments and Existing Loans and the Second Amended and
Restated Credit Agreement shall be (immediately upon such purchase and 

 2
 

 

assumption by the
Lenders) amended and restated in their entirety as more particularly described
herein, and neither the Loan Parties nor the Lenders shall be subject to or
bound by any of the terms or provisions of the Second Amended and Restated
Credit Agreement (other than such terms or provisions that are to survive
termination of the Second Amended and Restated Credit Agreement or the payment
of the Obligations as provided by the express terms of the Second Amended and
Restated Credit Agreement) and shall only be subject to or bound by the terms
and provisions of this Agreement in respect of the Revolving Credit
Commitments, Loans, other Obligations and the transactions contemplated hereby,
as set forth herein.  Notwithstanding any
other provision herein to the contrary, no additional Notice of Borrowing shall
be required as of the Closing Date with respect to any Existing Loan that shall
continue as an amended and restated Base Rate Loan or LIBOR Rate Loan under the
terms of this Agreement as more fully set forth herein.  The parties acknowledge and agree that the
Letter of Credit Issuer shall continue to honor its obligations under the
Letters of Credit outstanding immediately prior to the Closing Date under the
Second Amended and Restated Credit Agreement as if such Letters of Credit had
been requested under and issued pursuant to the terms of this Agreement.  The parties acknowledge and agree that this
Agreement and the other Loan Documents do not constitute a novation, payment
and reborrowing or termination of the obligations under the Second Amended and
Restated Credit Agreement and that all such obligations are in all respects
continued and outstanding as obligations under this Agreement and the Notes
with only the terms being modified from and after the Closing Date as provided
in this Agreement, the Notes and the other Loan Documents.  All
references in the Notes and the other Loan Documents to (i) the “Credit
Agreement” shall be deemed to include references to this Agreement and (ii) the
“Lenders” or a “Lender” or to the “Agent” shall mean such terms as defined in
this Agreement.  By its execution hereof,
each Lender consents to the amendment, amendment and restatement, replacement
or other modification to any other Loan Document being so amended, amended and
restated, replaced or otherwise modified on the date hereof or on or prior to
the Closing Date in the form approved by the Administrative Agent.

1.2                                 Revolving Loans.

(a)                                  (i)                                     Amounts.  Subject to the satisfaction of the conditions
precedent set forth in Article 8, and except for Non-Ratable Loans
and Agent Advances, each Revolving Credit Lender severally, but not jointly,
agrees, upon a Borrower’s request from time to time on any Business Day during
the period from the Closing Date to the Termination Date, to make revolving
loans (the “Revolving Loans”) to the Borrowers in aggregate amounts
not to exceed such Lender’s Pro Rata Share of the Availability.  The Revolving Credit Lenders, however, in
their unanimous discretion, may elect to make Revolving Loans or issue or
arrange to have issued Letters of Credit in excess of the Borrowing Base on one
or more occasions, but if they do so, neither the Agent nor the Revolving
Credit Lenders shall be deemed thereby to have changed the limits of the
Borrowing Base, or to be obligated to exceed such limits on any other occasion.

(ii)                                  At the request of any
Revolving Credit Lender, each of the Borrowers shall execute and deliver to
such Lender a single note to evidence the Revolving Loans of that Lender.  Each note shall be in the principal amount of
the Revolving Credit Lender’s Pro Rata Share of the Revolving Credit
Commitments, 

 3
 

 

dated the date hereof and substantially in the form of Exhibit A-1
(each such note, together with any new note issued pursuant to Section 11.2
upon the assignment of any portion of any Revolving Credit Lender’s Revolving
Loans and Revolving Credit Commitment a “Revolving Loan Note” and,
collectively, the “Revolving Loan Notes”).  Each Revolving Loan Note shall represent the
obligation of FMC to pay the amount of such Revolving Credit Lender’s Pro Rata
Share of the Revolving Credit Commitments, or, if less, such Revolving Credit
Lender’s Pro Rata Share of the aggregate unpaid principal amount of all
Revolving Loans to FMC together with interest thereon as prescribed in Section 1.2.  The entire unpaid balance of the Revolving
Loans and all other non-contingent Obligations shall be immediately due and
payable in full in immediately available funds on the Termination Date.

(b)                           Procedure for Borrowing.

(i)                                     Subject to Section
1.1, each Borrowing shall be made upon a Borrower’s irrevocable written notice
delivered to the Agent in the form of a notice of borrowing (“Notice of
Borrowing”), which must be received by the Agent prior to (i) 10:00 a.m.
(Los Angeles time) three Business Days prior to the requested Funding Date, in
the case of LIBOR Rate Loans and (ii) 10:00 a.m. (Los Angeles time) on the
requested Funding Date, in the case of Base Rate Loans, specifying:

(1)                                  the amount of the
Borrowing, which in the case of a LIBOR Rate Loan must equal or exceed
$1,000,000 (and increments of $500,000 in excess of such amount);

(2)                                  the requested Funding
Date, which must be a Business Day;

(3)                                  whether the Revolving
Loans requested are to be Base Rate Revolving Loans or LIBOR Rate Loans (and if
not specified, it shall be deemed a request for a Base Rate Revolving Loan);
and

(4)                                  the duration of the
Interest Period for LIBOR Rate Loans (and if not specified, it shall be deemed
a request for an Interest Period of one month).

(ii)                                  In lieu of delivering
a Notice of Borrowing, a Borrower may give the Agent telephonic notice of such
request for advances to its Designated Account on or before the deadline set forth
above.  The Agent at all times shall be
entitled to rely on such telephonic notice in making such Revolving Loans,
regardless of whether any written confirmation is received.

(iii)                               The Borrowers shall have
no right to request a LIBOR Rate Loan while a Default or Event of Default has
occurred and is continuing.

 4
 

 

(c)                            Reliance upon Authority.  Prior to the Closing Date, the Borrowers
shall deliver to the Agent a notice setting forth the accounts of FMC (each, a “Designated
Account”) to which the Agent is authorized to transfer the proceeds of the
Revolving Loans requested hereunder by the Borrowers.  The Borrowers may designate a replacement
account from time to time by written notice. 
All such Designated Accounts must be reasonably satisfactory to the Agent.  The Agent is entitled to rely conclusively on
any person’s request for Revolving Loans on behalf of any Borrower, so long as
the proceeds thereof are to be transferred to the applicable Designated
Account.  The Agent has no duty to verify
the identity of any individual representing himself or herself as a person
authorized by any Borrower to make such requests on its behalf.

(d)                           No Liability.  The Agent shall not incur any liability to
the Borrowers as a result of acting upon any notice referred to in Sections
1.2(b) and (c), which the Agent believes in good faith to have been
given by an officer or other person duly authorized by the applicable Borrower
to request Revolving Loans on its behalf. 
The crediting of Revolving Loans to the applicable Designated Account
conclusively establishes the obligation of the applicable Borrowers to repay
such Revolving Loans as provided herein.

(e)                            Notice Irrevocable.  Any Notice of Borrowing (or telephonic notice
in lieu thereof) made pursuant to Section 1.2(b) shall be
irrevocable.  A Borrower shall be bound
to borrow the funds requested therein in accordance therewith.

(f)                              The Agent’s Election.  Promptly after receipt of a Notice of
Borrowing (or telephonic notice in lieu thereof), the Agent shall elect to have
the terms of Section 1.2(g) or the terms of Section 1.2(h) apply
to such requested Borrowing.  If the Bank
declines in its sole discretion to make a Non-Ratable Loan pursuant to Section 1.2(h),
the terms of Section 1.2(g) shall apply to the requested Borrowing.

(g)                           Making of Revolving Loans.  If the Agent elects to have the terms of this
Section 1.2(g) apply to a requested Borrowing, then promptly after
receipt of a Notice of Borrowing or telephonic notice in lieu thereof, the
Agent shall notify the Revolving Credit Lenders by telecopy, telephone or
e-mail of the requested Borrowing.  Each
Revolving Credit Lender shall transfer its Pro Rata Share of the requested
Borrowing to the Agent in immediately available funds, to the account from time
to time designated by the Agent, not later than 12:00 noon (Los Angeles time)
on the applicable Funding Date.  After
the Agent’s receipt of all proceeds of such Revolving Loans, the Agent shall
make the proceeds of such Revolving Loans available to the applicable Borrower
on the applicable Funding Date by transferring same day funds to the Designated
Account of the applicable Borrower; provided, however, that the
amount of Revolving Loans so made on any date shall not exceed Availability on
such date, unless all of the Revolving Credit Lenders otherwise agree.

 5
 

 

(h)                           Making of Non-Ratable
Loans.

(i)                                     If the Agent
elects, with the consent of the Bank, to have the terms of this Section
1.2(h) apply to a requested Borrowing, the Bank shall make a Revolving Loan
in the amount of that Borrowing available to the applicable Borrower on the
applicable Funding Date by transferring same day funds to such Borrower’s
Designated Account.  Each Revolving Loan
made solely by the Bank pursuant to this Section is herein referred to as a “Non-Ratable
Loan”, and such Revolving Loans are collectively referred to as the “Non-Ratable
Loans.”  Each Non-Ratable Loan shall
be subject to all the terms and conditions applicable to other Revolving Loans
except that all payments thereon shall be payable to the Bank solely for its
own account.  The aggregate amount of
Non-Ratable Loans outstanding at any time shall not exceed $10,000,000.  The Agent shall not request the Bank to make
any Non-Ratable Loan if (1) the Agent has received written notice from any
Revolving Credit Lender that one or more of the applicable conditions precedent
set forth in Article 8 will not be satisfied on the requested
Funding Date for the applicable Borrowing, and such conditions have not been
waived in accordance with this Agreement or (2) the requested Borrowing
would exceed Availability on that Funding Date.

(ii)                                  The Non-Ratable Loans
shall be secured by the Agent’s Liens in and to the Collateral and shall
constitute Base Rate Revolving Loans and Obligations hereunder.

(i)                               The Agent Advances.

(i)                                     Subject to the
limitations set forth below, the Agent is authorized by the Borrowers and the
Revolving Credit Lenders, from time to time in the Agent’s sole discretion, (A)
after the occurrence of a Default or an Event of Default, or (B) at any time
that any of the other conditions precedent set forth in Article 8
have not been satisfied, to make Base Rate Revolving Loans to the Borrowers on
behalf of the Revolving Credit Lenders in an aggregate amount outstanding at
any time not to exceed $7,500,000 which the Agent, in its reasonable business
judgment, deems necessary or desirable (1) to preserve or protect the
Collateral, or any portion thereof, (2) to enhance the likelihood of, or
maximize the amount of, repayment of the Loans and other Obligations, or (3) to
pay any other amount chargeable to the Borrowers pursuant to the terms of this
Agreement, including costs, fees and expenses as described in Section 13.7
(any of such advances are herein referred to as “Agent Advances”); provided,
that (x) in no event shall the Aggregate Revolver Outstandings at any time
exceed the aggregate Revolving Credit Commitments and (y) the Majority
Lenders may at any time revoke the Agent’s authorization to make Agent
Advances.  Any such revocation must be in
writing and shall become effective prospectively upon the Agent’s receipt
thereof.

 6
 

 

(ii)                                  Agent Advances shall
be secured by the Agent’s Liens in and to the Collateral and shall constitute
Base Rate Revolving Loans and Obligations hereunder.

1.3                                 Initial
Term Loan.

(a)                            Amount of Initial Term
Loan.  Subject to Section 1.1, each
Term Lender severally agrees to make a term loan (any such term loan being
referred to as an “Initial Lender Term Loan” and such term loans being
referred to collectively as the “Initial Term Loan”) to the Borrowers on
the Closing Date, upon the satisfaction of the conditions precedent set forth
in Article 8, in an amount equal to such Term Lender’s Pro Rata Share of
$18,071,425.  The Initial Term Loan shall
initially be a LIBOR Rate Loan.

(b)                           Making of Term Loan.  Subject to Section 1.1, each Initial Lender
Term Loan shall be made available by each Term Lender to the Agent in same day
funds, to the Agent’s designated account, not later than 12:00 noon (Los
Angeles time) on the Closing Date. 
Subject to Section 1.1, after the Agent’s receipt of the proceeds of
such Initial Term Loan, upon satisfaction of the conditions precedent set forth
in Article 8, the Agent shall make the proceeds of such Initial Term
Loan available to the Borrowers on such date by transferring same day funds
equal to the proceeds of such Initial Term Loan received by the Agent to the
Borrowers’ Designated Account or as the Borrowers shall otherwise instruct in
writing.

(c)                            Term Loan Notes.  At the request of any Term Lender, the
Borrowers shall execute and deliver to Agent on behalf of each Term Lender, on
the Closing Date, a promissory note, substantially in the form of Exhibit
A-2 attached hereto and made a part hereof (such promissory notes, together
with any new notes issued pursuant to Section 11.2 upon the assignment
of any portion of any Lender Term Loan, being hereinafter referred to
collectively as the “Initial Term Loan Notes” and each of such
promissory notes being hereinafter referred to individually as an “Initial
Term Loan Note”).  The Initial Term
Loan Notes, if any, shall evidence the Initial Lender Term Loan of each Term
Lender in an original principal amount equal to that Term Lender’s Pro Rata
Share of $18,071,425 and with other appropriate insertions.  Each Initial Term Loan Note, if any, shall be
dated the Closing Date and shall mature on the Stated Termination Date.  Each payment shall be payable to the Agent
for the account of the applicable Term Lender. 
The Initial Term Loan shall be payable in full on the earlier of (x) the
date on which this Agreement is terminated for any reason and (y) the date the Revolving Credit Commitments are
terminated or have expired.  Payment or
prepayment of the Initial Term Loan may not be reborrowed.

1.4                                 Letters
of Credit.

(a)                            Agreement to Issue or
Cause to Issue.  Subject to the terms
and conditions of this Agreement, the Agent agrees (i) to cause the Letter of
Credit Issuer to issue for the account of a Borrower one or more
commercial/documentary 

 7
 

 

and standby letters of credit (“Letter of Credit”) and/or (ii)
to provide credit support or other enhancement to a Letter of Credit Issuer
acceptable to the Agent, which issues a Letter of Credit for the account of a
Borrower (any such credit support or enhancement being herein referred to as a “Credit
Support”) from time to time during the term of this Agreement.

(b)                           Amounts; Outside
Expiration Date.  The Agent shall not
have any obligation to issue or cause to be issued any Letter of Credit or to
provide Credit Support for any Letter of Credit at any time if: (i) the maximum
face amount of the requested Letter of Credit is greater than the Unused Letter
of Credit Subfacility at such time; (ii) the maximum undrawn amount of the
requested Letter of Credit and all commissions, fees, and charges due from the
Borrowers in connection with the opening thereof would exceed the Availability
at such time or (iii) such Letter of Credit has an expiration date less
than 30 days prior to the Stated Termination Date or more than 12 months from
the date of issuance for standby letters of credit and 180 days for documentary
letters of credit.  With respect to any
Letter of Credit which contains any “evergreen” or automatic renewal provision,
each Lender shall be deemed to have consented to any such extension or renewal
unless any Revolving Credit Lender shall have provided to the Agent written
notice that it declines to consent to any such extension or renewal at least
thirty (30) days prior to the date on which the Letter of Credit Issuer is entitled
to decline to extend or renew the Letter of Credit.  If all of the requirements of this Section
1.4 are met and no Default or Event of Default has occurred and is
continuing, no Lender shall decline to consent to any such extension or
renewal.

(c)                            Other Conditions.  In addition to conditions precedent contained
in Article 8, the obligation of the Agent to cause to be issued any
Letter of Credit or to provide Credit Support for any Letter of Credit is
subject to the following conditions precedent having been satisfied in a manner
reasonably satisfactory to the Agent:

(i)                                     The applicable
Borrower shall have delivered to the Letter of Credit Issuer, at such times and
in such manner as such Letter of Credit Issuer may prescribe, an application in
form and substance satisfactory to such Letter of Credit Issuer and reasonably
satisfactory to the Agent for the issuance of the Letter of Credit and such
other documents as may be required pursuant to the terms thereof, and the form,
terms and purpose of the proposed Letter of Credit shall be reasonably
satisfactory to the Agent and the Letter of Credit Issuer; and

(ii)                                  As of the date of
issuance, no order of any court, arbitrator or Governmental Authority shall
purport by its terms to enjoin or restrain money center banks generally from
issuing letters of credit of the type and in the amount of the proposed Letter
of Credit, and no law, rule or regulation applicable to money center banks
generally and no request or directive (whether or not having the force of law)
from any Governmental Authority with jurisdiction over money center banks
generally shall prohibit, or request that the proposed Letter of Credit Issuer
refrain from, the issuance of letters of credit generally or the issuance of
such Letters of Credit.

 8
 

 

(d)                           Issuance of Letters of
Credit.

(i)                                     Request for
Issuance.  A Borrower must notify the
Agent of a requested Letter of Credit at least three (3) Business Days prior to
the proposed issuance date.  Such notice
shall be irrevocable and must specify the original face amount of the Letter of
Credit requested, the Business Day of issuance of such requested Letter of
Credit, whether such Letter of Credit may be drawn in a single or in partial
draws, the Business Day on which the requested Letter of Credit is to expire,
the purpose for which such Letter of Credit is to be issued, and the
beneficiary of the requested Letter of Credit. 
The Borrower shall attach to such notice the proposed form of the Letter
of Credit.

(ii)                                  Responsibilities
of the Agent; Issuance.  As of the
Business Day immediately preceding the requested issuance date of the Letter of
Credit, the Agent shall determine the amount of the applicable Unused Letter of
Credit Subfacility and the Availability. 
If (i) the face amount of the requested Letter of Credit is less
than the Unused Letter of Credit Subfacility and (ii) the amount of such
requested Letter of Credit and all commissions, fees, and charges due from the
Borrower in connection with the opening thereof would not exceed the
Availability, the Agent shall cause the Letter of Credit Issuer to issue the
requested Letter of Credit on the requested issuance date so long as the other
conditions hereof are met.

(iii)                               No Extensions or
Amendment.  The Agent shall not be
obligated to cause the Letter of Credit Issuer to extend or amend any Letter of
Credit issued pursuant hereto unless the requirements of this Section 1.4
are met as though a new Letter of Credit were being requested and issued.

(e)                            Payments Pursuant to
Letters of Credit.  FMC agrees to
reimburse immediately the Letter of Credit Issuer for any draw under any Letter
of Credit issued for its benefit and the Agent for the account of the Revolving
Credit Lenders upon any payment pursuant to any Credit Support, and to pay the
Letter of Credit Issuer the amount of all other charges and fees payable to the
Letter of Credit Issuer in connection with any Letter of Credit immediately
when due, irrespective of any claim, setoff, defense or other right which any
Borrower may have at any time against the Letter of Credit Issuer or any other
Person.  Each drawing under any Letter of
Credit shall constitute a request by the applicable Borrower to the Agent for a
Borrowing of a Base Rate Revolving Loan in the amount of such drawing.  The Funding Date with respect to such
borrowing shall be the date of such drawing.

 9
 

 

(f)                              Indemnification;
Exoneration; Power of Attorney.

(i)                                     Indemnification.  In addition to amounts payable as elsewhere
provided in this Section 1.4, each of FMC and Fleetwood agrees to
protect, indemnify, pay and save the Lenders and the Agent harmless from and
against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys’ fees) which any Lender or
the Agent (other than a Lender in its capacity as Letter of Credit Issuer) may
incur or be subject to as a consequence, direct or indirect, of the issuance of
any Letter of Credit or the provision of any Credit Support or enhancement in
connection therewith.  The Borrowers’
obligations under this Section shall survive payment of all other Obligations.

(ii)                                  Assumption of Risk
by the Borrowers.  As among the
Borrowers, the Lenders, and the Agent but subject to subsection (iv) below, the
Borrowers assume all risks of the acts and omissions of, or misuse of any of
the Letters of Credit by, the respective beneficiaries of such Letters of
Credit.  In furtherance and not in
limitation of the foregoing, subject to subsection (iv) below, the
Lenders and the Agent shall not be responsible for:  (A) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any Person
in connection with the application for and issuance of and presentation of
drafts with respect to any of the Letters of Credit, even if it should prove to
be in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (B) the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (C) the failure of the
beneficiary of any Letter of Credit to comply duly with conditions required in
order to draw upon such Letter of Credit; (D) errors, omissions, interruptions,
or delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (E) errors in
interpretation of technical terms; (F) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any Letter
of Credit or of the proceeds thereof; (G) the misapplication by the beneficiary
of any Letter of Credit of the proceeds of any drawing under such Letter of
Credit; (H) any consequences arising from causes beyond the control of the
Lenders or the Agent, including any act or omission, whether rightful or
wrongful, of any present or future de  jure or de  facto
Governmental Authority; or (I) the Letter of Credit Issuer’s honor of a draw
for which the draw or any certificate fails to comply in any respect with the
terms of the Letter of Credit.  None of
the foregoing shall affect, impair or prevent the vesting of any rights or
powers of the Agent or any Lender under this Section 1.4(f).

(iii)                               Exoneration.  Without limiting the foregoing, no action or
omission whatsoever by the Agent or any Lender with respect to any Letter of
Credit issued hereunder (excluding any Lender in its capacity as a Letter of
Credit Issuer) shall result in any liability of the Agent and/or Lender to any
Borrower, or relieve any Borrower of any of its obligations hereunder to any
such Person.

 10
 

 

(iv)                              Rights Against Letter
of Credit Issuer.  Nothing contained
in this Agreement is intended to limit a Borrower’s rights, if any, with
respect to the Letter of Credit Issuer which arise as a result of the letter of
credit application and related documents executed by and between such Borrower
and the Letter of Credit.

(v)                                 Account Party.  Each Borrower hereby authorizes and directs
any Letter of Credit Issuer to name such Borrower as the “Account Party”
therein and to deliver to the Agent all instruments, documents and other
writings and property received by the Letter of Credit Issuer pursuant to the
Letter of Credit, and to accept and rely upon the Agent’s instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit or the application therefor.

(g)                           Supporting Letter of
Credit; Cash Collateral.  If,
notwithstanding the provisions of Section 1.4(b) and Section 10.1,
any Letter of Credit or Credit Support is outstanding upon the termination of
this Agreement, then upon such termination FMC shall deposit with the Agent,
for the ratable benefit of the Agent and the Revolving Credit Lenders, with
respect to each Letter of Credit or Credit Support then outstanding, cash (“Cash
Collateral”) or a standby letter of credit (a “Supporting Letter of
Credit”) in form and substance satisfactory to the Agent, issued by an
issuer satisfactory to the Agent, in each case in an amount equal to the
greatest amount for which such Letter of Credit or such Credit Support may be
drawn plus any fees and expenses associated with such Letter of Credit or such
Credit Support, under which Supporting Letter of Credit the Agent is entitled
to draw amounts necessary to reimburse the Agent and the Revolving Credit
Lenders for payments to be made by the Agent and the Revolving Credit Lenders
under such Letter of Credit or Credit Support and any fees and expenses
associated with such Letter of Credit or Credit Support.  Such Supporting Letter of Credit and/or Cash
Collateral shall be held by the Agent, for the ratable benefit of the Agent and
the Revolving Credit Lenders, as security for, and to provide for the payment
of, the aggregate undrawn amount of such Letters of Credit or such Credit
Support remaining outstanding.

1.5                                 Bank
Products.  A Borrower may request and
the Agent may, in its sole and absolute discretion, arrange for a Borrower to
obtain from the Bank or the Bank’s Affiliates Bank Products although no
Borrower is required to do so.  If Bank
Products so requested by a Borrower are provided by an Affiliate of the Bank,
each Borrower agrees to indemnify and hold the Agent, the Bank and the Lenders
harmless from any and all costs and obligations now or hereafter incurred by
the Agent, the Bank or any of the Lenders which arise from any indemnity given
by the Agent to its Affiliates related to such Bank Products; provided, however,
nothing contained herein is intended to limit the Borrower’s rights, with
respect to the Bank or its Affiliates, if any, which arise as a result of the
execution of documents by and between such Borrower and the Bank which relate
to Bank Products.  The agreement
contained in this Section 

 11
 

 

shall survive termination of this Agreement.  Each Borrower acknowledges and agrees that
the obtaining of Bank Products from the Bank or the Bank’s Affiliates (a) is in
the sole and absolute discretion of the Bank or the Bank’s Affiliates, and (b)
is subject to all rules and regulations of the Bank or the Bank’s Affiliates.

1.6                                 Joint
and Several Obligations; Contribution Rights.

(a)                            All Obligations of FMC
shall be the joint and several Obligations of the Borrowers, regardless of
which Borrower actually receives any Loans or other extensions of credit under
the Loan Documents, the amount received by any Borrower or the manner in which
any Borrower, the Agent or any Lender accounts for such Loans and other
extensions of credit.

(b)                           To the extent that any
Borrower is a guarantor or a surety as a result of the joint and several
obligations hereunder, such Obligations and the Liens securing such Obligations
shall not be released or impaired by any action or inaction on the part of the
Agent or any Lender which would otherwise constitute the release of a
surety.  Without limiting the generality
of the foregoing, the liability of any Borrower under this Agreement shall not
be affected or impaired in any manner by, (i) the failure of any Person to
become or remain a Borrower or guarantor or the failure of the Agent or any
Lender to preserve, protect or enforce any right to require any Person to
become or remain a Borrower or guarantor, (ii) any taking, failure to
take, failure to create, perfect or ensure the priority of, or exchange,
release or termination or lapse of any Lien securing any Obligations, or any
taking, failure to take, release or amendment or waiver of or consent to
departure from any other guaranty of, any of the Obligations, (iii) any manner
or order of sale or other enforcement of any Lien securing any of the
Obligations or any manner or order of application of the proceeds of any such
Lien to the payment of the Obligations or any failure to enforce any Lien or to
apply any proceeds thereof, (iv) any furnishing, exchange, substitution or
release of any collateral securing the Obligations, or any failure to perfect
any Lien in any of the collateral securing the Obligations, or (v) any
other circumstance which might otherwise constitute a defense (except the final
payment in full) available to, or a discharge of, a surety or guarantor.

(c)                            To the extent that any
Borrower is a guarantor or a surety as a result of the joint and several
obligations hereunder, the liability of each such Borrower under this Agreement
shall remain valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than
final payment in full of the Obligations), including the occurrence of any of
the following, whether or not such Borrower shall have had notice or knowledge
of any of them:  (i) any failure or
omission to assert or enforce or agreement or election not to assert or
enforce, or the stay or enjoining, by order of court, by operation of law or
otherwise, of the exercise or enforcement of, any claim or demand or any right,
power or remedy (whether arising under the Loan Documents, at law, in equity or
otherwise) with respect to the Obligations or any agreement relating thereto,
or with respect to any other guaranty of or security for 

 12
 

 

the payment of the Obligations; (ii) any rescission, waiver,
amendment or modification of, or any consent to departure from, any of the
terms or provisions (including provisions relating to Events of Default) of the
Credit Agreement, any of the other Loan Documents or any agreement or
instrument executed pursuant thereto, or of any other guaranty or security for
the Obligations, in each case whether or not in accordance with the terms of
this Agreement, such Loan Document or any agreement relating to such other
guaranty or security; (iii) the Obligations, or any agreement relating
thereto, at any time being found to be illegal, invalid or unenforceable in any
respect; (iv) the application of payments received from any source to the
payment of any liability other than the Obligations, even though the Lenders
might have elected to apply such payment to any part or all of the Obligations;
(v) any consent by any Lender or the Agent to the change, reorganization
or termination of the corporate structure or existence of any other Borrower,
or any other Person and to any corresponding restructuring of the Obligations;
(vi) any failure to perfect or continue perfection of a security interest
in any collateral which secures any of the Obligations; (vii) any defenses
(except the defense of final payment in full), set-offs or counterclaims which
any Borrower, any guarantor or any other Person may allege or assert against
the Agent or any Lender in respect of the Obligations, including, for example,
failure of consideration, breach of warranty, statute of frauds, statute of
limitations, accord and satisfaction and usury; and (viii) any other act
or thing or omission, or delay to do any other act or thing, which may or might
in any manner or to any extent vary the risk of any Borrower as an obligor in
respect of the Obligations.

(d)                           To the extent that any
Borrower is a guarantor or a surety as a result of the joint and several
obligations hereunder, to the maximum extent permitted by law, each such
Borrower hereby waives and agrees not to assert or take advantage of:  (i) any defense now existing or
hereafter arising based upon any legal disability or other defense of any other
Borrower or any guarantor or other Person, or by reason of the cessation or
limitation of the liability of any other Borrower or any guarantor or other
Person from any cause other than full payment and performance of all
obligations due under this Agreement or any of the other Loan Documents;
(ii) any defense based upon any lack of authority of the officers,
directors, partners or agents acting or purporting to act on behalf of any
other Borrower or any guarantor or other Person, or any defect in the formation
of any other Borrower or any guarantor or other Person; (iii) the
unenforceability or invalidity of any security or guaranty or the lack of
perfection or continuing perfection, or failure of priority of any security for
the Obligations; (iv) any and all rights and defenses arising out of an
election of remedies by the Agent or any Lender, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security for an
Obligation, has destroyed such Borrower’s rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the
California Code of Civil Procedure or otherwise; (v) any defense based
upon any failure to disclose to such Borrower any information concerning the
financial condition of any other Borrower or any guarantor or other Person or
any other circumstances bearing on the ability of any other Borrower or any
guarantor or other Person to pay and perform all obligations due under this
Agreement or any 

 13
 

 

of the other Loan Documents; (vi) any failure by the Agent or any
Lender to give notice to any Borrower or any guarantor or other Person of the
sale or other disposition of security, and any defect in notice given by the
Agent or any Lender in connection with any such sale or disposition of
security; (vii) any failure of the Agent or any Lender to comply with
applicable laws in connection with the sale or disposition of security,
including, without limitation, any failure by the Lender to conduct a
commercially reasonable sale or other disposition of such security;
(viii) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in any
other respects more burdensome than that of a principal, or that reduces a
surety’s or guarantor’s obligations in proportion to the principal’s
obligation; (ix) any use of cash collateral under Section 363 of the
Bankruptcy Code; (x) any defense based upon an election by the Agent or
any Lender, in any proceeding instituted under the Bankruptcy Code, of the
application of Section 1111(b)(2) of the Bankruptcy Code or any successor
statute; (xi) any defense based upon any borrowing or any grant of a
security interest under Section 364 of the Bankruptcy Code; (xii) any
right of subrogation, any right to enforce any remedy which the Agent or any Lender
may have against any other Borrower or any guarantor or other Person and any
right to participate in, or benefit from, any security now or hereafter held by
the Agent or any Lender for the Obligations; (xiii) presentment, demand,
protest and notice of any kind, including notice of acceptance of this
Agreement and of the existence, creation or incurring of new or additional
Obligations; (xiv) the benefit of any statute of limitations affecting the
liability of any other Borrower or any guarantor or other Person, enforcement
of this Agreement or any other Loan Documents, the liability of any Borrower
hereunder or the enforcement hereof; (xv) all notices of intention to
accelerate and/or notice of acceleration of the Obligations; (xvi) relief from
any applicable valuation or appraisement laws; (xvii) any other action by
the Agent or any Lender, whether authorized by this Agreement or otherwise, or
any omission by the Agent or any Lender or other failure of the Agent or any
Lender to pursue, or delay in pursuing, any other remedy in its power; (xviii)
any and all claims and/or rights of counterclaim, recoupment, setoff or offset;
and (xix) any defense based upon the application of the proceeds of a Loan
for purposes other than the purposes represented by the Borrowers or intended
or understood by the Agent or any Lender or any Borrower.  Each Borrower agrees that the payment and
performance of all Obligations or any part thereof or other act which tolls any
statute of limitations applicable to this Agreement or the other Loan Documents
shall similarly operate to toll the statute of limitations applicable to such
Borrower’s liability hereunder.  Without
limiting the generality of the foregoing or any other provision hereof, each
Borrower further waives any and all rights and defenses that such Borrower may
have because the debt of the Borrowers is secured by real property of other
Borrowers; this means, among other things, that:  (1) the Lenders may collect from such Borrower
without first foreclosing on any real or personal property collateral pledged
by any other Borrower, (2) if the Agent or any Lender forecloses on any
real property collateral pledged by any other Borrower, then (A) the
amount of the debt may be reduced only by the price for which that collateral
is sold at the foreclosure sale, even if the collateral is worth 

 14
 

 

more than the sale price, and (B) the Agent or any Lender may
collect from such Borrower even if the Agent or any Lender, by foreclosing on
the real property collateral, has destroyed any right such Borrower may have to
collect from any other Borrower.  The
foregoing sentence is an unconditional and irrevocable waiver of any rights and
defenses each Borrower may have because the Obligations are secured by real
property of any other Borrower.  Each
Borrower acknowledges and agrees that California Civil Code Section 2856
authorizes and validates waivers of a guarantor’s rights of subrogation and
reimbursement and waivers of certain other rights and defenses available to a
guarantor under California law.  Based on
the preceding sentence and without limiting the generality of the foregoing
waivers contained in this subparagraph or any other provision hereof, each
Borrower expressly waives to the extent permitted by law any and all rights and
defenses (except the defense of indefeasible final payment in full), including
without limitation any rights of subrogation, reimbursement, indemnification
and contribution (except contribution pursuant to this Agreement), which might
otherwise be available to such Borrower under California Civil Code Sections
2787 to 2855, inclusive, 2899 and 3433 and under California Code of Civil
Procedure Sections 580a, 580b, 580d and 726 (or any of such sections), or any
other jurisdiction to the extent the same are applicable to this Agreement or
the agreements, covenants or obligations of any Borrower hereunder.

(e)                            Each Borrower is fully
aware of the financial condition of the Borrowers, and is executing and
delivering this Agreement based solely upon such Borrower’s own independent
investigation of all matters pertinent hereto and is not relying in any manner
upon any representation or statement by the Agent or any Lender.  Each Borrower hereby assumes full
responsibility for obtaining any additional information concerning the
financial condition of the Borrowers or any other guarantor or their respective
properties, financial condition and prospects and any other matter pertinent
hereto as such Borrower may desire, and such Borrower is not relying upon or
expecting the Agent or any Lender to furnish to such Borrower any information
now or hereafter in the possession of the Agent or any Lender concerning the
same or any other matter.  By executing
this Agreement, each Borrower knowingly accepts the full range of risks encompassed
within a contract of this type, which risks such Borrower acknowledges.  No Borrower shall have the right to require
the Agent or any Lender to obtain or disclose any information with respect to
the Obligations, the financial condition or prospects of any Borrower, the
ability of any Borrower to pay or perform the Obligations, the existence,
perfection, priority or enforceability of any collateral security for any or
all of the Obligations, the existence or enforceability of any other guaranties
of all or any part of the Obligations, any action or non-action on the part of
the Agent or any Lender, any Borrower or any other Person, or any other event,
occurrence, condition or circumstance whatsoever.

(f)                              To the extent that any
Borrower is a guarantor or a surety as a result of the joint and several
obligations hereunder, the Obligations of each such Borrower shall be limited
in amount to an amount not to exceed the maximum amount of such obligations and
liabilities that can be made or assumed by such 

 15
 

 

Borrower without rendering such obligation or liability void or
voidable under applicable laws relating to fraudulent conveyance, fraudulent
transfer or similar laws affecting the rights of creditors generally, in each
case giving effect to all liabilities of such Borrower other than any
liabilities in respect of intercompany indebtedness to the extent that it would
be discharged in the amount paid by such Borrower hereunder and giving effect
to all rights of subrogation, contribution, reimbursement, indemnity or similar
rights pursuant to applicable law or any agreement (the “Maximum Liability”).

(g)                                 Each
Borrower hereby agrees that to the extent that a Borrower makes any payment on
behalf of FMC, such Borrower shall be entitled to seek and receive contribution
and indemnification from and to be reimbursed by each other Borrower in an
amount equal to a fraction of such payment, the numerator of which is the
Maximum Liability of the Borrower making the payment and the denominator of
which is the Maximum Liability of all Borrowers as of the date of
determination.  Each Borrower’s right of
contribution shall be subject to the terms and conditions of Section 1.6(h).  The provisions of this Section 1.6(g)(i)
shall in no respect limit the obligations and liabilities of any Borrower to
the Lenders and each Borrower shall remain liable to the Lenders for the full
amount of its liabilities hereunder.

(h)                                 No
Borrower shall be entitled to be subrogated to any of the rights of the Agent
or any Lender against or any other Borrower or any collateral security or
guarantee or right to offset held by the Agent or any Lender for the payment of
the Obligations, nor shall any Borrower seek or be entitled to seek any
contribution or reimbursement from or any other Borrower in respect of payments
made by such Borrower hereunder, until all amounts owing to the Agent or any
Lender on account of the Obligations are paid in full, no Letter of Credit
shall be outstanding and the Revolving Credit Commitments are terminated or
have expired.  If any amount shall be
paid to any Borrower on account of such subrogation rights at any time not
permitted hereunder, such amount shall be held by such Borrower in trust for
the Agent and the Lenders, segregated from other funds of such Borrower, and
shall, forthwith upon receipt, be turned over to the Agent in the exact form
received (duly endorsed to the Agent, if required), to be applied against the
Obligations, whether matured or unmatured, in such order as the Agent may
determine.

1.7                                 Borrowing
Agency Provisions.

(a)                            At the request of, and
solely as an accommodation to, Borrowers, the Lenders have agreed to make the
Loans to, and to issue Letters of Credit for the Borrowers on a joint and
several basis as co-borrowers.  In order to
facilitate the co-borrowing arrangement, each Borrower hereby irrevocably
designates Holdings to be its agent and attorney-in-fact for purposes of the
Loan Documents, and each of them hereby irrevocably authorizes such agent in
such capacity to take such actions on behalf of the applicable Borrower and to
exercise such powers under this Agreement and the other Loan Documents on such
Borrower’s behalf as may otherwise be exercised by such Borrower, together with
such powers as are 

 16
 

 

incidental thereto, including without limitation to borrow Loans, to
execute and deliver Notices of Borrowing, Notices of Conversion/Continuation,
requests for Letters of Credit, Borrowing Base Certificates and such other
documents, instruments and certificates required by the Loan Documents in
connection with any Borrowing or repayment of the Loans, to borrow, repay,
reborrow, convert and continue Loans and to receive proceeds of Loans and to
give all other notices and consents hereunder. 
Each Borrower further irrevocably authorizes the Agent to act on all
such documents, instruments and certificates delivered by such agents and
attorneys-in-fact, and to pay over and credit the proceeds of any Loans so
requested to the Designated Account of Holdings and hereby accepts the
appointment to act as agent and attorney in fact for the Borrowers.  The Agent and each Lender shall be entitled
to rely absolutely on the appointment and authorization of Holdings to act on
behalf of the Borrowers with respect to all matters relating to this Agreement
and the other Loan Documents, whether or not any provision of this Agreement or
any other Loan Documents specifically provides that action may or shall be
taken by Holdings on behalf of the Borrowers. 
The Agent and the Lenders may give all notices to any Borrower to
Holdings.  Each Borrower agrees that each
notice, election, representation and warranty, covenant, agreement and
undertaking made on its behalf by Holdings shall be deemed for all purposes to
have been made by such Borrower and shall be binding upon and enforceable
against such Borrower to the same extent as if the same had been made directly
by such Borrower.

(b)                           All Borrowers acknowledge
and agree that the Borrowers are engaged in an integrated operation that
requires financing on the basis of credit availability to each Borrower, that
the co-borrowing arrangement has been established at the request of the
Borrowers, and that each Borrower expects to derive, directly or indirectly,
benefit from such credit availability to the other Borrowers.  Neither the Agent nor the Letter of Credit
Issuer nor any Lender shall incur any liability to Borrowers or any other Loan
Party as a result of the co-borrowing arrangement established by this Agreement
and shall not have any liability or responsibility to the Borrowers to inquire
into the allocation, apportionment or use of the proceeds of any Loans or
extensions of credit hereunder.  To
induce the Agent, the Letter of Credit Issuer and the Lenders to establish this
co-borrowing arrangement and in consideration thereof, each Borrower hereby
indemnifies the Agent, the Letter of Credit Issuer and the Lenders, and their
respective successors and assigns, and agrees to hold each of them harmless
from any and all liabilities, expenses, losses, damages and claims asserted
against them by any Person arising from or incurred by reason of the handling
of the financing arrangements of the Borrowers as provided in this Agreement,
any reliance by the Agent, the Letter of Credit Issuer or any Lender on any
document, request or instruction given by the agents designated by the
Borrowers herein to act on their behalf or any other action taken by the Agent,
the Letter of Credit Issuer or the Lenders with respect to the co-borrowing
arrangement; provided, however, that no Borrower shall have an
obligation to indemnify any of the Agent, the Letter of Credit Issuer or any
Lender under this Section 1.7 with respect to any liabilities finally
determined by a court of 

 17
 

 

competent jurisdiction to have resulted primarily from the gross negligence
or willful misconduct of such indemnified party.  The agreements of the Borrowers contained in
this Section 1.7 shall survive payment of all other Obligations.

1.8                                 Senior
Indebtedness.  All Obligations of
Fleetwood under this Agreement and the other Loan Documents, and all rights of
contribution, indemnity, subrogation and reimbursement relating to the
Obligations of any Loan Party with respect to Fleetwood, are “Senior
Indebtedness” under the 2003 Subordinated Debentures.  All Obligations of Fleetwood under this
Agreement and the other Loan Documents to the extent such Obligations are (A)
liabilities of Fleetwood for borrowed money or under any reimbursement
obligation relating to a letter of credit, surety bond or similar instrument,
or (B) liabilities of Fleetwood evidenced by a bond, note, debenture or similar
instrument, or (C) liabilities of others described in the preceding clauses (A)
and (B) that Fleetwood has guaranteed or that are otherwise its legal
liability, or (D) deferrals renewals, extensions or refundings of any liability
of the types referred to in clauses (A), (B) and (C) above, are “Senior
Indebtedness” under the 1998 Subordinated Debentures and Fleetwood’s guaranty
of the Trust Securities.

1.9                                 Delayed
Draw Term Loan.

(a)                                  (i)                                           Amounts.  Subject to the satisfaction of the conditions
precedent set forth in Article 8, each Term Lender severally, but
not jointly, agrees, upon a Borrower’s request on any one single occasion on a
Business Day during the period from the Closing Date to the Facility Increase
Termination Date, to make a term loan (any such term loan being referred to as
a “Delayed Draw Lender Term Loan” and such term loans being referred to
collectively as the “Delayed Draw Term Loan”) to FMC in an aggregate
amount not to exceed such Lender’s Pro Rata Share of the Delayed Draw
Commitment Aggregate Availability.

(ii)                                  Delayed Draw Term
Loan Notes.  At the request of any
Term Lender, FMC shall execute and deliver to Agent on behalf of each Term
Lender, on the Delayed Draw Date, a promissory note, substantially in the form
of Exhibit A-3 attached hereto and made a part hereof (such promissory
notes, together with any new notes issued pursuant to Section 11.2 upon
the assignment of any portion of any Lender Term Loan, being hereinafter
referred to collectively as the “Delayed Draw Term Loan Notes” and each
of such promissory notes being hereinafter referred to individually as an “Delayed
Draw Term Loan Note”).  The Delayed
Draw Term Loan Notes, if any, shall evidence the Delayed Draw Lender Term Loan
of each Term Lender in an original principal amount equal to that Term Lender’s
Pro Rata Share of the original principal amount of the Delayed Draw Term Loan
on the Delayed Draw Date and with other appropriate insertions.  Each Delayed Draw Term Loan Note, if any,
shall be dated the Delayed Draw Date and shall mature on the Stated Termination
Date.  Each payment shall be payable to
the Agent for the account of the applicable Term Lender.  The Delayed Draw Term Loan shall be payable
in full on the earlier of (x) the date on which this Agreement is terminated
for any reason and (y) the date the
Revolving Credit Commitments are terminated or have expired.  Payment or prepayment of the Delayed Draw
Term Loan may not be reborrowed.

 18
 

 

(b)                           Procedure for Borrowing.

(i)                                     A single Borrowing
shall be made upon a Borrower’s irrevocable written notice delivered to the
Agent in the form of a Notice of Borrowing, which must be received by the Agent
prior to (i) 10:00 a.m. (Los Angeles time) three Business Days prior to the
requested Delayed Draw Date, in the case of LIBOR Rate Loans and (ii) 10:00
a.m. (Los Angeles time) on the requested Funding Date, in the case of Base Rate
Loans, specifying:

(1)                                  the amount of the
Borrowing under the Delayed Draw Term Loan;

(2)                                  the requested Delayed
Draw Date, which must be a Business Day;

(3)                                  whether the Delayed
Draw Term Loan requested is to be a Base Rate Term Loan or LIBOR Rate Loan (and
if not specified, it shall be deemed a request for a Base Rate Term Loan); and

(4)                                  the duration of the
Interest Period for LIBOR Rate Loans (and if not specified, it shall be deemed
a request for an Interest Period of one month);

provided,
however, that if the Delayed Draw Date is within three Business Days of
the Closing Date, such Borrowings will consist of Base Rate Revolving Loans
only.

(ii)                                  The Borrowers shall
have no right to request a LIBOR Rate Loan while a Default or Event of Default
has occurred and is continuing.

(c)                            Reliance upon Authority.  Prior to the Closing Date, the Borrowers
shall deliver to the Agent a notice setting forth the Designated Accounts to
which the Agent is authorized to transfer the proceeds of the Delayed Draw Term
Loan requested hereunder by the Borrowers. 
The Borrowers may designate a replacement account from time to time by
written notice.  All such Designated
Accounts must be reasonably satisfactory to the Agent.  The Agent is entitled to rely conclusively on
any person’s request for the Delayed Draw Term Loan on behalf of FMC, so long
as the proceeds thereof are to be transferred to the applicable Designated
Account.  The Agent has no duty to verify
the identity of any individual representing himself or herself as a person
authorized by FMC to make such requests on its behalf.

(d)                           No Liability.  The Agent shall not incur any liability to
the Borrowers as a result of acting upon any notice referred to in Sections
1.9(b) and (c), which the Agent believes in good faith to have been
given by an officer or 

 19
 

 

other person duly authorized by FMC to request the Delayed Draw Term
Loan on its behalf.  The crediting of the
Delayed Draw Term Loan to the applicable Designated Account conclusively
establishes the obligation of FMC to repay the Delayed Draw Term Loan as
provided herein.

(e)                            Notice Irrevocable.  Any Notice of Borrowing (or telephonic notice
in lieu thereof) made pursuant to Section 1.9(b) shall be
irrevocable.  FMC shall be bound to
borrow the funds requested therein in accordance therewith.

(f)                              Making of the Delayed
Draw Term Loan.  Promptly after
receipt of a Notice of Borrowing or telephonic notice in lieu thereof, the
Agent shall notify the Term Loan Lenders by telecopy, telephone or e-mail of
the requested Borrowing.  Each Term Loan
Lender shall transfer its Pro Rata Share of the requested Borrowing to the
Agent in immediately available funds, to the account from time to time
designated by the Agent, not later than 12:00 noon (Los Angeles time) on the
applicable Delayed Draw Date.  After the
Agent’s receipt of all proceeds of the Delayed Draw Term Loan, the Agent shall
make the proceeds of the Delayed Draw Term Loan available to the Borrowers on
the Delayed Draw Date by transferring same day funds to the Designated Account
of the Borrowers; provided, however, that the amount of the
Delayed Draw Term Loan so made on the Delayed Draw Date shall not exceed its
Pro Rata Share of the Delayed Draw Commitment Aggregate Availability on such
date.

ARTICLE 2

INTEREST AND FEES

2.1                                 Interest.

(a)                            Interest Rates.  All outstanding Obligations shall bear
interest on the unpaid principal amount thereof (including, to the extent
permitted by law, on interest thereon not paid when due) from the date made
until paid in full in cash at a rate determined by reference to the Base Rate
or the LIBOR Rate plus the Applicable Margin, but not to exceed the Maximum
Rate.  If at any time Loans are
outstanding with respect to which a Borrower has not delivered to the Agent a
notice specifying the basis for determining the interest rate applicable thereto
in accordance herewith, those Loans shall bear interest at a rate determined by
reference to the Base Rate until notice to the contrary has been given to the
Agent in accordance with this Agreement and such notice has become
effective.  Except as otherwise provided
herein, the outstanding Obligations shall bear interest as follows:

(i)                                     For each Base Rate
Lender Term Loan at a fluctuating per annum rate equal to the Base Rate plus
the Applicable Margin;

(ii)                                  For all Base Rate
Revolving Loans and other Obligations (other than Base Rate Lender Term Loans
and LIBOR Rate Loans) at a fluctuating per annum rate equal to the Base Rate
plus the Applicable Margin;

 20
 

 

(iii)                               For all LIBOR Lender
Term Loans at a per annum rate equal to the LIBOR Rate plus the
Applicable Margin; and

(iv)                              For all LIBOR Revolving
Loans at a per annum rate equal to the LIBOR Rate plus the Applicable
Margin.

Each change in the Base
Rate shall be reflected in the interest rate applicable to Base Rate Loans as
of the effective date of such change. 
All interest charges shall be computed on the basis of a year of 360
days and actual days elapsed (which results in more interest being paid than if
computed on the basis of a 365-day year). 
The applicable Borrowers shall pay to the Agent, for the ratable benefit
of the applicable Lenders, interest accrued on all Base Rate Loans in arrears
on the first day of each month hereafter and on the Termination Date.  The Borrowers shall pay to the Agent, for the
ratable benefit of Lenders, interest on all LIBOR Rate Loans in arrears on each
LIBOR Interest Payment Date.

(b)                           Default Rate.  If any Default or Event of Default occurs and
is continuing and the Agent or the Majority Lenders in their discretion so
elect, then, from the date that the Agent gives written notice to Holdings of
the Agents’ or the Majority Lenders’ election and so long as such Default or
Event of Default is continuing, all of the Obligations shall bear interest at
the Default Rate applicable thereto; provided that from the date of the
occurrence of an Event of Default under Section 9.1(a) with respect to any Term
Loan Obligation, the Term Loan Obligations shall automatically bear interest at
the Default Rate applicable thereto so long as any such Event of Default is
continuing.

2.2                                 Continuation
and Conversion Elections.

(a)                            The Borrowers may:

(i)                                     elect, as of any
Business Day, in the case of Base Rate Revolving Loans to convert any such Base
Rate Revolving Loans (or any part thereof in an amount not less than
$1,000,000, or that is in an integral multiple of $500,000 in excess thereof)
into LIBOR Rate Loans; or

(ii)                                  elect, as of any
Business Day, in the case of Base Rate Lender Term Loans to convert any such
Base Rate Lender Term Loans (or any part thereof in an amount not less than
$1,000,000, or that is in an integral multiple of $500,000 in excess thereof)
into LIBOR Rate Loans; or

(iii)                               elect, as of the last
day of the applicable Interest Period, to continue any LIBOR Rate Loans having
Interest Periods expiring on such day (or any part thereof in an amount not
less than $1,000,000, or that is in an integral multiple of $500,000 in excess
thereof);

provided,
that if at any time the aggregate amount of LIBOR Rate Loans in respect of any
Borrowing is reduced, by payment, prepayment, or conversion of part thereof to
be less than $1,000,000, such LIBOR Rate Loans shall automatically convert into
Base Rate Loans; provided  further that if the notice shall fail
to specify the duration of the Interest Period, such Interest Period shall be
one month.

 21

 

(b)                           The Borrowers shall deliver
a notice of continuation/conversion (“Notice of Continuation/Conversion”)
to the Agent not later than 10:00 a.m. (Los Angeles time) at least three (3)
Business Days in advance of the Continuation/Conversion Date, if the Loans are
to be converted into or continued as LIBOR Rate Loans and specifying:

(i)                                     the proposed
Continuation/Conversion Date;

(ii)                                  the aggregate amount
of Loans to be converted or renewed;

(iii)                               the type of Loans
resulting from the proposed conversion or continuation; and

(iv)                              the duration of the
requested Interest Period, provided, however, the Borrowers may
not select an Interest Period that ends after the Stated Termination Date.

(c)                            If upon the expiration of
any Interest Period applicable to LIBOR Rate Loans, the Borrowers failed to
select timely a new Interest Period to be applicable to LIBOR Rate Loans or if
any Default or Event of Default then exists, the Borrowers shall be deemed to
have elected to convert such LIBOR Rate Loans into Base Rate Loans effective as
of the expiration date of such Interest Period.

(d)                           The Agent will promptly
notify each Lender of its receipt of a Notice of Continuation/Conversion.  All conversions and continuations shall be
made ratably according to the respective outstanding principal amounts of the
Loans with respect to which the notice was given held by each Lender.

(e)                            There may not be more than
seven (7) different LIBOR Rate Loans in effect hereunder at any time.

2.3                                 Maximum Interest Rate.  In no event shall any interest rate provided
for hereunder exceed the maximum rate legally chargeable by any Lender under
applicable law for such Lender with respect to loans of the type provided for
hereunder (the “Maximum Rate”). 
If, in any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month shall be the
Maximum Rate, and, if in future months, that interest rate would otherwise be
less than the Maximum Rate, then that interest rate shall remain at the Maximum
Rate until such time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been limited by the
Maximum Rate.  In the event that, upon
payment in full of the Obligations, the total amount of interest paid or
accrued under the terms of this Agreement is less than the total amount of
interest which would, but for this Section 2.3, have been paid or
accrued if the interest rate otherwise set forth in this Agreement had at all
times been in effect, then the Borrowers shall, to the extent permitted by
applicable law, pay the Agent, for the account of the Lenders, an amount equal
to the excess of (a) the lesser of (i) the amount of interest which would
have been charged if the Maximum Rate

 22
 

 

had, at all times, been in effect or (ii) the
amount of interest which would have accrued had the interest rate otherwise set
forth in this Agreement, at all times, been in effect over (b) the amount of
interest actually paid or accrued under this Agreement.  If a court of competent jurisdiction
determines that the Agent and/or any Lender has received interest and other
charges hereunder in excess of the Maximum Rate, such excess shall be deemed
received on account of, and shall automatically be applied to reduce, the Obligations
other than interest, in the inverse order of maturity, and if there are no
Obligations outstanding, the Agent and/or such Lender shall refund to the
applicable Borrower(s) such excess.

2.4                                 Closing Fee.  The Borrowers, jointly and severally, agree
to pay the Agent on the Closing Date a closing fee (the “Closing Fee”)
as set forth in the Fee Letter.  The
Borrowers hereby authorize the Agent to charge the Loan Account in an amount
equal to the Closing Fee set forth in such Fee Letter.

2.5                                 Unused
Line Fee.  On the first day of
each month and on the Termination Date the Borrowers, jointly and severally,
agree to pay to the Agent, for the account of the Revolving Credit Lenders, in
accordance with their respective Pro Rata Shares, an unused line fee (the “Unused
Line Fee”) equal to percentage per annum set forth in the definition of
Applicable Margin times the amount by which the Maximum Revolver Amount
exceeded the sum of the average daily outstanding amount of Revolving Loans and
the average daily undrawn face amount of outstanding Letters of Credit, during
the immediately preceding month or shorter period if calculated for the first
month hereafter or on the Termination Date. 
The Unused Line Fee shall be computed on the basis of a 360-day year for
the actual number of days elapsed.  All
principal payments received by the Agent shall be deemed to be credited to the
applicable Borrowers’ Loan Account immediately upon receipt for purposes of
calculating the Unused Line Fee pursuant to this Section 2.5.

2.6                                 Letter of Credit Fee.  FMC agrees to pay to the Agent, for the
account of the Revolving Credit Lenders, in accordance with their respective
Pro Rata Shares, for each Letter of Credit, a fee (the “Letter of Credit Fee”)
equal to the percentage per annum set forth in the definition of Applicable
Margin times the undrawn face amount of each Letter of Credit and to the Agent
for the benefit of the Letter of Credit Issuer a fronting fee of one-eighth of
one percent (0.125%) per annum of the undrawn face amount of each Letter of
Credit, and to the Letter of Credit Issuer, all out-of-pocket costs, fees and
expenses incurred by the Letter of Credit Issuer in connection with the
application for, processing of, issuance of, or amendment to any Letter of
Credit.  The Letter of Credit Fee shall
be payable monthly in arrears on the first day of each month following any
month in which a Letter of Credit is outstanding and on the Termination
Date.  The Letter of Credit Fee shall be
computed on the basis of a 360-day year for the actual number of days elapsed.

2.7                                 [RESERVED].

2.8                                 Substitution
of Property.  The Borrowers may from
time to time provide substitute real property collateral (the “Substituted
Property”) for any real property Collateral; provided that for each
such substitution (a “Property Substitution”) the following conditions
are satisfied with respect to such Property Substitution and the applicable
Substituted Property:

 23
 

 

(a)                            no Default or Event of
Default has occurred and is continuing both before and after giving effect to
such Property Substitution;

(b)                           the Flexibility Conditions
are satisfied as of the date of and both before and immediately after giving
effect to such Property Substitution;

(c)                            the applicable Substituted
Property is free and clear of all Liens other than Liens described in clauses
(a), (b) and (e) of the definition of Permitted Liens;

(d)                           Agent shall have received an
appraisal (in form and substance and by an appraiser reasonably satisfactory to
the Agent) for the applicable Substituted Property (the “Substituted
Property Appraisal”), dated no more than six (6) months prior to the date
of such Property Substitution;

(e)                            the appraised value of the
applicable Substituted Property, as set forth in the Substituted Property
Appraisal shall be equal to or greater than the value, as reasonably determined
by the Agent, of the portion of the Collateral being replaced (the “Replaced
Property”);

(f)                              the Agent shall have
received each of the following:

(i)                                     a fully executed
Mortgage (the “Substituted Property Mortgage”) with respect to each
parcel of the Substituted Property, in substantially the form of the Mortgages
delivered on or prior to the Closing Date, with such modifications thereto as
shall be advisable and are reasonably acceptable to the Agent with respect to
the local jurisdictions in which the Substitute Property is located;

(ii)                                  an ALTA extended
coverage title policy or policies, in form and substance and in amounts and
with such endorsements as are reasonably acceptable to the Agent, with respect
to each Substituted Property Mortgage;

(iii)                               duly executed UCC-3
Termination Statements or such other instruments or evidence, in form and
substance satisfactory to the Agent, as shall be necessary to terminate and
satisfy all Liens, if any, on the Substituted Property; and

(iv)                              to the extent reasonably
requested by the Agent or the Majority Lenders, environmental audits, surveys,
title reports and any other document reasonably requested by the Agent, the
Majority Lenders or any Lender, as applicable, with respect to the Substituted
Property, in each case in form and substance satisfactory to the Agent, the
Majority Lenders and such Lender, as applicable; and

(v)                                 opinions of counsel
for the Borrower which is the owner of the Substituted Property as the Agent
shall reasonably request, in a form, scope and substance reasonably
satisfactory to the Agent and its counsel;

 24
 

 

(g)                           Borrowers shall have paid
all reasonable costs related to such Property Substitution, including, but not
limited to, reasonable attorney’s fees or fees related to appraisers, and
consultants, filing fees and the cost of ALTA extended coverage title policies
for the Substituted Property required above, in connection with any request for
Property Substitution, and as a condition to such substitution, the Borrowers
shall have provided evidence to the Agent that Borrowers have paid, or made
arrangement satisfactory to the Agent for the payment of, all such costs which
became due and payable prior to or concurrently with such Property Substitution;
and

(h)                           the Borrowers shall execute
such other documents and agreements as the Agent may require to encumber the
Substituted Property and amend the Loan Documents to reflect the replacement of
the Substitute Property for the Replaced Property; and

(i)                               no default or event of
default has occurred and is continuing both before and after giving effect to
such Property Substitution under the terms of any Subordinated Debt.

Upon a substitution of Substituted Property pursuant
to the provisions of this Section 2.8, all Liens on the Replaced
Property in favor of the Agent for the benefit of itself and the Lenders shall
be released and the Lenders hereby authorize the Agent to execute such
documents and take such further action as reasonably requested by the Borrowers
or determined by the Agent, in furtherance of this Section 2.8.  For the
avoidance of doubt, following the substitution of any Replaced Property with
any Substituted Property in accordance with this Section 2.8, such
Replaced Property shall no longer constitute Mortgaged Property, Term Loan
Collateral or Real Estate Subfacility Assets for any purpose under this
Agreement and Schedule 6.11 shall be deemed modified accordingly.

ARTICLE 3

PAYMENTS AND PREPAYMENTS

3.1                                 Revolving Loans.  FMC shall repay the outstanding principal
balance of the Revolving Loans made to it, plus all accrued but unpaid interest
thereon, on the Termination Date.  Any
Borrower may prepay Revolving Loans at any time, and reborrow subject to the
terms of this Agreement.  In addition,
and without limiting the generality of the foregoing, upon demand FMC shall pay
to the Agent, for account of the Revolving Credit Lenders, the amount, without
duplication, by which the Aggregate Revolver Outstandings exceeds the lesser of
the Borrowing Base or the Maximum Revolver Amount.

3.2                                 Termination of Facility.  The Borrowers may terminate this Agreement
upon at least thirty days’ notice to the Agent and the Lenders, upon
(a) the payment in full of all outstanding Revolving Loans, together with
accrued interest thereon, and the cancellation and return of all outstanding
Letters of Credit (or the provision of Cash Collateral or a Supporting Letter
of Credit in accordance with Section 1.4(g) above), (b) the
prepayment in full of the Term Loan, together with accrued interest thereon,
(c) the payment of the early termination fee set forth below, (d) the payment
in full in cash of all reimbursable expenses and other Obligations, 

 25
 

 

and (e) with respect to any LIBOR Rate Loans
prepaid, payment of the amounts due under Section 4.4, if any.  If this Agreement is terminated prior to the
first anniversary of the Closing Date, whether pursuant to this Section 3.2
or pursuant to Section 9.2, Borrowers shall pay to the Agent, for the
accounts of the Lenders, in proportion to their respective Pro Rata Shares, an
early termination fee equal to one percent (1%) of the Total Facility.  If this Agreement is terminated on or after
the first anniversary of the Closing Date but prior to the second anniversary
of the Closing Date, whether pursuant to this Section 3.2 or pursuant to
Section 9.2, Borrowers shall pay to the Agent, for the accounts of the
Lenders, in proportion to their respective Pro Rata Shares, an early
termination fee equal to one-half of one percent (0.5%) of the Total
Facility.  No early termination fee shall
be payable if this Agreement is terminated after the second anniversary of the
Closing Date.  The foregoing
notwithstanding, no early termination fee shall be payable hereunder in
connection with a refinancing of the Obligations with a credit facility
arranged or provided by another lending department of the Agent.

3.3                                 Repayment
of the Term Loan.

(a)                            Amortization of Term
Loan.

(i)                                     On the first day
of each Fiscal Quarter commencing January 29, 2007, FMC agrees to repay the
principal amount of the Term Loan in an amount equal to $785,715.00.

(ii)                                  On the Stated
Termination Date, FMC agrees to repay the outstanding principal amount of and
all accrued and unpaid interest on the Term Loan.

(b)                           Term Lenders.  FMC agrees to repay the principal of the Term
Loan to the Agent, for the account of the Lenders as set forth in Section
1.3.

(c)                            Application of
Prepayments.  Any prepayments of the
Term Loan hereunder shall be applied first, to the repayment of the Term
Loan required pursuant to Section 3.3(a)(ii), and second, to the
repayment of the Term Loan required pursuant to Section 3.3(a)(i) in
inverse order of maturity.

3.4                                 Prepayments of the
Loans.

(a)                            FMC
may prepay the principal of the Term Loan in whole or in part, at any time and
from time to time upon at least 5 Business Days’ prior written notice to the
Agent and the Term Lenders.  All
voluntary prepayments of the principal of the Term Loan shall be accompanied by
the payment of all accrued but unpaid interest on the Term Loan to the date of
prepayment.  Amounts prepaid in respect
of the Term Loan may not be reborrowed.

(b)                           Immediately upon receipt by
any Loan Party of proceeds of any disposition of Real Estate Subfacility
Assets, FMC shall repay the Revolving Loans in an amount equal to the amount
advanced against the applicable asset in calculation of the Borrowing Base, if
any, and the Maximum Real Estate Loan Amount shall be permanently reduced by
such amount.

 26
 

 

(c)                            Immediately upon any
receipt by any Loan Party of proceeds of any disposition of any Term Loan
Collateral, FMC shall repay the Term Loan in an amount equal to all such
proceeds, net of (A) commissions and other customary transaction costs, fees
and expenses properly attributable to such transaction and payable by a Loan
Party in connection therewith (other than any amounts payable to any
Affiliate), (B) transfer taxes, (C) amounts payable to holders of senior Liens
(to the extent that such Liens are Permitted Liens), if any and (D) an
appropriate reserve for income taxes in accordance with GAAP in connection
therewith (the “Net Proceeds”). 
After the Term Loan has been repaid in full, any remaining Net Proceeds
shall be applied to the Revolving Loans, but without reduction of the Revolving
Credit Commitments.

(d)                           Immediately upon any receipt
by any Loan Party of proceeds (other than assets or other property received in
exchange for any Equipment sold, traded-in or exchanged pursuant to Section
7.9(b) hereof) of any assets (other than Inventory sold in the ordinary
course of business), the Borrowers shall repay the Revolving Loans in an amount
equal to all such proceeds, net of (A) commissions and other customary
transaction costs, fees and expenses properly attributable to such transaction
and payable by a Loan Party in connection therewith (other than any amounts
payable to any Affiliate), (B) transfer taxes, (C) amounts payable to holders
of senior Liens (to the extent that such Liens are Permitted Liens), if any,
and (D) an appropriate reserve for income taxes in accordance with GAAP in
connection therewith (the “Net Proceeds”), but without reduction of the
Revolving Credit Commitments.

(e)                            [RESERVED].

(f)                              [RESERVED].

(g)                           [RESERVED].

(h)                           [RESERVED].

(i)                               No provision contained
in this Section 3.4 shall constitute a consent to an asset disposition
that is otherwise not permitted by the terms of this Agreement.

3.5                                 LIBOR
Rate Loan Prepayments.  In connection
with any prepayment, if any LIBOR Rate Loans are prepaid prior to the
expiration date of the Interest Period applicable thereto, the applicable
Borrower shall pay to the Revolving Credit Lenders the amounts described in Section
4.4.

3.6                                 Payments
by the Borrowers.

(a)                            All payments to be made by
the Borrowers shall be made without set-off, recoupment or counterclaim.  Except as otherwise expressly provided
herein, all payments by the Borrowers shall be made to the Agent for the
account of the Revolving Credit Lenders or Term Lenders, as applicable, at the
account 

 27
 

 

designated by the Agent and shall be made in Dollars and in immediately
available funds, no later than 12:00 noon (Los Angeles time) on the date
specified herein.  Any payment received
by the Agent after such time shall be deemed (for purposes of calculating
interest only) to have been received on the following Business Day and any
applicable interest shall continue to accrue.

(b)                           Subject to the provisions
set forth in the definition of “Interest Period”, whenever any payment
is due on a day other than a Business Day, such payment shall be due on the
following Business Day, and such extension of time shall in such case be
included in the computation of interest or fees, as the case may be.

3.7                                 Payments
as Revolving Loans.  At the election
of the Agent, all payments of principal of or interest on the Revolving Loans,
reimbursement obligations in connection with Letters of Credit and Credit
Support for Letters of Credit, fees, premiums, reimbursable expenses and other
sums payable hereunder (other than the Term Loan) may be paid from the proceeds
of Revolving Loans made hereunder. 
Proceeds of Revolving Loans may be used to make payments of the Term
Loan Obligations only if: (a) for payments of the Term Loan Obligations under
Section 3.3(a)(i), no Event of Default has occurred and is continuing, and (b)
for payments of Term Loan Obligations under Section 3.3(a)(ii), (x) no Event of
Default has occurred and is continuing, and (y) a Minimum Liquidity Event, as
of the date of such prepayment, shall not have occurred, after giving effect to
such prepayment.  Each Borrower hereby
irrevocably authorizes the Agent to charge the applicable Loan Account for the
purpose of paying all amounts from time to time due from FMC or any Borrower
and agrees that all such amounts charged shall constitute Revolving Loans (including
Non-Ratable Loans and Agent Advances).

3.8                                 Apportionment,
Application and Reversal of Payments. 
Principal and interest payments shall be apportioned ratably among the
Lenders (according to the unpaid principal balance of the Loans to which such
payments relate held by each Lender). 
All payments shall be remitted to the Agent and all such payments not
relating to principal or interest of specific Loans, or not constituting
payment of specific fees, and all proceeds of Accounts, or except as set forth
below with respect to Term Loan Collateral, other Collateral received by the
Agent, shall be applied, ratably, subject to the provisions of this Agreement, first,
to pay any fees, indemnities, or expense reimbursements (other than amounts
related to Bank Products) then due to the Agent or the Lenders from the
Borrowers; second, to pay interest due from such Borrower in respect of
all Loans, including Non-Ratable Loans and Agent Advances; third, to pay
or prepay principal of the Non-Ratable Loans and Agent Advances owed by the
Borrowers; fourth, to pay or prepay principal of the Revolving Loans
(other than Non-Ratable Loans and Agent Advances) and unpaid reimbursement
obligations in respect of Letters of Credit; fifth, if an Event of
Default has occurred and is continuing to pay an amount to the Agent equal to
all outstanding Letter of Credit Obligations of the Borrowers to be held as
cash collateral for such Obligations; sixth, to pay or prepay, ratably,
principal of the Term Loan owed by the Borrowers; seventh, to the
payment of any other Obligation (other than amounts related to Bank Products)
due to the Agent or any Lender by the Borrowers and eighth, to pay any
fees, indemnities or expense 

 28
 

 

reimbursements related to Bank Products due to the
Agent from the Borrowers. 
Notwithstanding the foregoing, until the Term Loan has been paid in
full, proceeds of the Term Loan Collateral shall be applied first to
pay, ratably, any fees, indemnities or expense reimbursements relating to the
Term Loan or the Term Loan Collateral then due to the Agent or the Lenders; second,
to pay, ratably, interest due from FMC in respect to the Term Loan; third,
to pay or prepay principal of the Term Loan; and fourth, to all other
Obligations in accordance with the preceding sentence.  Notwithstanding anything to the contrary
contained in this Agreement, unless so directed by the applicable Borrowers, or
unless an Event of Default has occurred and is continuing, neither the Agent
nor any Lender shall apply any payments which it receives to any LIBOR Rate
Loan, except (a) on the expiration date of the Interest Period applicable to
any such LIBOR Rate Loan, or (b) in the event, and only to the extent,
that there are no outstanding Base Rate Loans and, in any event, the Borrowers
shall pay LIBOR breakage losses in accordance with Section 4.4.  Upon the occurrence and during the
continuation of an Event of Default and, prior thereto in order to correct any
error, the Agent and the Lenders shall have the continuing and exclusive right
to apply and reverse and reapply any and all such proceeds and payments to any
portion of the Obligations.

3.9                                 Indemnity
for Returned Payments.  If after
receipt of any payment which is applied to the payment of all or any part of
the Obligations, the Agent, any Lender, the Bank or any Affiliate of the Bank
is for any reason compelled to surrender such payment or proceeds to any Person
because such payment or application of proceeds is invalidated, declared
fraudulent, set aside, determined to be void or voidable as a preference,
impermissible setoff, or a diversion of trust funds, or for any other reason,
then the Obligations or part thereof intended to be satisfied shall be revived
and continued and this Agreement shall continue in full force as if such payment
or proceeds had not been received by the Agent, such Lender, the Bank or any
Affiliate of the Bank and the Borrowers shall be liable to pay to the Agent and
the Lenders, and hereby indemnify the Agent and the Lenders and hold the Agent
and the Lenders harmless for the amount of such payment or proceeds
surrendered.  The provisions of this Section 3.9
shall be and remain effective notwithstanding any contrary action which may
have been taken by the Agent or any Lender, the Bank or any Affiliate of the
Bank in reliance upon such payment or application of proceeds, and any such
contrary action so taken shall be without prejudice to the Agent’s and the
Lenders’ rights under this Agreement and shall be deemed to have been
conditioned upon such payment or application of proceeds having become final
and irrevocable.  The provisions of this Section 3.9
shall survive the termination of this Agreement.

3.10                           The
Agent’s and Lenders’ Books and Records; Monthly Statements.  The Agent shall record the principal amount
of the Loans owing to each Lender, the undrawn face amount of all outstanding
Letters of Credit and the aggregate amount of unpaid reimbursement obligations
outstanding with respect to the Letters of Credit from time to time on its
books.  In addition, each Lender may note
the date and amount of each payment or prepayment of principal of such Lender’s
Loans in its books and records.  Failure
by the Agent or any Lender to make such notation shall not affect the
obligations of the applicable Borrower with respect to the Loans or the Letters
of Credit.  Each Borrower agrees that the
Agent’s and each Lender’s books and records showing the Obligations and the
transactions pursuant to this Agreement and the other Loan Documents shall be
admissible in any action or proceeding arising therefrom, and shall constitute
rebuttably presumptive proof thereof, irrespective of whether any Obligation is
also evidenced by a promissory note or other instrument.  The Agent will provide to the Borrowers a
monthly statement of Loans, payments, and other transactions pursuant to this
Agreement.  Such statement shall be
deemed correct, accurate, and binding on the Borrowers and an account stated
(except for reversals and reapplications of payments made as provided in 

 29
 

 

Section 3.8
and corrections of errors discovered by the Agent), unless the Borrowers notify
the Agent in writing to the contrary within thirty (30) days after such
statement is rendered.  In the event a
timely written notice of objections is given by the Borrowers, only the items
to which exception is expressly made will be considered to be disputed by the
Borrowers.

ARTICLE 4

TAXES, YIELD PROTECTION AND ILLEGALITY

4.1                                 Taxes.

(a)                            Any and all payments by the
Borrowers to each Lender or the Agent under this Agreement and any other Loan
Document shall be made free and clear of, and without deduction or withholding
for any Taxes.  In addition, the
Borrowers shall pay all Other Taxes.

(b)                           Each Borrower agrees to
indemnify and hold harmless each Lender and the Agent for the full amount of
Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by any Lender or the
Agent and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted.  Payment under this indemnification shall be
made within 30 days after the date such Lender or the Agent makes written
demand therefor.

(c)                            If a Borrower shall be
required by law to deduct or withhold any Taxes or Other Taxes from or in
respect of any sum payable hereunder to any Lender or the Agent, then:

(i)                                     the sum payable
shall be increased as necessary so that after making all required deductions
and withholdings (including deductions and withholdings applicable to
additional sums payable under this Section) such Lender or the Agent, as the
case may be, receives an amount equal to the sum it would have received had no
such deductions or withholdings been made;

(ii)                                  such Borrower shall
make such deductions and withholdings;

(iii)                               such Borrower shall pay
the full amount deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and

(iv)                              such Borrower shall also
pay to each Lender or the Agent for the account of such Lender, at the time
interest is paid, all additional amounts which the respective Lender specifies
as necessary to preserve the after-tax yield such Lender would have received if
such Taxes or Other Taxes had not been imposed.

 30
 

 

(d)                           At the Agent’s request,
within 30 days after the date of any payment by a Borrower of Taxes or Other
Taxes, such Borrower shall furnish the Agent the original or a certified copy
of a receipt evidencing payment thereof, or other evidence of payment
satisfactory to the Agent.  If any
Borrower determines in good faith that a reasonable basis exists for contesting
any Taxes or Other Taxes, at the request of such Borrower, the relevant Lender
shall cooperate with such Borrower in challenging such Tax or Other Tax at such
Borrower’s expense (but shall have no obligation to disclose any confidential
information with respect to such Lender). 
No Lender shall have any obligation to contest any Tax or Other Tax,
except to cooperate with the Borrowers in any contest requested by a Borrower
as provided herein.  If any Lender
becomes aware that it has received a refund for any Tax or Other Tax for which
a payment has been made to it by the Borrowers under this Section, which in the
good faith judgment of such Lender is allocable to such payment, the amount of
such refund shall be paid to the applicable Borrower(s) to the extent that such
Borrower(s) have paid in full the payments required by this Section 4.1

(e)                            If a Borrower is required
to pay additional amounts to any Lender or the Agent pursuant to subsection
(c) of this Section, then such Lender shall use reasonable efforts
(consistent with legal and regulatory restrictions) to change the jurisdiction
of its lending office so as to eliminate any such additional payment by such
Borrower which may thereafter accrue, if such change in the judgment of such
Lender is not otherwise disadvantageous to such Lender.

4.2                                 Illegality.

(a)                            If any Revolving Credit
Lender determines that the introduction of any Requirement of Law, or any
change in any Requirement of Law, or in the interpretation or administration of
any Requirement of Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any Revolving
Credit Lender or its applicable lending office to make LIBOR Rate Loans, then,
on notice thereof by that Revolving Credit Lender to the Borrowers through the
Agent, any obligation of that Revolving Credit Lender to make LIBOR Rate Loans
shall be suspended until that Revolving Credit Lender notifies the Agent and
the Borrowers that the circumstances giving rise to such determination no
longer exist.

(b)                           If a Revolving Credit Lender
determines that it is unlawful to maintain any LIBOR Rate Loan, the Borrowers
shall, upon receipt of notice of such fact and demand from such Revolving
Credit Lender (with a copy to the Agent), prepay in full such LIBOR Rate Loans
of that Revolving Credit Lender then outstanding, together with interest accrued
thereon and amounts required under Section 4.4, either on the last day
of the Interest Period thereof, if that Revolving Credit Lender may lawfully
continue to maintain such LIBOR Rate Loans to such day, or immediately, if that
Revolving Credit Lender may not lawfully continue to maintain such LIBOR Rate
Loans.  If the Borrowers are required to
so prepay any LIBOR Rate Loans, then concurrently with such prepayment, the
applicable Borrower shall borrow from the affected Revolving Credit Lender, in
the amount of such repayment, a Base Rate Loan.

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4.3                                 Increased
Costs and Reduction of Return.

(a)                            If any Lender determines
that due to either (i) the introduction of any Requirement of Law, or any
change in any Requirement of Law, or any change in the interpretation of any
Requirement of Law or (ii) the compliance by that Lender with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to such Lender of agreeing to make or making, funding or maintaining any
LIBOR Rate Loans, then the Borrowers shall be liable for, and shall from time
to time, upon demand (with a copy of such demand to be sent to the Agent), pay
to the Agent for the account of such Lender, additional amounts as are
sufficient to compensate such Lender for such increased costs.

(b)                           If any Lender shall have
determined that (i) the introduction of any Capital Adequacy Regulation, (ii)
any change in any Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy Regulation by any
central bank or other Governmental Authority charged with the interpretation or
administration thereof, or (iv) compliance by such Lender or any corporation or
other entity controlling such Lender with any Capital Adequacy Regulation,
affects or would affect the amount of capital required or expected to be
maintained by such Lender or any corporation or other entity controlling such
Lender and (taking into consideration such Lender’s or such corporation’s or
other entity’s policies with respect to capital adequacy and such Lender’s
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Revolving Credit Commitments, Loans, credits
or obligations under this Agreement, then, upon demand of such Lender to the
Borrowers through the Agent, the Borrowers shall pay to such Lender, from time
to time as specified by such Lender, additional amounts sufficient to
compensate such Lender for such increase.

4.4                                 Funding
Losses.  FMC shall reimburse each
Revolving Credit Lender and hold each Revolving Credit Lender harmless from any
loss or expense which such Lender may sustain or incur as a consequence of:

(a)                            the failure of the
applicable Borrower(s) to make on a timely basis any payment of principal of
any LIBOR Rate Loan;

(b)                           the failure of the
applicable Borrower(s) to borrow, continue or convert a Loan after such
Borrower has given (or is deemed to have given) a Notice of Borrowing or a Notice
of Continuation/Conversion; or

(c)                            the prepayment or other
payment (including after acceleration thereof) of any LIBOR Rate Loans on a day
that is not the last day of the relevant Interest Period;

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including any such loss of anticipated profit and any
loss or expense arising from the liquidation or reemployment of funds obtained
by it to maintain its LIBOR Rate Loans or from fees payable to terminate the
deposits from which such funds were obtained. 
The Borrowers shall also pay any customary administrative fees charged
by any Lender in connection with the foregoing.

4.5                                 Inability
to Determine Rates.  If the Agent
determines that for any reason adequate and reasonable means do not exist for
determining the LIBOR Rate for any requested Interest Period with respect to a
proposed LIBOR Rate Loan, or that the LIBOR Rate for any requested Interest
Period with respect to a proposed LIBOR Rate Loan does not adequately and
fairly reflect the cost to the Revolving Credit Lenders of funding such Loan,
the Agent will promptly so notify the Borrowers and each Revolving Credit
Lender.  Thereafter, the obligation of
the Revolving Credit Lenders to make or maintain LIBOR Rate Loans hereunder
shall be suspended until the Agent revokes such notice in writing; and the Agent
shall promptly deliver such notice after it determines that the reason for such
suspension no longer exists.  Upon
receipt of such notice of suspension, Borrowers may revoke any Notice of
Borrowing or Notice of Continuation/Conversion then submitted by it.  If the applicable Borrower does not revoke
such Notice, the Revolving Credit Lenders shall make, convert or continue the
Loans, as proposed by the applicable Borrower, in the amount specified in the
applicable notice submitted by such Borrower, but such Loans shall be made,
converted or continued as Base Rate Loans instead of LIBOR Rate Loans.

4.6                                 Certificates
of the Agent.

(a)                            If any
Lender claims reimbursement or compensation under this Article 4
(an “Affected Lender”), the Agent shall determine the amount thereof and
shall deliver to the Borrowers (with a copy to the Affected Lender) a
certificate setting forth in reasonable detail the amount payable to the
Affected Lender, and such certificate shall be conclusive and binding on the
Borrowers in the absence of manifest or demonstrable error.

(b)                           Without
limiting its obligations to reimburse an Affected Lender for compensation
theretofore claimed by an Affected Lender pursuant to this Article 4, Borrowers
may, within 60 days following any demand by an Affected Lender, request that
one or more Persons that are Eligible Assignees and that are approved by the
Administrative Agent (which approval shall not be unreasonably withheld)
purchase all (but not part) of the Affected Lender’s then outstanding Loans,
and assume its Pro Rata Share of the Revolving Credit Commitments and its
obligations hereunder; provided that such request may not be made, and the
Administrative Agent and the Lenders shall have no obligations under this
Section 4.6(b), if and to the extent that the basis for any such reimbursement
or compensation with respect to such Affected Lender is, in the judgment of the
Administrative Agent, applicable to the Required Lenders or has resulted or
could reasonably be expected to result in any claim for reimbursement or
compensation under this Article 4 by the Required Lenders.  If one or more such Eligible Assignees so
agree in writing (each, an “Assuming Lender,” and collectively, the “Assuming
Lenders”), the Affected Lender shall assign its Pro Rata Share of the
Revolving Credit Commitments, together with the outstanding Revolving Loans, 

 33
 

 

to the Assuming
Lender or Assuming Lenders in accordance with Section 11.2.  On the date of any such assignment, the
Affected Lender which is being so replaced shall cease to be a “Lender” for all
purposes of this Agreement and shall receive (x) from the Assuming Lender or
Assuming Lenders the principal amount of its outstanding Loans and (y) from
Borrowers all interest and fees accrued and then unpaid with respect to such
Loans, together with any other amounts then payable to such Lender by
Borrowers.

4.7                                 Survival.  The agreements and obligations of the
Borrowers in this Article 4 shall survive the payment of all other
Obligations.

ARTICLE 5

BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES

5.1                                 Books and Records.  Fleetwood shall, and shall cause each of its
Subsidiaries to maintain, at all times, correct and complete books, records and
accounts in which complete, correct and timely entries are made of its
transactions in accordance with GAAP applied consistently with the audited
Financial Statements required to be delivered pursuant to Section 5.2(a).  Fleetwood shall, and shall cause each of its
Subsidiaries to, by means of appropriate entries, reflect in such accounts and
in all Financial Statements proper liabilities and reserves for all taxes and
proper provision for depreciation and amortization of property and bad debts,
all in accordance with GAAP.  Fleetwood
shall, and shall cause each Loan Party to maintain at all times books and
records pertaining to the Collateral in such detail, form and scope as the
Agent or any Lender shall reasonably require, including, but not limited to,
records of (a) all payments received and all credits and extensions granted with
respect to the Accounts; (b) the return, rejection, repossession, stoppage in
transit, loss, damage, or destruction of any Inventory; and (c) all other
dealings affecting the Collateral in any material respect.

5.2                                 Financial Information.  Fleetwood shall, and shall cause each of its
Subsidiaries to promptly furnish to each Lender, all such financial information
as the Agent shall reasonably request. 
Without limiting the foregoing, Fleetwood and the Borrowers will furnish
to the Agent, in sufficient copies for distribution by the Agent to each
Lender, in such detail as the Agent or the Lenders shall request, the
following:

(a)                            As soon as available, but
in any event not later than ninety (90) days after the close of each Fiscal
Year, consolidated audited balance sheets, and income statements, cash flow
statements and changes in stockholders’ equity for Fleetwood and its
Subsidiaries for such Fiscal Year, and the accompanying notes thereto, setting
forth in each case in comparative form figures for the previous Fiscal Year,
all in reasonable detail, fairly presenting the financial position and the
results of operations of Fleetwood and its consolidated Subsidiaries as at the
date thereof and for the Fiscal Year then ended, and prepared in accordance
with GAAP.  Such statements shall be
examined in accordance with generally accepted auditing standards by and, in
the case of such statements performed on a consolidated basis, accompanied by a
report thereon unqualified in any respect of independent certified public accountants
selected by Fleetwood and reasonably satisfactory to the Agent.  Fleetwood and the Borrowers hereby authorize
the 

 34
 

 

Agent to communicate directly with their certified public accountants
and, by this provision, authorize those accountants to disclose to the Agent
any and all financial statements and other supporting financial documents and
schedules relating to Fleetwood and its Subsidiaries and to discuss directly
with the Agent, in the presence of Fleetwood, the finances and affairs of
Fleetwood and its Subsidiaries.

(b)                           As soon as available, but in
any event not later than forty-five (45) days after the end of the first three
Fiscal Quarters of any Fiscal Year, consolidated unaudited balance sheets of
Fleetwood and its consolidated Subsidiaries as at the end of such Fiscal
Quarter, and consolidated unaudited income statements and cash flow statements
for Fleetwood and its consolidated Subsidiaries for such Fiscal Quarter and for
the period from the beginning of the Fiscal Year to the end of such Fiscal
Quarter, all in reasonable detail, fairly presenting the financial position and
results of operations of Fleetwood and its consolidated Subsidiaries as at the
date thereof and for such periods, and, in each case, in comparable form,
figures for the corresponding period in the prior Fiscal Year, and prepared in
accordance with GAAP applied consistently with the audited Financial Statements
required to be delivered pursuant to Section 5.2(a).  Fleetwood shall certify by a certificate
signed by its chief financial officer or chief accounting officer that all such
statements have been prepared in accordance with GAAP and present fairly the
financial position of Fleetwood and its Subsidiaries as at the dates thereof
and its results of operations for the periods then ended, subject to normal
year-end adjustments and to the absence of footnotes required by GAAP.

(c)                            As soon as available, but
in any event no later than 30 days (or, in the case of the first fiscal month
after the end of each Fiscal Year, 60 days) after the end of each fiscal month
(other than any month which is also the end of a Fiscal Quarter), consolidated
unaudited balance sheets of Fleetwood and its consolidated Subsidiaries as at
the end of such fiscal month, and consolidated unaudited income statements and
consolidated unaudited cash flow statements for Fleetwood and its consolidated
Subsidiaries for such fiscal month and for the period from the beginning of the
Fiscal Year to the end of such fiscal month, all in reasonable detail, fairly presenting
the financial position and results of operations of Fleetwood and its
consolidated Subsidiaries as at the date thereof and for such periods, and, in
each case, in comparable form, figures for the corresponding period in the
prior Fiscal Year, and prepared in accordance with GAAP applied consistently
with the audited Financial Statements required to be delivered pursuant to Section
5.2(a).  Fleetwood shall certify by a
certificate signed by its chief financial officer or chief accounting officer that
all such statements have been prepared in accordance with GAAP and present
fairly the financial position of Fleetwood and its Subsidiaries as at the dates
thereof and its results of operations for the periods then ended, subject to
normal year-end adjustments and the absence of footnotes required by GAAP.

(d)                           With each of the audited
Financial Statements delivered pursuant to Section 5.2(a), a
certificate of the independent certified public accountants that 

 35
 

 

examined such statement to the effect that they have reviewed and are
familiar with this Agreement and that, in examining such Financial Statements,
they did not become aware of any fact or condition which then constituted a
Default or Event of Default with respect to a financial covenant, except for
those, if any, described in reasonable detail in such certificate.

(e)                            With each of the annual
audited Financial Statements delivered pursuant to Section 5.2(a),
and within forty-five (45) days after the end of each Fiscal Quarter, a
certificate of the chief financial officer, chief accounting officer, vice
president-treasurer or vice president-controller of Fleetwood setting forth in
reasonable detail the calculations required to establish that Fleetwood and its
Subsidiaries were in compliance with the covenants set forth in Sections 7.22
and, if applicable, 7.24 during the period covered in such Financial
Statements and as at the end thereof. 
Within thirty (30) days after the end of each fiscal month, a
certificate of the chief financial officer, chief accounting officer, vice
president-treasurer or vice president-controller of Fleetwood setting forth in
reasonable detail the calculations required to establish whether a Minimum
Liquidity Event shall have occurred as set forth in Section 7.24.  Within forty-five (45) days after the end of
each Fiscal Quarter, a certificate of the chief financial officer, chief
accounting officer, vice president-treasurer or vice president-controller of
Fleetwood stating that, except as explained in reasonable detail in such
certificate, (A) all of the representations and warranties of the Loan
Parties contained in this Agreement and the other Loan Documents are correct
and complete in all material respects as at the date of such certificate as if
made at such time, except for those that speak as of a particular date, which
shall have been true and correct as of such date, (B) the Loan Parties are, at
the date of such certificate, in compliance in all material respects with all
of their respective covenants and agreements in this Agreement and the other
Loan Documents, (C) no Default or Event of Default then exists or existed
during the period covered by the Financial Statements for such Fiscal Quarter,
(D) describing and analyzing in reasonable detail all material trends, changes,
and developments in each and all Financial Statements; and (E) explaining the
variances of the figures in the corresponding Latest Projections and prior
Fiscal Year financial statements.  If any
such certificate discloses that a representation or warranty is not correct or
complete, or that a covenant has not been complied with, or that a Default or
Event of Default existed or exists, such certificate shall set forth what
action Loan Parties have taken or propose to take with respect thereto.

(f)                              No sooner than sixty (60)
days prior to and not more than thirty (30) days after the beginning of each
Fiscal Year, annual forecasts (to include forecasted consolidated balance
sheets, income statements and consolidated cash flow statements) for Fleetwood
and its Subsidiaries as at the end of and for each quarter of such Fiscal Year.

(g)                           A copy of each annual report
or other filing filed with the PBGC or the IRS with respect to each Plan of
Fleetwood and its Subsidiaries (A) upon the request of the Agent or (B) in the
event such filing reflects a significant change with respect to the matters
covered thereby, within three (3) Business Days after the filing thereof.

 36
 

 

(h)                           If requested by the Agent,
promptly upon the filing thereof, copies of all reports, if any, to or other
documents filed by Fleetwood or any of its Subsidiaries with the Securities and
Exchange Commission under the Exchange Act, and all reports, notices, or
statements sent or received by Fleetwood or any of its Subsidiaries to or from
the holders of any equity interests of Fleetwood or any of its Subsidiaries
(other than routine non-material correspondence sent by shareholders of
Fleetwood to Fleetwood) or any such Subsidiary or of any Debt of Fleetwood or
any of its Subsidiaries registered under the Securities Act or to or from the
trustee under any indenture under which the same is issued.

(i)                               As soon as available,
but in any event not later than 15 days after any Loan Party’s receipt thereof,
a copy of all management reports and management letters prepared for any Loan
Party by any independent certified public accountants.

(j)                               If requested by the
Agent, promptly after their preparation, copies of any and all proxy
statements, financial statements, and reports which Fleetwood makes available
to its shareholders.

(k)                            If requested by the Agent,
promptly after filing with the IRS, a copy of each tax return filed by
Fleetwood or by any of its Subsidiaries.

(l)                               No later than Wednesday
of each week, a schedule of the Borrowers’ Accounts created, credits given,
cash collected and other adjustments to Accounts since the last schedule,
together with a Borrowing Base Certificate as of the end of the preceding week
(a “Weekly Borrowing Base Certificate”) and all supporting information
in accordance with Section 9 of the Security Agreement.

(m)                         Not later than the 15th day after each Fiscal Quarter, a report, in
form and substance satisfactory to the Agent, with respect to the Repurchase
Obligations.

(n)                           [RESERVED].

(o)                           Such additional information
as any Agent and/or any Lender may from time to time reasonably request
regarding the financial and business affairs of Fleetwood or any Subsidiary.

5.3                                 Notices to the Lenders.  Fleetwood or the Borrowers shall notify the
Agent and the Lenders in writing of the following matters at the following
times:

(a)                            Promptly, and, in any
event, within two (2) Business Days, after becoming aware of any Default or
Event of Default;

 37

 

(b)           Promptly,
and, in any event, within two (2) Business Days, after becoming aware of the
assertion by the holder of any Capital Stock of Fleetwood or of any Subsidiary
or the holder of any Debt of Fleetwood or any Subsidiary in a face amount in
excess of $1,000,000 that a default exists with respect thereto or that
Fleetwood or such Subsidiary is not in compliance with the terms thereof, or
the threat or commencement by such holder of any enforcement action because of
such asserted default or non-compliance; and promptly, but, in any event within
two (2) Business Days, after becoming aware of the assertion that any
Repurchase Obligations of $500,000 or more payable in cash shall have become
due and payable;

(c)           Promptly,
and, in any event, within two (2) Business Days, after becoming aware of any
event or circumstance (other than general economic trends) which could
reasonably be expected to have a Material Adverse Effect;

(d)           Promptly,
and, in any event, within two (2) Business Days, after becoming aware of any
pending or threatened action, suit, or proceeding, by any Person, or any
pending or threatened investigation by a Governmental Authority, which if
adversely determined would reasonably be expected to have a Material Adverse
Effect;

(e)           Promptly,
and, in any event, within two (2) Business Days, after becoming aware of any
pending or threatened strike, work stoppage, unfair labor practice claim, or
other labor dispute affecting Fleetwood or any of its Subsidiaries in a manner
which could reasonably be expected to have a Material Adverse Effect;

(f)            Promptly,
and, in any event, within two (2) Business Days, after becoming aware of any
violation of any law, statute, regulation, or ordinance of a Governmental
Authority affecting Fleetwood or any Subsidiary which could reasonably be
expected to have a Material Adverse Effect;

(g)           Promptly,
and, in any event, within two (2) Business Days, after receipt of any notice of
any violation by Fleetwood or any of its Subsidiaries of any Environmental Law
which could reasonably be expected to have a Material Adverse Effect or that
any Governmental Authority has asserted in writing that Fleetwood or any
Subsidiary is not in compliance in any material respect with any Environmental
Law or is investigating Fleetwood’s or such Subsidiary’s compliance therewith;

(h)           Promptly,
and, in any event, within two (2) Business Days, after receipt of any written
notice that Fleetwood or any of its Subsidiaries is or may be liable to any
Person as a result of the Release or threatened Release of any Contaminant or
that Fleetwood or any Subsidiary is subject to investigation by any
Governmental Authority evaluating whether any remedial action is needed to
respond to the Release or threatened Release of any Contaminant which, in
either case, is reasonably likely to give rise to liability in excess of
$1,000,000;

 38
 

 

(i)            Promptly,
and, in any event, within two (2) Business Days, after receipt of any written
notice of the imposition of any Environmental Lien against any property of
Fleetwood or any of its Subsidiaries;

(j)            Any
change in any Loan Party’s name, state of organization, locations of
Collateral, or form of organization, trade names under which it will sell
Inventory or create Accounts, or to which instruments in payment of Accounts
may be made payable, in each case at least thirty (30) days prior thereto;

(k)           Within
ten (10) Business Days after Fleetwood or any ERISA Affiliate knows or has
reason to know, that an ERISA Event or a prohibited transaction (as defined in
Sections 406 of ERISA and 4975 of the Code) has occurred, and, when known, any
action taken or threatened by the IRS, the DOL or the PBGC with respect
thereto;

(l)            Upon
request, or, in the event that such filing reflects a significant change with
respect to the matters covered thereby, within three (3) Business Days after
the filing thereof with the PBGC, the DOL or the IRS, as applicable, copies of
the following:  (i) each annual report
(form 5500 series), including Schedule B thereto, filed with the PBGC, the DOL
or the IRS with respect to each Plan, (ii) a copy of each funding waiver
request filed with the PBGC, the DOL or the IRS with respect to any Plan and
all communications received by Fleetwood or any ERISA Affiliate from the PBGC,
the DOL or the IRS with respect to such request, and (iii) a copy of each other
filing or notice filed with the PBGC, the DOL or the IRS, with respect to each
Plan by either Fleetwood or any ERISA Affiliate;

(m)          Upon
request, copies of each actuarial report for any Plan or Multi-employer Plan
and annual report for any Multi-employer Plan; and within three (3) Business
Days after receipt thereof by Fleetwood or any ERISA Affiliate, copies of the
following:  (i) any notices of the
PBGC’s intention to terminate a Plan or to have a trustee appointed to
administer such Plan; (ii) any favorable or unfavorable determination
letter from the IRS regarding the qualification of a Plan under
Section 401(a) of the Code; or (iii) any notice from a Multi-employer Plan
regarding the imposition of withdrawal liability;

(n)           Within
three (3) Business Days after the occurrence thereof: (i) any changes in the
benefits of any existing Plan which increase the annual costs of Fleetwood and
its Subsidiaries with respect thereto by an amount in excess of $1,000,000 or
the establishment of any new Plan or the commencement of contributions to any
Plan to which Fleetwood or any ERISA Affiliate was not previously contributing;
or (ii) any failure by Fleetwood or any ERISA Affiliate to make a required
installment or any other required payment under Section 412 of the Code on or
before the due date for such installment or payment; or

(o)           Within
three (3) Business Days after Fleetwood or any ERISA Affiliate knows or has
reason to know that any of the following events has or will occur:  (i) a Multi-employer Plan has been or will be
terminated; (ii) the administrator or plan sponsor of a Multi-employer Plan
intends to terminate a Multi-employer Plan; or (iii) the PBGC has instituted or
will institute proceedings under Section 4042 of ERISA to terminate a
Multi-employer Plan.

 39
 

 

Each notice given under this Section shall describe
the subject matter thereof in reasonable detail, and shall set forth the action
that Fleetwood, its Subsidiary, or any ERISA Affiliate, as applicable, has taken
or proposes to take with respect thereto.

ARTICLE 6

GENERAL WARRANTIES AND REPRESENTATIONS

Fleetwood and the Borrowers warrant and represent to
the Agent and the Lenders that except as hereafter disclosed to and accepted by
the Agent and the Majority Lenders in writing:

6.1           Authorization,
Validity, and Enforceability of this Agreement and the Loan Documents.  Each Loan Party has the power and authority
to execute, deliver and perform this Agreement and the other Loan Documents to
which it is a party, to incur the Obligations, and to grant to the Agent Liens
upon and security interests in the Collateral. 
Each Loan Party has taken all necessary action (including obtaining
approval of its stockholders if necessary) to authorize its execution,
delivery, and performance of this Agreement and the other Loan Documents to
which it is a party.  This Agreement and
the other Loan Documents to which it is a party have been duly executed and
delivered by each Loan Party which is a party thereto, and constitute the legal,
valid and binding obligations of such Loan Party, enforceable against it in
accordance with their respective terms, subject to the effect of bankruptcy,
insolvency, moratorium and other laws affecting the rights of creditors
generally and to the effect of general principles of equity.  Each Loan Party’s execution, delivery, and
performance of this Agreement and the other Loan Documents to which it is a
party do not and will not conflict with, or constitute a violation or breach
of, or result in the imposition of any Lien upon the property of Fleetwood or
any of its Subsidiaries, by reason of the terms of (a) any material
contract, mortgage, lease, agreement, indenture, or instrument to which
Fleetwood or any of its Subsidiaries is a party or which is binding upon it,
the breach of which could reasonably be expected to result in a Material
Adverse Effect, (b) any Requirement of Law applicable to Fleetwood or any of
its Subsidiaries, the violation of which could reasonably be expected to result
in a Material Adverse Effect or (c) the certificate or articles of
incorporation or by-laws or the limited liability company or limited
partnership agreement (or other organizational documents) of Fleetwood or any
of its Subsidiaries.

6.2           Validity
and Priority of Security Interest. 
The provisions of this Agreement, the Mortgages, and the other Loan
Documents (upon recordation thereof) create legal and valid Liens on all the
Collateral in favor of the Agent for the ratable benefit of the Agent and the
Revolving Credit Lenders or the Term Lenders, as the case may be, and, when
properly filed and, where applicable recorded, such Liens constitute perfected
and continuing Liens on all the Collateral, having priority over all other
Liens on the Collateral (except for Permitted Liens) securing all the
Obligations, and enforceable against the Loan Parties and all third
parties.  The Liens on the Collateral
constitute first priority perfected Liens in favor of the Agent, for the
ratable benefit of the Agent and the Lenders, except in each case for Permitted

 40
 

 

Liens and except to the extent permitted by the
Security Agreement; provided that, as between the Lenders, the Liens created on
the Collateral other than the Term Loan Collateral constitute (x) first
priority, perfected Liens in favor of the Agent, for the ratable benefit of the
Agent and the Revolving Credit Lenders, and (y) second priority, perfected
Liens in favor of the Agent, for the ratable benefit of the Agent and the Term
Lenders, and the Liens created on the Term Loan Collateral constitute (x) first
priority, perfected Liens in favor of the Agent, for the ratable benefit of the
Agent and the Term Lenders, and (y) second priority, perfected Liens in favor
of the Agent, for the ratable benefit of the Agent and the Revolving Credit
Lenders.

6.3           Organization
and Qualification.  Each Loan Party
(a) is duly organized or incorporated and validly existing in good
standing under the laws of the state of its organization or incorporation,
(b) is qualified to do business and is in good standing in the
jurisdictions set forth on Schedule 6.3 hereto which are the only jurisdictions in which qualification is
material to the conduct of its business and (c) has all requisite power
and authority to conduct its business and to own its property.

6.4           Corporate
Name; Prior Transactions.  Except as
set forth on Schedule 6.4 hereto
no Loan Party has, during the five (5) years prior to the Closing Date, been
known by or used any other corporate or fictitious name, or been a party to any
merger or consolidation, or acquired all or substantially all of the assets of
any Person, or acquired any of its property outside of the ordinary course of
business.

6.5           Subsidiaries
and Affiliates.  Schedule 6.5 hereto, and as the same may be amended after
the Closing Date with the consent of the Agent (such consent not to be
unreasonably withheld), is a correct and complete list of the name and
relationship to Fleetwood of each and all of its Subsidiaries and, to the
knowledge of Fleetwood and the Borrowers, their other Affiliates.  Each Subsidiary which is not a Loan Party is
(a) duly incorporated or organized and validly existing in good standing under
the laws of its state of incorporation or organization set forth on Schedule
6.5 hereto, and as same may be amended
after the Closing Date with the consent of the Agent (such consent not to be
unreasonably withheld), and (b) qualified to do business and in good standing
in each jurisdiction in which the failure to so qualify or be in good standing
would reasonably be expected to have a material adverse effect on any such
Subsidiary’s business, operations, property, or condition (financial or
otherwise) and (c) has all requisite power and authority to conduct its
business and own its property.

6.6           Financial Statements
and Projections.

(a)           Fleetwood
has delivered to the Agent and the Lenders the audited balance sheet and
related statements of income, retained earnings, cash flows, and changes in
stockholders equity for Fleetwood and its consolidated Subsidiaries as of April
30, 2006, and for the Fiscal Year then ended, accompanied by the report thereon
of its independent certified public accountants, Ernst & Young.  Fleetwood has also delivered to the Agent and
the Lenders the unaudited balance sheet and related statements of income and
cash flows for Fleetwood and its consolidated Subsidiaries as of the Fiscal
Quarter ending July 31, 2006.  Such
financial statements are attached hereto as Exhibit C.  All such financial statements have been
prepared in accordance with GAAP and present accurately and fairly in all 

 41
 

 

material
respects the financial position of Fleetwood and its consolidated Subsidiaries
as at the dates thereof and their results of operations for the periods then
ended, subject in the case of the unaudited statements to normal year end audit
adjustments and to the omission of footnotes required by GAAP.

(b)           The
Latest Projections when submitted to the Lenders as required herein represent
the good faith estimate by the Borrowers of the future financial performance of
Fleetwood and its consolidated Subsidiaries for the periods set forth
therein.  The Latest Projections have
been prepared on the basis of the assumptions set forth therein, which the
Borrowers believe are fair and reasonable in light of current and reasonably
foreseeable business conditions at the time submitted to the Lenders.

6.7           Capitalization.  Schedule 6.7 hereto sets forth the capitalization of Fleetwood and its
Subsidiaries and all of the authorized and issued Capital Stock of each such
Person.  All outstanding Capital Stock
has been validly issued, and is fully paid and non-assessable.  All of the Capital Stock of Subsidiaries is
owned, beneficially and of record, by the Person set forth on such Schedule
6.7.

6.8           Solvency.  Each of Fleetwood and Holdings is, and upon
the incurrence of any Obligations by such Loan Party will be, Solvent.  FMC, taken as a whole, is, and upon the
incurrence of any Obligations by any Loan Party will be Solvent.

6.9           Debt.  After giving effect to the Revolving Loans
outstanding as of and the making of the Term Loan on the Closing Date,
Fleetwood and its Subsidiaries have no Debt on the Closing Date, except (a) the
Obligations, (b) the Subordinated Debt existing on the Closing Date in an
amount (including principal and accrued but unpaid interest) of not more than
$261,000,000, and the Trust Securities in relation thereto also outstanding on
the Closing Date, (c) Debt described on Schedule 6.9 hereto, (d)
Guaranties entered into in accordance with Section 7.12 and (e) other
Debt in an aggregate amount of not more than $5,000,000.

6.10         Distributions.  Since June 12, 2001, no Distribution has been
declared, paid, or made upon or in respect of any Capital Stock or other
securities of Fleetwood or any of its Subsidiaries, except as permitted by Section 7.10.

6.11         Real
Estate; Leases.  Schedule 6.11
sets forth, as of the Closing Date, a correct and complete list of all Real
Estate owned in fee simple by Fleetwood or any of its Subsidiaries, all leases
and subleases of real or personal property held by Fleetwood or any of its
Subsidiaries as lessee or sublessee (other than leases of personal property as
to which Fleetwood or any of its Subsidiaries is lessee or sublessee for which
the value of such personal property covered by such lease in the aggregate is
less than $500,000), and all leases and subleases of real or personal property
held by Fleetwood or any of its Subsidiaries as lessor, or sublessor.  Each of such leases and subleases is valid
and enforceable in accordance with its terms and is in full force and effect,
and to the knowledge of Fleetwood and the Borrowers no material default by any
party to any such lease or sublease exists. 
Fleetwood and its Subsidiaries have good and marketable title in fee
simple to the Real Estate identified on Schedule 6.11 as owned by
Fleetwood or any of its Subsidiaries, or valid leasehold interests in all Real
Estate designated 

 42
 

 

therein as “leased” by Fleetwood or any of its
Subsidiaries and Fleetwood and its Subsidiaries have good, indefeasible, and
merchantable title to all of its other property reflected on the most recent
Financial Statements delivered to the Agent and the Lenders, except as disposed
of in the ordinary course of business or as otherwise permitted by Section
7.9 since the date thereof, free of all Liens except Permitted Liens.

6.12         Proprietary
Rights.  Schedule 6.12 hereto and as the same may be amended after
the Closing Date with the consent of the Agent (such consent not to be
unreasonably withheld), sets forth a correct and complete list of all of the
Proprietary Rights of the Loan Parties that are material to the conduct of the
businesses of the Loan Parties (other than commercially available third party
software).  As of the Closing Date, none
of such Proprietary Rights is subject to any licensing agreement or similar
arrangement except as set forth on Schedule 6.12 and as the same may be
amended after the Closing Date with the consent of the Agent (such consent not
to be unreasonably withheld).  To the
knowledge of Fleetwood and the Borrowers, none of the Proprietary Rights
infringes on or conflicts with any other Person’s property, and, to the
knowledge of Fleetwood and the Borrowers no other Person’s property infringes
on or conflicts with such Proprietary Rights, except in each case where such
infringement or conflict could not reasonably be expected to result in a
Material Adverse Effect.  The Proprietary
Rights described on Schedule 6.12 and as the same may be amended after
the Closing Date with the consent of the Agent (such consent not to be
unreasonably withheld), constitute all of the property of such type material to
the current and anticipated future conduct of the business of the Loan Parties.

6.13         Trade Names.  All material trade names or styles under which
any Loan Party will sell Inventory or create Accounts, or to which instruments
in payment of Accounts may be made payable, are listed on Schedule 6.13 hereto.

6.14         Litigation.  Except as set forth on Schedule 6.14 and as the same may be amended after the
Closing Date with the consent of the Agent (such consent not to be unreasonably
withheld), there is no pending, or to the best knowledge of Fleetwood and the
Borrowers threatened, action, suit, proceeding, or counterclaim by any Person,
or to the best knowledge of Fleetwood and the Borrowers, investigation by any
Governmental Authority, which could reasonably be expected to have a Material
Adverse Effect.

6.15         Labor
Disputes.  Except as set forth on Schedule
6.15 hereto (a) there is no
collective bargaining agreement or other labor contract covering employees of
Fleetwood or any of its Subsidiaries, (b) no such collective bargaining
agreement or other labor contract is scheduled to expire during the term of
this Agreement, (c) no union or other labor organization is seeking to
organize, or to be recognized as, a collective bargaining unit of employees of
Fleetwood or any of its Subsidiaries or for any similar purpose, and
(d) there is no pending or (to the best knowledge of the Borrowers)
threatened, strike, work stoppage, material unfair labor practice claim, or
other material labor dispute against or affecting Fleetwood or its Subsidiaries
or their employees.

 43
 

 

6.16         Environmental
Laws.  Except as otherwise disclosed
on Schedule 6.16 hereto:

(a)           Fleetwood
and its Subsidiaries have complied in all material respects with all
Environmental Laws and neither Fleetwood nor any Subsidiary nor any of its
presently owned real property or presently conducted operations, nor its
previously owned real property or prior operations, is subject to any
enforcement order from or liability agreement with any Governmental Authority
or private Person respecting (i) compliance with any Environmental Law or (ii)
any potential liabilities and costs or remedial action arising from the Release
or threatened Release of a Contaminant.

(b)           Fleetwood
and its Subsidiaries have obtained all permits necessary for their current
operations under Environmental Laws, the absence of which could reasonably be
expected to have a Material Adverse Effect, and all such permits are in good
standing and Fleetwood and its Subsidiaries are in compliance with all material
terms and conditions of such permits.

(c)           Neither
Fleetwood nor any of its Subsidiaries, nor, to the best knowledge of Fleetwood
and the Borrowers, any of its predecessors in interest, has stored, treated or
disposed of any hazardous waste in violation of applicable law, except for any
such violation as could not reasonably be expected to have a Material Adverse
Effect.

(d)           Neither
Fleetwood nor any of its Subsidiaries has, as of the Closing Date, received any
summons, complaint, order or similar written notice indicating that it is not
currently in compliance with, or that any Governmental Authority is
investigating its compliance with, any Environmental Laws or that it is or may
be liable to any other Person as a result of a Release or threatened Release of
a Contaminant.

(e)           To
the best knowledge of Fleetwood and the Borrowers, as of the Closing Date, none
of the present or past operations of Fleetwood and its Subsidiaries is the
subject of any investigation by any Governmental Authority evaluating whether
any remedial action is needed to respond to a Release or threatened Release of
a Contaminant.

(f)            There
is not now, nor to the best knowledge of Fleetwood and the Borrowers has there
ever been on or in the Real Estate:

(i)            any
underground storage tanks or other than those maintained and/or closed in
compliance in all material respects with applicable laws or surface
impoundments,

(ii)           any
asbestos-containing material that is friable, except such as has been removed
in compliance in all material respects with Environmental Laws, or

 44
 

 

(iii)          any
polychlorinated biphenyls (PCBs) used in hydraulic oils, electrical
transformers or other equipment, other than those maintained in compliance in
all material respects with Environmental Laws.

(g)           Neither
Fleetwood nor any of its Subsidiaries has filed any notice under any
requirement of Environmental Law reporting a spill or accidental and
unpermitted Release or discharge of a Contaminant into the environment.

(h)           Neither
Fleetwood nor any of its Subsidiaries has entered into any negotiations or
settlement agreements with any Person (including the prior owner of its
property) imposing material obligations or liabilities on Fleetwood or any of
its Subsidiaries with respect to any remedial action in response to the Release
of a Contaminant or environmentally related claim.

(i)            None
of the products currently manufactured, distributed or sold by Fleetwood or any
of its Subsidiaries contain asbestos containing material.

(j)            No
Environmental Lien has attached to the Real Estate.

6.17         No
Violation of Law.  Neither Fleetwood
nor any of its Subsidiaries is in violation of any law, statute, regulation,
ordinance, judgment, order, or decree applicable to it which violation could
reasonably be expected to have a Material Adverse Effect.

6.18         No
Default.  Neither Fleetwood nor any
of its Subsidiaries is in default with respect to any note, indenture, loan
agreement, mortgage, lease, deed, or other agreement to which Fleetwood or such
Subsidiary is a party or by which it is bound, which default could reasonably
be expected to have a Material Adverse Effect.

6.19         ERISA
Compliance.  Except as specifically
disclosed in Schedule 6.19 hereto:

(a)           Each
Plan is in compliance in all material respects with the applicable provisions
of ERISA, the Code and other federal or state law.  Each Plan which is intended to qualify under
Section 401(a) of the Code has received a favorable determination letter from
the IRS and to the best knowledge of Fleetwood and the Borrowers, nothing has
occurred which would cause the loss of such qualification.  Fleetwood and each ERISA Affiliate has made
all required contributions to any Plan subject to Section 412 of the Code, and
no application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.

(b)           There
are no pending or, to the best knowledge of Fleetwood and Borrowers, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. 
There has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect.

 45
 

 

(c)           (i)
No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension
Plan has any Unfunded Pension Liability; (iii) neither Fleetwood nor any ERISA
Affiliate has incurred, or reasonably expects to incur, any liability under
Title IV of ERISA with respect to any Pension Plan (other than premiums due and
not delinquent under Section 4007 of ERISA); (iv) neither Fleetwood nor any
ERISA Affiliate has incurred, or reasonably expects to incur, any liability
(and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA
with respect to a Multi-employer Plan; and (v) neither Fleetwood nor any ERISA
Affiliate has engaged in a transaction that could be subject to Section 4069 or
4212(c) of ERISA.

6.20         Taxes.  Fleetwood and its Subsidiaries have filed all
federal income and other material federal, provincial, state and other tax
returns required by law to be filed, and have paid all federal income and other
material taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable unless such unpaid taxes and assessments would constitute a Permitted
Lien or are being contested in good faith by appropriate proceedings.  Fleetwood and its Subsidiaries have withheld
and paid over all taxes required to have been withheld and paid over, and
complied in all material respects with all information reporting requirements
in connection with amounts paid or owing, to any employee, creditor,
independent contractor or other third party.

6.21         Regulated
Entities.  None of Fleetwood, any
Person controlling Fleetwood, or any Subsidiary, is an “Investment Company”
within the meaning of the Investment Company Act of 1940.  No Loan Party is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code or law, or any other
federal or state statute or regulation limiting its ability to incur
indebtedness.

6.22         Use
of Proceeds; Margin Regulations.  The
proceeds of the Loans are to be used solely for the repayment of Debt, working
capital and other general corporate purposes. 
Neither Fleetwood nor any Subsidiary is engaged in the business of
purchasing or selling Margin Stock or extending credit for the purpose of
purchasing or carrying Margin Stock.

6.23         Copyrights,
Patents, Trademarks and Licenses, etc. 
Each Loan Party owns or is licensed or otherwise has the right to use
all of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, licenses, rights of way, authorizations and other
rights that are reasonably necessary for the operation of its businesses,
without known conflict in any material respect with the rights of any other
Person.  To the knowledge of Fleetwood
and the Borrowers, no slogan or other advertising device, product, process,
method, substance, part or other material now employed, or now contemplated to
be employed, by Fleetwood or any Subsidiary infringes upon any rights held by
any other Person in any manner that could reasonably be expected to result in a
Material Adverse Effect.  No claim or
litigation regarding any of the foregoing is pending or, to the knowledge of
Fleetwood and the Borrowers, threatened, and to the knowledge of Fleetwood and
the Borrowers no patent, invention, device, application, principle or any
statute, law, rule, regulation, standard or code is pending or, to the
knowledge of Fleetwood and the Borrowers, proposed, which, in either case,
could reasonably be expected to have a Material Adverse Effect.

 46
 

 

6.24         No
Material Adverse Change.  No Material
Adverse Effect has occurred since April 30, 2006.

6.25         Full
Disclosure.  None of the
representations or warranties made by Fleetwood or any Subsidiary in the Loan
Documents as of the date such representations and warranties are made or deemed
made, and none of the statements contained in any exhibit, report, written
statement or certificate furnished by or on behalf of Fleetwood or any
Subsidiary in connection with the Loan Documents (including the offering and
disclosure materials delivered by or on behalf of Fleetwood or any of its
Subsidiaries to the Lenders prior to the Closing Date), contains any untrue
statement of a material fact or, when considered as a whole, omits any material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they are made, not
misleading as of the time when made or delivered.

6.26         Material
Agreements.  There are no agreements,
contracts and other documents that are material to Fleetwood and its
Subsidiaries other than the Material Contracts.

6.27         Bank
Accounts.  Schedule 6.27 hereto contains a complete and accurate list
of all bank accounts maintained by any Loan Party with any bank or other financial
institution.

6.28         Governmental
Authorization.  No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other Person is necessary or required in connection
with the execution, delivery or performance by, or enforcement against,
Fleetwood or any of its Subsidiaries of this Agreement or any other Loan
Document.

6.29         Senior
Indebtedness.  All Obligations of
Fleetwood under the Loan Documents are “Senior Indebtedness” under the 2003
Subordinated Debentures.  All Obligations
of Fleetwood under this Agreement and the other Loan Documents to the extent
such Obligations are (A) liabilities of Fleetwood for borrowed money or under
any reimbursement obligation relating to a letter of credit, surety bond or
similar instrument, or (B) liabilities of Fleetwood evidenced by a bond, note,
debenture or similar instrument, or (C) liabilities of others described in the
preceding clauses (A) and (B) that Fleetwood has guaranteed or that are otherwise
its legal liability, or (D) deferrals renewals, extensions or refundings of any
liability of the types referred to in clauses (A), (B) and (C) above, are “Senior
Indebtedness” under the 1998 Subordinated Debentures and Fleetwood’s guaranty
of the Trust Securities.

ARTICLE 7

AFFIRMATIVE AND NEGATIVE COVENANTS

Fleetwood and the Borrowers covenant to the Agent and
each Lender that until the payment in full in cash of all of the Obligations:

7.1           Taxes
and Other Obligations.  Fleetwood
shall, and shall cause each of its Subsidiaries to, (a) file when due
(subject to any extensions thereof) all tax returns and other reports which it
is required to file; (b) pay, or provide for the payment, when due (subject to
permitted extensions), of all material taxes, fees, assessments and other
governmental charges against it or upon its property, income and franchises,
make all required withholding and other 

 47
 

 

tax deposits, and establish adequate reserves for the
payment of all such items, and provide to the Agent and the Lenders, upon
request, satisfactory evidence of its timely compliance with the foregoing; and
(c) pay when due all Debt owed by it and all claims of materialmen,
mechanics, carriers, warehousemen, landlords, processors and other like
Persons, and all other indebtedness owed by it if failure to pay such Debt or
such claims would otherwise result in an Event of Default and perform and
discharge in a timely manner all other obligations undertaken by it; provided,
however, so long as Fleetwood has notified the Agent in writing, neither
Fleetwood nor any of its Subsidiaries need pay any amount pursuant to clauses
(b) or (c) above (i) it is contesting in good faith by appropriate
proceedings diligently pursued, (ii) as to which Fleetwood or its Subsidiary, as
the case may be, has established proper reserves as required under GAAP, and
(iii) the nonpayment of which does not result in the imposition of a Lien
(other than a Permitted Lien).

7.2           Legal
Existence and Good Standing. 
Fleetwood shall, and shall cause each other Loan Party to, maintain its
legal existence (except as permitted by Section 7.9) and its
qualification and good standing in all jurisdictions in which the failure to
maintain such existence and qualification or good standing would reasonably be
expected to have a Material Adverse Effect.

7.3           Compliance
with Law and Agreements; Maintenance of Licenses.  Fleetwood shall comply, and shall cause each
Subsidiary to comply, in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act and all Environmental
Laws).  Fleetwood shall, and shall cause
each of its Subsidiaries to, obtain and maintain all licenses, permits,
franchises, and governmental authorizations necessary to own its property and
to conduct its business as conducted on the Closing Date, except where the
failure to obtain or maintain such licenses, franchises and governmental
authorizations could not reasonably be expected to have a Material Adverse
Effect.  Fleetwood shall not, and shall
not permit any of its Subsidiaries to, modify, amend or alter its certificate
or articles of incorporation, or its limited liability company operating
agreement, limited partnership agreement or other organizational documents, as
applicable, other than in a manner which does not adversely affect the rights
of the Lenders or the Agent.

7.4           Maintenance of
Property; Inspection of Property.

(a)           Fleetwood
shall, and shall cause each of its Subsidiaries to, maintain all of its
property necessary and useful in the conduct of its business, in good operating
condition and repair, ordinary wear and tear excepted and except where the
failure to maintain any such property would not reasonably be expected to have a
Material Adverse Effect.

(b)           Fleetwood
shall, and shall cause each of the Loan Parties to, permit representatives and
independent contractors of the Agent (at the expense of the Borrowers and not
to exceed two (2) times per year unless an Event of Default has occurred and is
continuing) to visit and inspect any of its properties, to examine its
corporate, financial and operating records, and make copies thereof or
abstracts therefrom and to discuss its affairs, finances and accounts with its
directors,

 48
 

 

officers and
independent public accountants (and, in the case of discussions with the
Borrowers’ accountants, with the Borrowers present), at such reasonable times
during normal business hours and as soon as may be reasonably desired, upon
reasonable advance; provided, however, that representatives and
independent contractors of each Lender may, at such Lender’s own expense,
accompany the Agent’s representatives and independent contractors on such
visits and inspections.  Notwithstanding
the foregoing, when an Event of Default exists, the Agent or any Lender may do
any of the foregoing at the expense of the Borrowers at any time during normal
business hours and without advance notice.

7.5           Insurance.

(a)           Fleetwood shall
maintain, and shall cause each of its Subsidiaries to maintain, with
financially sound and reputable insurers having a rating of at least A+ or
better by Best Rating Guide, insurance against loss or damage by fire with
extended coverage; theft, burglary, pilferage and loss in transit; public liability
and third party property damage; larceny, embezzlement or other criminal
liability; business interruption; public liability and third party property
damage; and such other hazards or of such other types as is customary for
Persons engaged in the same or similar business, in amounts customary for
Persons engaged in the same or similar business, and under policies acceptable
to the Agent and the Majority Lenders. 
Without limiting the foregoing, in the event that any improved Real
Estate covered by the Mortgages is determined to be located within an area that
has been identified by the Director of the Federal Emergency Management Agency
as a Special Flood Hazard Area (“SFHA”), the applicable Loan Party shall
purchase and maintain flood insurance on the improved Real Estate and any
Equipment and Inventory located on such Real Estate to the extent required by
applicable law.  The amount of said flood
insurance will be reasonably determined by the Agent, and shall, at a minimum,
comply with applicable federal regulations as required by the Flood Disaster
Protection Act of 1973, as amended. 
Except as otherwise approved by the Agent, the Loan Parties shall also
maintain flood insurance for all Inventory and Equipment which is, at any time,
located in a SFHA.

(b)           Fleetwood
shall cause the Agent, for the ratable benefit of the Agent and the Lenders, to
be named as secured party or mortgagee and sole loss payee or additional
insured, in a manner acceptable to the Agent. 
Each policy of insurance shall contain a clause or endorsement requiring
the insurer to give not less than thirty (30) days’ prior written notice to the
Agent in the event of cancellation of the policy for any reason whatsoever and
a clause or endorsement stating that the interest of the Agent shall not be
impaired or invalidated by any act or neglect of Fleetwood or any of its
Subsidiaries or the owner of any Real Estate for purposes more hazardous than
are permitted by such policy.  All
premiums for such insurance shall be paid by Fleetwood and its 

 49
 

 

Subsidiaries
when due, and certificates of insurance and, if requested by the Agent or any
Lender, photocopies of the policies, shall be delivered to the Agent, in each
case in sufficient quantity for distribution by the Agent to each of the
Lenders.  If Fleetwood and its
Subsidiaries fail to procure such insurance or to pay the premiums therefor
when due, the Agent may, and at the direction of the Majority Lenders shall, do
so from the proceeds of Revolving Loans.

7.6           Insurance
and Condemnation Proceeds.  The
Borrowers shall promptly notify the Agent and the Lenders of any material loss,
damage, or destruction to the Collateral, whether or not covered by
insurance.  The Agent is hereby
authorized to collect all insurance and condemnation proceeds in respect of
Collateral directly and to apply or remit them as follows:

(a)           With
respect to insurance and condemnation proceeds relating to Collateral other
than Fixed Assets, after deducting from such proceeds the reasonable expenses,
if any, incurred by the Agent in the collection or handling thereof, the Agent
shall apply such proceeds to the Revolving Loans.

(b)           With
respect to insurance and condemnation proceeds relating to Collateral
consisting of Fixed Assets, the Agent shall permit or require the Loan Parties
to use such proceeds, or any part thereof, to replace, repair, restore or
rebuild the relevant Fixed Assets in a diligent and expeditious manner with
materials and workmanship of substantially the same quality as existed before
the loss, damage or destruction so long as (1) no Default or Event of
Default has occurred and is continuing and (2) the Loan Parties first
(i) provide the Agent and the Majority Lenders with plans and
specifications for any such repair or restoration which shall be reasonably satisfactory
to the Majority Lenders (such satisfaction not to be unreasonably withheld or
delayed) and (ii) demonstrate to the reasonable satisfaction of the
Majority Lenders (such satisfaction not to be unreasonably withheld or delayed)
that the funds available to it will be sufficient to complete such project in
the manner provided therein.  In all
other circumstances, the Agent shall hold all such insurance and condemnation
proceeds as Collateral or, if directed by the Majority Lenders, apply such
insurance and condemnation proceeds (a) if such Fixed Assets are Term Loan
Collateral, to the Term Loan or (b) otherwise, to the Revolving Loans (but
without reduction of the Revolving Loan Commitments).  Notwithstanding the foregoing, no insurance
or condemnation proceeds relating to the Term Loan Collateral may be used to
replace, repair, restore or rebuild without the prior written consent of
Majority Term Lenders (such consent not be unreasonably withheld or delayed).

7.7           Environmental Laws.

(a)           Fleetwood
shall, and shall cause each of its Subsidiaries to, conduct its business in
compliance in all material respects with all Environmental Laws applicable to
it, including those relating to the generation, handling, use, storage, and
disposal of any Contaminant.  Fleetwood
shall, and shall cause each of its Subsidiaries to, take prompt and appropriate
action to respond to any non-compliance with Environmental Laws and shall
regularly report to the Agent on such responses to any material non-compliance
with Environmental Laws.

 50
 

 

(b)           Without
limiting the generality of the foregoing, Fleetwood shall submit to the Agent
and the Lenders annually, commencing on the first Anniversary Date, and on each
Anniversary Date thereafter, an update of the status of each environmental
compliance or liability issue.  The Agent
or any Lender may request copies of technical reports prepared by Fleetwood or
any of its Subsidiaries and its communications with any Governmental Authority
to determine whether Fleetwood or any of its Subsidiaries is proceeding
reasonably to correct, cure or contest in good faith any alleged non-compliance
or environmental liability.  Fleetwood
shall, at the Agent’s or the Majority Lenders’ request and at the Borrowers’
expense, (i) retain an independent environmental engineer acceptable to
the Agent to evaluate the site, including tests if appropriate, where the
non-compliance or alleged non-compliance with Environmental Laws has occurred
and prepare and deliver to the Agent, in sufficient quantity for distribution
by the Agent to the Lenders, a report setting forth the results of such
evaluation, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof, and (ii) provide to
the Agent and the Lenders a supplemental report of such engineer whenever the
scope of the environmental problems, or the response thereto or the estimated
costs thereof, shall increase in any material respect.

(c)           The
Agent and its representatives will have the right at any reasonable time to
enter and visit the Real Estate and any other place where any property of any
Loan Party is located (such right limited to twice within any twelve (12) month
period or any time following notice of any notice of any non-compliance with
Environmental Law) for the purposes of observing the Real Estate, taking and
removing soil or groundwater samples, and conducting tests on any part of the
Real Estate.  The Agent is under no duty,
however, to visit or observe the Real Estate or to conduct tests, and any such
acts by the Agent will be solely for the purposes of protecting the Agent’s
Liens and preserving the Agent and the Lenders’ rights under the Loan
Documents.  No site visit, observation or
testing by the Agent and the Lenders will result in a waiver of any default or
impose any liability on the Agent or the Lenders.  In no event will any site visit, observation
or testing by the Agent be a representation that hazardous substances are or
are not present in, on or under the Real Estate, or that there has been or will
be compliance with any Environmental Law. 
Neither Fleetwood nor any of its Subsidiaries nor any other party is
entitled to rely on any site visit, observation or testing by the Agent.  The Agent and the Lenders owe no duty of care
to protect Fleetwood or any of its Subsidiaries or any other party against, or
to inform Fleetwood or any of its Subsidiaries or any other party of, any
hazardous substances or any other adverse condition affecting the Real Estate.  The Agent may in its discretion disclose to
Fleetwood or to any other party if so required by law any report or findings
made as a result of, or in connection with, any site visit, observation or
testing by the Agent.  Fleetwood and the
Borrowers understand and agree that the Agent makes no warranty or
representation to any Loan Party or any other party regarding the truth,
accuracy or completeness of any such report or findings that may be
disclosed.  Fleetwood and the Borrowers
also understands that depending on the results of any site visit, observation
or testing by the Agent 

 51
 

 

and disclosed
to Fleetwood, Fleetwood or its Subsidiary may have a legal obligation to notify
one or more environmental agencies of the results, that such reporting
requirements are site-specific, and are to be evaluated by or its Subsidiary
without advice or assistance from the Agent. 
In each instance, the Agent will give Fleetwood reasonable notice before
entering the Real Estate or any other place the Agent is permitted to enter
under this Section 7.7(c).  The
Agent will make reasonable efforts to avoid interfering with the use of the
Real Estate or any other property in exercising any rights provided hereunder.

7.8           Compliance
with ERISA.  Fleetwood shall, and
shall cause each of its ERISA Affiliates to: 
(a) maintain each Plan in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law; (b)
cause each Plan which is qualified under Section 401(a) of the Code to maintain
such qualification; (c) make all required contributions to any Plan subject to
Section 412 of the Code; (d) not engage in a prohibited transaction or
violation of the fiduciary responsibility rules which prohibited transaction or
violation of fiduciary responsibility rules, together with all other prohibited
transactions and violations of fiduciary responsibility rules, has resulted or
could reasonably be expected to result in a Material Adverse Effect; and (e)
not engage in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA.

7.9           Mergers,
Consolidations or Sales.  Neither
Fleetwood nor any of its Subsidiaries shall enter into any transaction of
merger, reorganization, or consolidation, or transfer, sell, assign, lease, or
otherwise dispose of all or any part of its property, or wind up, liquidate or
dissolve, or agree to do any of the foregoing, except

(a)           sales
of Inventory in the ordinary course of its business;

(b)           sales,
trade-ins, exchanges or other dispositions of Equipment in the ordinary course
of business that are obsolete or no longer used or useable by the applicable
Person in its business with an orderly liquidation value not to exceed
$5,000,000 in any Fiscal Year;

(c)           on
no less than 10 days’ prior notice to the Agent (unless a shorter period is
acceptable to the Agent in its sole discretion), any Borrower may merge with
and into any other Borrower, provided, however, that all Liens of
the Agent shall remain unimpaired, and the surviving Borrower shall execute and
deliver to the Agent such documents and agreements as the Agent may reasonably
request to evidence the continued liability for the Obligations of the
disappearing Borrower and the Liens securing such Obligations;

(d)           sales,
trade-ins, exchanges or other dispositions of assets by Fleetwood or any of its
Subsidiaries (other than Term Loan Collateral or any other real property
Collateral) with an orderly liquidation value not to exceed $5,000,000 in the
aggregate for the period commencing on the Closing Date through and including
the Termination Date;

 52
 

 

(e)           sale
for fair market value of the assets described on Schedule 7.9 as “Assets
held for Sale” if (1) at least 50% of the proceeds are received in cash and
applied to the Obligations in accordance with Section 3.4 and any
non-cash consideration received by any Loan Party shall constitute additional
Collateral hereunder, in which the Agent shall have a duly perfected Lien; and
(2) after giving effect to such disposition, no Default or Event of Default
exists;

(f)            [RESERVED].

(g)           any
Excluded Subsidiary and any Inactive Subsidiary may be wound up and dissolved
or sell any of its assets;

(h)           sale/leaseback
transactions with respect to Real Estate and Equipment permitted by Section
7.19;

(i)            any
sale or other disposition by Fleetwood or any Borrower of property that does
not constitute Collateral, provided that the Flexibility Conditions are
satisfied as of the date of and both before and immediately after giving effect
to such sale or other disposition.

(j)            sale
of Term Loan Collateral for at least fair market value, provided, however,
that (x) the sales price for any Term Loan Collateral must be greater than
eighty percent (80%) of the Appraised Orderly Liquidation Value for such Term
Loan Collateral; and (y) all proceeds shall be in cash and shall be applied to
repay the Loans as required by Section 3.4(c); and

(k)           any
loss, damage, or destruction to Fleetwood’s assets, in so far as the insurance
and/or condemnation proceeds received by Fleetwood in connection thereof are
applied in accordance with Section 7.6.

All Equipment purchased under this paragraph shall be
free and clear of all Liens except Liens under clauses (a) and (b) of the
definition of Permitted Liens.

7.10         Distributions;
Capital Change; Restricted Investments. 
Neither Fleetwood nor any of its Subsidiaries shall:

(a)           directly
or indirectly declare or make, or incur any liability to make, any
Distribution, except (i) Distributions to Holdings by any of its
Subsidiaries, or Distributions by any Borrower to another Borrower which is its
parent; (ii) so long as no Default or Event of Default has occurred and is
continuing on the date of the payment thereof, both before and after giving
effect to such payment, the Borrowers may make Distributions to Fleetwood (or
make intercompany loans permitted to be paid pursuant to Section 7.13(h)
or retain management fees to the extent permitted to be paid pursuant to Section
7.26) to pay, and Fleetwood may pay, a cash Dividend on the common stock of
Fleetwood in aggregate amounts not in excess of $.04 per share of its
outstanding common stock in any Fiscal Quarter; (iii) so long as no Default or
Event of Default has occurred and is continuing on the date of the payment
thereof, both before and after giving effect to such 

 53
 

 

payment, the
Borrowers may make Distributions to Fleetwood (or make intercompany loans
permitted to be paid pursuant to Section 7.13(h) or retain management
fees to the extent permitted pursuant to Section 7.26) to make the
payments permitted pursuant to Section 7.29 hereof; (iv) subject to
the subordination provisions contained in each of the 1998 Subordinated
Debentures and the 2003 Subordinated Debentures, as applicable, Fleetwood may
make payments in respect of the 1998 Subordinated Debentures and the 2003
Subordinated Debentures, and Fleetwood Trust may make related Distributions in
connection therewith, subject to the limitations of Section 7.29 hereof;
(v) Subsidiaries of Fleetwood may make Distributions to Fleetwood (or make
intercompany loans permitted to be paid pursuant to Section 7.13(h) or
retain management fees to the extent permitted pursuant to Section 7.26)
to pay when due (x) consolidated taxes, employee related expenses
(including salaries, wages, bonuses, fringe benefits, health benefits, workers
compensation insurance premiums and claims, retirement plan contributions and
related expenses (including payments with respect to the COLI Policies), and
manager’s in training reimbursements), marketing and product development,
capital expenditures and products’ liability payments, in a manner consistent
with past practices and (y) an additional aggregate amount in any Fiscal
Year not to exceed $6,000,000 to fund other general corporate overhead and
operating expenses; (vi) Subsidiaries of Fleetwood may pay management fees
to Fleetwood consistent with those agreements in existence on the Closing Date;
(vii) Fleetwood or the Fleetwood Trust may redeem, prepay, repurchase or
otherwise acquire the 1998 Subordinated Debentures, the 2003 Subordinated
Debentures and the Trust Securities (and pay the contemplated fees) to the
extent permitted under Sections 7.14 and 7.29; (viii) Borrowers may make
Distributions to Fleetwood or any Excluded Subsidiary of assets or proceeds of
sales of assets to the extent such assets do not in either case constitute
Collateral; provided that the Flexibility Conditions are satisfied as of
the date of and both before and immediately after giving effect to such
Distribution; and (ix) with respect to any Debt incurred pursuant to Section
7.13(m), the proceeds of which were received by any Borrower from
Fleetwood, any such Borrower may prepay such Debt pursuant to and subject to
the limitations of Section 7.14(d) hereof.

(b)           make
any change in its capital structure which could reasonably be expected to have
a Material Adverse Effect; or

(c)           make
any Restricted Investment other than Hedge Agreements with a Lender, except
that (i) Fleetwood may make capital contributions to Holdings;
(ii) any Borrower may make contributions, loans or advances to any other
Borrower; (iii) any Borrower may make loans or advances to Fleetwood or
any Subsidiary only to the extent permitted by Section 7.13;
(iv) any Excluded Subsidiary may make contributions, loans or advances to
any other Excluded Subsidiary; (v) Fleetwood may make capital contributions,
loans or advances to the Excluded Subsidiaries; provided that the
aggregate amount of all such capital contributions, loans and advances does not
to exceed $15,000,000 for the period commencing on the Closing Date and ending
on the Termination Date; and (vi) Fleetwood may make advances to any
Borrower after the Closing Date.

 54
 

 

7.11         Transactions
Affecting Collateral or Obligations. 
Neither Fleetwood nor any of its Subsidiaries shall enter into any
transaction which would be reasonably expected to have a Material Adverse
Effect.

7.12         Guaranties.  Neither Fleetwood nor any of its Subsidiaries
shall make, issue, or become liable on any Guaranty, except
(a) Guaranties of the Obligations in favor of the Agent;
(b) Repurchase Obligations of Fleetwood incurred in the ordinary course of
business consistent with past practices and customary in the industry;
(c) Guaranties existing on the date hereof and described on Schedule
7.12 hereto; (d) Fleetwood’s unsecured Guaranty of the Trust
Securities; (e) Letters of Credit issued for the account of a Borrower to
support obligations of Fleetwood and its Subsidiaries for worker’s compensation
and similar claims and insurance liabilities; (f) endorsements for
collection or deposits in the ordinary course of business; (g) Fleetwood’s
unsecured guaranty of up to $1,000,000 of the RCI Obligations, provided
that Fleetwood shall give notice of any claim by RCI upon such guaranty (and
any payment thereon) if the amount of any such past or present claim or claims,
in the aggregate, exceeds $500,000 for the period commencing on the Closing
Date and ending on the Termination Date; and (h) other Guaranties in an
aggregate amount not to exceed $10,000,000 at any time in effect.

7.13         Debt
.  Neither Fleetwood nor any of its
Subsidiaries shall incur or maintain any Debt, other than:

(a)           the
Obligations;

(b)           the
Subordinated Debt;

(c)           Debt
existing on the Closing Date described on Schedule 6.9 hereto;

(d)           Capital
Leases of Equipment and purchase money secured Debt incurred to purchase
Equipment provided that

(i)            Liens
securing the same attach only to the Equipment acquired by the incurrence of
such Debt and proceeds thereof, and

(ii)           the
aggregate amount of such Debt (including Capital Leases, and including, without
limitation, any such Capital Leases listed on Schedule 6.9 hereto)
outstanding does not exceed $20,000,000 at any time;

(e)           Capital
Leases of Equipment or Real Estate entered into in connection with
sale\leaseback transactions permitted pursuant to Section 7.19; provided
that Liens securing the same attach only to the Equipment or Real Estate
subject to the applicable Capital Lease;

(f)            Debt
evidencing a refunding, renewal or extension of the Debt permitted under Section
7.13(d), Section 7.13(s), or described on Schedule 6.9 hereto;
provided that:

 55

 

(i)            the principal amount thereof is not
increased,

(ii)           the Liens, if any, securing such refunded,
renewed or extended Debt do not attach to any assets in addition to those
assets, if any, securing the Debt to be refunded, renewed or extended,

(iii)          no Person that is not an obligor or guarantor
of such Debt as of the Closing Date shall become an obligor or guarantor
thereof,

(iv)          the terms of such refunding, renewal or
extension are no less favorable in any material respect to Fleetwood, its
Subsidiary, the Agent or the Lenders than the original Debt; and

(v)           in the case of such Debt incurred in
connection with any refunding, renewal or extension of Debt originally incurred
pursuant to Section 7.13(d) or Section 7.13(s), as applicable
(and irregardless of whether such Debt appears on Schedule 6.9 hereto),
such continuing Debt otherwise complies with the terms and conditions of Section
7.13(d), or Section 7.13(s), as applicable, and, in each case, meets
the requirements of any of the defined terms in such Sections.

(g)         Debt of any Borrower to another Borrower
evidenced by a master intercompany note pledged to the Agent;

(h)         Debt of Fleetwood to any Borrower provided,
that (i) on the date of the advance of the proceeds of such Debt, such
Borrower would be permitted to make a Distribution pursuant to Section
7.10(a)(ii), (iii), or (v); and (ii) such Debt is evidenced by a promissory
note pledged to the Agent;

(i)          Debt of any Excluded Subsidiary to Fleetwood;
provided that (i) such loan is permitted pursuant to Section
7.10(c)(v), (vi) or (vii) and (ii) such Debt is evidenced by a
promissory note pledged to the Agent;

(j)          [RESERVED];

(k)         [RESERVED];

(l)          Debt of any Excluded Subsidiary to another
Excluded Subsidiary;

(m)        Debt of a Borrower to Fleetwood or any Subsidiary
(other than a Borrower or an Excluded Subsidiary) that is evidenced by a master
intercompany note pledged to the Agent, and subordinated to the payment in full
of the Obligations on terms satisfactory to the Majority Lenders;

(n)         [RESERVED].

(o)         Guaranties permitted by Section 7.12
and any Debt arising upon such contingent obligations becoming absolute and
matured;

 56
 

 

(p)         Debt of any Borrower to Fleetwood Canada which
loans are evidenced by an intercompany note pledged to the Agent and
subordinated to payment in full of the Obligations on terms satisfactory to the
Majority Lenders provided that the aggregate amount of all such Debt to
all Borrowers outstanding does not exceed the amount of the Borrowing Base
attributable to the Accounts of Fleetwood Canada;

(q)         obligations under Hedge Agreements with any
Lender;

(r)          Debt arising from rights of indemnity or
contribution with respect to payments under the Loan Documents;

(s)         mortgage Debt of Fleetwood or any Borrower; provided
that (x) such mortgage Debt is secured solely by Liens which attach only
to property that does not constitute Collateral, and (y) the Flexibility
Conditions are satisfied as of the date of and both before and immediately
after giving effect to the incurrence of such mortgage Debt;

(t)          Debt of Fleetwood the proceeds of which are
applied solely for the purpose of paying benefits to employees or former
employees who are participants in non-qualified benefit plans of Fleetwood and
its Subsidiaries which are supported by the COLI Policies; provided that
(x) such Debt is secured solely by Liens which attach only to the COLI
Policies; and (y) the Flexibility Conditions are satisfied as of the date
of and both before and immediately after giving effect to the incurrence of
such Debt;

(u)         [RESERVED]; and

(v)         other unsecured Debt not to exceed $3,000,000
in the aggregate for all Loan Parties.

7.14         Prepayment.  Neither Fleetwood nor any of its Subsidiaries
shall voluntarily prepay any Debt, except the Obligations in accordance with
the terms of this Agreement; provided that (a) any of Fleetwood or its
Subsidiaries may prepay Debt incurred pursuant to Sections 7.13(g) through
(l), inclusive, and Section 7.13(p); (b) Fleetwood and its
Subsidiaries may prepay Debt, including, without limitation, Capital Leases,
being refinanced pursuant to Section 7.13(f) hereof; (c) (i) so long as
the Flexibility Conditions are satisfied as of the date of and both before and
immediately after giving effect to such prepayment, Fleetwood and its
Subsidiaries may prepay (A) any Capital Leases, so long as the acquisition of
any property in connection with the prepayment of such Capital Lease would not
constitute a Restricted Investment and (B) any Debt incurred pursuant to Section
7.13 and (ii) so long as the Flexibility Conditions are satisfied as of the
date of and both before and immediately after giving effect to such prepayment,
Fleetwood and its Subsidiaries may prepay any Debt not otherwise permitted to
be prepaid pursuant to this Section 7.14 in an aggregate amount not to
exceed $1,000,000; (d) so long as the Flexibility Conditions are satisfied as
of the date of and both before and immediately after giving effect to such
prepayment, any Borrower make prepayments to Fleetwood of Debt incurred
pursuant to Section 7.13(m), the proceeds of which were received

 57
 

 

by such Borrower from
Fleetwood; and (e) so long as no Default or Event of Default has occurred
and is continuing on the date of the payment thereof and the Flexibility
Conditions are satisfied, in each case both before and after giving effect to
such payment or other specified action, Fleetwood, or Fleetwood Trust, as
applicable, may, on or prior to May 9, 2007, either (I) call for redemption,
prepay, repurchase or otherwise acquire in exchange for the issuance to the holders
thereof of ordinary or common Capital Stock of Fleetwood and, in each case,
cancel all or such portion of the 2003 Subordinated Debentures, the 1998
Subordinated Debentures or the Trust Securities so redeemed, prepaid,
repurchased or otherwise acquired or (II) pay a solicitation, conversion, or
other inducement fee to induce the holders of the Trust Securities or the 2003
Subordinated Debentures, to convert the Trust Securities or the 2003
Subordinated Debentures, pursuant to the terms thereof; provided that
the aggregate amount of such prepayment or repurchase from and after May 9,
2006 to May 9, 2007 does not exceed, in the case of clauses (I) and (II) above
combined, $50,000,000 and, in the case of clause (II) above, a sublimit of
$20,000,000; provided  further that contemporaneously therewith
either (A) in the case of prepayments in respect of the 1998 Subordinated
Debentures made pursuant to clause (I) above, Fleetwood Trust uses such
proceeds to prepay or repurchase and cancel those Trust Securities having the
same liquidation amount as the principal amount of such 1998 Subordinated
Debentures underlying such Trust Securities or (B) in the case of clause (II)
above, the holders of the Trust Securities or the 2003 Subordinated Debentures,
together with Fleetwood Trust, otherwise comply with the requirements upon
conversion set forth in the 1998 Subordinated Debentures and the Trust
Securities, or the 2003 Subordinated Debentures, as applicable; and provided
still  further that the per-security amount of any redemption,
prepayment or repurchase of the 2003 Subordinated Debentures, the 1998
Subordinated Debentures or the Trust Securities shall not exceed 95.0% of the
par value of the security being so redeemed, prepaid or repurchased.

7.15         Transactions with
Affiliates.  Except as set forth
below, neither Fleetwood nor any of its Subsidiaries shall sell, transfer,
distribute, or pay any money or property, including, but not limited to, any
fees or expenses of any nature (including, but not limited to, any fees or
expenses for management services), to any Affiliate, or lend or advance money
or property to any Affiliate, or except as permitted in Sections 7.10 and
7.14 invest in (by capital contribution or otherwise) or purchase or
repurchase any Capital Stock or indebtedness, or any property, of any
Affiliate, or except as permitted in Section 7.12, become liable on any
Guaranty of the indebtedness, dividends, or other obligations of any
Affiliate.  Notwithstanding the foregoing
but subject to the limitations set forth in Sections 7.9, 7.10, 7.12,
and 7.13, (i) any Loan Party may engage in transactions with any other
Loan Party in the ordinary course of business consistent with past practices;
and (ii) while no Event of Default has occurred and is continuing, any Loan
Party may engage in transactions with any Affiliate (other than a Loan Party)
in the ordinary course of business consistent with past practices, and in the
case of transactions with Affiliates other than Excluded Subsidiaries, in
amounts and upon terms fully disclosed to the Agent and the Lenders, and no
less favorable to Loan Parties than would be obtained in a comparable arm’s-length
transaction with a third party who is not an Affiliate.  The foregoing restrictions shall not apply to
(a) reasonable and customary fees paid to, and customary indemnification of,
members of the board of directors (or similar governing body) of Fleetwood and
its Subsidiaries and (b) compensation arrangements for officers and other
employees of Fleetwood and its Subsidiaries entered into in the ordinary course
of business.

 58
 

 

7.16         Investment Banking and
Finder’s Fees.  Neither Fleetwood nor
any of its Subsidiaries shall pay or agree to pay, or reimburse any other party
with respect to, any investment banking or similar or related fee, underwriter’s
fee, finder’s fee, or broker’s fee to any Person in connection with this
Agreement.  The Borrowers shall defend
and indemnify the Agent and the Lenders against and hold them harmless from all
claims of any Person that the Borrower is obligated to pay for any such fees,
and all costs and expenses (including attorneys’ fees) incurred by the Agent
and/or any Lender in connection therewith.

7.17         Business Conducted.  Fleetwood shall not and shall not permit any
of its Subsidiaries to, engage directly or indirectly, in any line of business
other than the businesses in which it is engaged on the Closing Date and
businesses reasonably related thereto.

7.18         Liens.  Neither Fleetwood nor any of its Subsidiaries
shall create, incur, assume, or permit to exist any Lien on any property now
owned or hereafter acquired by any of them, except Permitted Liens.

7.19         Sale and Leaseback
Transactions.  Neither Fleetwood nor
any of its Subsidiaries shall, directly or indirectly, enter into any arrangement
with any Person providing for Fleetwood or such Subsidiary to lease or rent
property that Fleetwood or such Subsidiary has sold or will sell or otherwise
transfer to such Person, except that:

(a)         a Borrower may sell Real Estate owned by it
(other than Term Loan Collateral) and lease such Real Estate if (i) the
terms and conditions of such sale and leaseback are approved by Majority
Lenders and (ii) the proceeds of such sale are applied to the Obligations
in accordance with Section 3.4;

(b)         a Borrower may sell Real Estate that is Term
Loan Collateral and that is owned by it and lease such Real Estate if (i) the
Net Proceeds are an amount in excess of eighty percent (80%) of the Appraised
Orderly Liquidation Value for such Term Loan Collateral, (ii) the terms and
conditions of such sale and leaseback are approved by Required Term Lenders and
(iii) the proceeds of such sale are applied to the Obligations in accordance
with Section 3.4; and

(c)         a Borrower may sell Equipment owned by it and
lease such Equipment if (i) the terms and conditions of such sale and
leaseback are approved by Majority Lenders (ii) the proceeds of such sale
are applied to the Obligations in accordance with Section 3.4; and
(iii) the aggregate Net Proceeds of such sale and all previous sales
pursuant to this Section 7.19(b) do not exceed $25,000,000.

7.20         New Subsidiaries.  Without the prior written consent of the
Agent, Fleetwood shall not, directly or indirectly, organize, create, acquire
or permit to exist any subsidiary other (i) than those listed on Schedule
6.5 hereto as the same may be amended from time to time with the consent of
the Agent (not to be unreasonably withheld), (ii) Inactive Subsidiaries, and
(iii) the Mexican Subsidiary.

7.21         Fiscal Year.  Fleetwood shall not, and shall not permit any
of its Subsidiaries to, change its Fiscal Year.

 59
 

 

7.22         Capital Expenditures.  Neither Fleetwood nor any of its Subsidiaries
shall make or incur any Capital Expenditure if, after giving effect thereto,
the aggregate amount of all Capital Expenditures by Fleetwood and its
Subsidiaries on a consolidated basis (including the capitalized amount of all
Capital Leases and the principal amount of all Purchase Money Debt incurred in
connection therewith) would exceed $40,000,000 in any Fiscal Year; provided that to the extent the amount of Capital
Expenditures permitted to be made in the Fiscal Year ended April 2006 and any
Fiscal Year thereafter (each “Year 1”) pursuant to this clause exceeds
the aggregate amount of Capital Expenditures actually made during such Fiscal
Year, such excess amount, up to $20,000,000 (the “Standard Capital
Expenditure Excess”), may be carried forward to (but only to) the next
succeeding Fiscal Year (each “Year 2”) (any such amount to be certified
to the Administrative Agent in the compliance certificate delivered for the
last Fiscal Quarter of Year 1 pursuant to Section 5.1(e)); provided
further that any Capital Expenditures made in any Fiscal Year will first be
attributed to the $40,000,000 permitted pursuant to this Section 7.22
without regard to any carried forward Standard Capital Expenditure Excess.

7.23         [RESERVED].

7.24         Minimum EBITDA.  If a Minimum Liquidity Event as described in
clause (1) thereof shall occur as of the end of any calendar month, as
indicated in any compliance certificate delivered pursuant to Section 5.2(e)
or as described in clause (2) thereof shall have occurred on any date from and
after the Closing Date, Fleetwood shall be required to have maintained EBITDA
for the most recent period of single or consecutive Fiscal Quarters (for which
an annual or quarterly compliance certificate has been delivered pursuant to
Section 5.2(e)) specified below and ended on the last day of each Fiscal
Quarter set forth below of not less than the amount set forth below opposite
each such period:

	
  Period Ending

  	
   

  	
  EBITDA

  	
   

  
	
  Four Fiscal
  Quarters ending in October 2006

  	
   

  	
  $

  	
  11,500,000

  	
   

  
	
  Four Fiscal
  Quarters ending in January 2007

  	
   

  	
  $

  	
  (25,000,000

  	
  )

  
	
  Four Fiscal
  Quarters ending in April 2007

  	
   

  	
  $

  	
  (40,000,000

  	
  )

  
	
  Four Fiscal
  Quarters ending in July 2007

  	
   

  	
  $

  	
  (20,000,000

  	
  )

  
	
  Four Fiscal
  Quarters ending in October 2007

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
  Four Fiscal
  Quarters ending in January 2008

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
  Four Fiscal Quarters
  ending in April 2008 and each Fiscal Quarter ending in July, October, January
  and April thereafter

  	
   

  	
  $

  	
  43,000,000

  	
   

  

 

7.25         Bank Accounts.  The Borrowers shall
establish and maintain a cash management system reasonably acceptable to the
Agent, including (a) arrangements satisfactory to the Administrative Agent to
transfer funds to the Administrative Agent for application to the Obligations
on a daily basis, or on such other basis as the Administrative Agent agrees,
and, (b) Blocked Account Agreements satisfactory to the Administrative Agent in
respect of accounts over which the Administrative Agent shall have control
(within the meaning of the UCC).

 60
 

 

7.26         Contribution of Management Fees.  On the date
of receipt by Fleetwood of any management fees from any of its Subsidiaries,
Fleetwood shall make a capital contribution to FMC in the amount of such
management fees so received less the amount on such day of Distributions by the
Borrowers to Fleetwood that would be permitted pursuant to Section
7.10(a)(ii), (iii), or (iv).

7.27         Use of Proceeds.  The Borrowers shall not, and shall
not suffer or permit any of their Subsidiaries to, use any portion of the Loan
proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii)
to repay or otherwise refinance indebtedness of Fleetwood or any of its
Subsidiaries or others incurred to purchase or carry Margin Stock, (iii) to
extend credit for the purpose of purchasing or carrying any Margin Stock, or
(iv) to acquire any security in any transaction that is subject to Section 13
or 14 of the Exchange Act.  The proceeds
of the Revolving Loans shall not be used to pay the Term Loan Obligations
unless (x) for payments of the Term Loan Obligations under Section 3.3(a)(i),
no Event of Default has occurred and is continuing, and (y) for payments of
Term Loan Obligations under Section 3.3(a)(ii), (A) no Event of Default
has occurred and is continuing, and (B) a Minimum Liquidity Event, as of the
date of such prepayment shall not have occurred, after giving effect to such
prepayment.

7.28       Further Assurances; Mortgages.

(a)         Fleetwood shall, and shall cause each of its
Subsidiaries to, execute and deliver, or cause to be executed and delivered, to
the Agent and/or the Lenders such documents and agreements, and shall take or
cause to be taken such actions, as the Agent or any Lender may, from time to
time, reasonably request to carry out the terms and conditions of this
Agreement and the other Loan Documents.

(b)         [RESERVED].

(c)         If Fleetwood forms any new Subsidiary that is not an Excluded Subsidiary or
if any Inactive Subsidiary becomes an active Subsidiary which owns assets in
excess of $250,000 or has revenues in excess of $1,000,000 in any Fiscal Year,
the Borrowers shall cause such Subsidiary to become a Borrower hereunder by
delivering a counterpart to this Agreement and to each other Loan Document to
which a Borrower is a party or become a Guarantor by delivering a counterpart
to the Subsidiary Guaranty and to each other Loan Document to which a Guarantor
which is a Subsidiary is a party, together with such evidences of authority,
opinions and other documents and instruments as the Agent may reasonably
request; provided that no such Subsidiary may become a Borrower without
the prior written consent of the Required Lenders.

7.29       Subordinated Debt; Trust Securities.

(a)         Fleetwood will not, and will not permit any of
its Subsidiaries to, amend, supplement or otherwise modify the terms of the
1998 Subordinated Debentures, the 2003 Subordinated Debentures, or any Guaranty
thereof, or the Trust Securities or any Guaranty thereof or add any Guaranty of
any other Credit Party.

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(b)         Fleetwood will not, and will not permit any of
its Subsidiaries to, make any cash payments or prepayments with respect to the
1998 Subordinated Debentures other than, subject to the subordination
provisions contained therein, (A) mandatory payments of interest (including any
additional amounts on the 1998 Subordinated Debentures) when due under the
terms of the 1998 Subordinated Debentures (without acceleration),
(B) fees, indemnification payments, expense reimbursements and other
customary payments made to any trustee, conversion agent, transfer agent,
exchange agent, paying agent, depositary or custodian for the 1998 Subordinated
Debentures or the Trust Securities, or any agent or counsel for any of the foregoing,
(C) mandatory prepayments in respect of fractional shares upon conversion
of the 1998 Subordinated Debenture, (D) any other mandatory payments of
principal and/or interest (including any additional amounts) required under the
terms of the indenture under which the 1998 Subordinated Debentures are issued
and (E) so long as no Default or Event of Default has occurred and is
continuing on the date of the payment thereof, both before and after giving
effect to such payment, Fleetwood may make the payments and/or pay the fees
described in Section 7.14 hereof.

(c)         Fleetwood will not, and will not permit any of
its Subsidiaries to, make any cash payments or prepayments with respect to the
2003 Subordinated Debentures other than, subject to the subordination provisions
contained therein, (A) mandatory payments of interest (including any additional
amounts on the 2003 Subordinated Debentures and any Fleetwood common stock
issued upon conversion thereof) when due under the terms of the 2003
Subordinated Debentures (without acceleration), (B) mandatory payments in
respect of fractional shares upon conversion of 2003 Subordinated Debentures,
(C) mandatory payments to satisfy repurchase obligations with respect to 2003
Subordinated Debentures upon a change of control (as defined in the indenture
under which the 2003 Subordinated Debentures are issued), (D) fees,
indemnification payments, expense reimbursements and other customary payments
made to any trustee, conversion agent, transfer agent, exchange agent, paying agent,
depositary or custodian for the 2003 Subordinated Debentures or any agent or
counsel for any of the foregoing, (E) payment of customary fees and expenses
related to registering for resale under the Securities Act of 1933 the 2003
Subordinated Debentures and the Fleetwood common stock into which such
debentures are convertible, (F) any other mandatory payments of principal
and/or interest (including any additional amounts) or mandatory repurchase
payments required under the terms of the indenture under which the 2003
Subordinated Debentures are issued and (G) so long as no Default or Event
of Default has occurred and is continuing on the date of the payment thereof,
both before and after giving effect to such payment, Fleetwood may make the
payments and/or pay the fees described in Section 7.14 hereof.

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ARTICLE 8

CONDITIONS OF LENDING

8.1           Conditions Precedent to Making of Loans on the
Closing Date.  The obligation of the Lenders to make any
additional Revolving Loans and the Term Loan on the Closing Date, and the
obligation of the Agent to cause the Letter of Credit Issuer to issue any
Letter of Credit, are subject to the following conditions precedent having been
satisfied in a manner satisfactory to the Agent and each Lender:

(a)         This Agreement and the other Loan Documents,
including each Mortgage to be delivered on the Closing Date, shall have been
executed by each party thereto and the Loan Parties shall have performed and
complied in all material respects with all covenants, agreements and conditions
contained herein and the other Loan Documents which are required to be
performed or complied with by the Loan Parties before or on the Closing Date.

(b)         [RESERVED].

(c)         All representations and warranties made hereunder and
in the other Loan Documents shall be true and correct as if made on such date.

(d)         No Default or Event of Default shall have occurred
and be continuing after giving effect to the Loans to be made and the Letters
of Credit to be issued on the Initial Funding Date.

(e)         The Agent and the Lenders shall have received such
opinions of counsel for Fleetwood and its Subsidiaries as the Agent or any
Lender shall reasonably request, each such opinion to be in a form, scope, and
substance reasonably satisfactory to the Agent, the Lenders, and their respective
counsel.

(f)          [RESERVED].

(g)         The Agent shall have received:

(i)            acknowledgment copies of proper financing statements,
or amendments thereof, duly filed on or before the Closing Date under the UCC
of all jurisdictions that the Agent may deem necessary or desirable in order to
perfect and/or continue the Agent’s Liens; or shall have received duly executed
financing statements from all Loan Parties for all such jurisdictions;

(ii)           duly executed UCC-3 Termination Statements or
such other instruments or evidence, in form and substance satisfactory to the
Agent, as shall be necessary to terminate and satisfy all Liens on the Property
of Fleetwood and its Subsidiaries except Permitted Liens;

(iii)          duly executed security agreements with respect to all
Proprietary Rights for recording in the United States Patent and Trademark
Office;

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(iv)          certificates for the Capital Stock pledged pursuant
to the Pledge Agreement together with undated stock powers duly endorsed in
blank; and

(v)           all intercompany notes payable to any Loan Party duly
endorsed in blank.

(h)         The Borrowers shall have paid all fees and expenses
of the Agent and the Attorney Costs incurred in connection with any of the Loan
Documents and the transactions contemplated thereby to the extent invoiced.

(i)          Fleetwood and the Borrowers shall have paid all fees
due and owing to the Agent and the Lenders on the Closing Date (including all
fees under the Fee Letter).

(j)          The Agent shall have received evidence, in form,
scope, and substance, reasonably satisfactory to the Agent, of all insurance
coverage as required by this Agreement.

(k)         The Agent and the Lenders shall have had an
opportunity, if they so choose, to examine the books of account and other
records and files of Fleetwood and its Subsidiaries and to make copies thereof,
and to conduct a pre-closing audit which shall include, without limitation,
verification of Inventory, Accounts, and the Borrowing Bases, and the results
of such examination and audit shall have been satisfactory to the Agent and the
Lenders in all respects.

(l)          All proceedings taken in connection with the
execution of this Agreement, the Term Notes, all other Loan Documents and all
documents and papers relating thereto shall be satisfactory in form, scope, and
substance to the Agent and the Lenders.

(m)        No event that, in the opinion of the Lenders,
constitutes a Material Adverse Effect shall have occurred.

(n)         There shall exist no action, suit, investigation,
litigation, or proceeding pending or, to the knowledge of Fleetwood and the Borrowers
or any Lender, threatened in any court or before any arbitrator or Governmental
Authority that (i) could reasonably be expected to have a material adverse
effect on any Borrower’s assets, liabilities, business, or financial condition,
or results of operations or which could impair any Borrower’s ability to
perform satisfactorily under the Loan Documents or repay the Obligations, or
(ii) could reasonably be expected to materially and adversely affect the Loan
Documents or the transactions contemplated thereby.

(o)         With respect to each parcel of Real Estate listed on Schedule
6.11 attached hereto and identified thereon as Mortgaged Property, (i)
such Mortgaged Property that is subject to any Existing Mortgage shall remain subject to such Existing Mortgages and (ii)
Fleetwood and/or the applicable Loan Party shall have

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delivered to the Agent and the
Collateral Agent (A) duly executed and acknowledged amendments to or
amendment and restatements of the Existing Mortgages or in the case of any
Mortgaged Property in which any such Mortgaged Property was not subject to an
Existing Mortgage, a new Mortgage (each a “Mortgage Amendment” and,
collectively, the “Mortgage Amendments”), in each case to the extent
necessary under applicable law, in the reasonable judgment of the Agent, to
continue and maintain the enforceability, perfection and priority of the
Existing Mortgages or such new Mortgages from and after the Closing Date (or,
in the case of any Mortgaged Property in which no Existing Mortgage was in existence
immediately prior to the Closing Date, to effect the enforceability, perfection
and priority of the Mortgage Amendment from and after the Closing Date) in
proper form for recording in all appropriate places in all applicable
jurisdictions, (B) title policies (or endorsements to the Existing
Mortgage Title Policies) as reasonably requested by the Agent, assuring the
Agent that such Mortgages constitute first priority mortgage liens subject only
to Permitted Liens under clauses (a), (b), (d) and (e) of the definition of
Permitted Liens, and (C) if requested by the Agent, opinions of counsel as to
such matters as reasonably requested by the Agent; provided that any opinions
of local counsel to be delivered in connection with the amendment of any
Mortgage on the Closing Date shall be delivered on or prior to the date which
is sixty (60) days following the Closing Date, unless such period is extended
by the Agent.

(p)         Lenders shall be satisfied that each Borrower is
adequately capitalized, that the fair saleable value of its assets will exceed
its liabilities at closing, and that each Borrower will have sufficient working
capital to pay its debts as they become due.

(q)         Fleetwood and its Subsidiaries shall have obtained
all governmental and third party consents and approvals as may be necessary or
appropriate in connection with the Loan Documents and the transactions
contemplated thereby.

(r)          The Lenders shall be satisfied with all environmental
aspects relating to Borrowers and their business, including all environmental
reports as may be required by the Lenders.

(s)         [RESERVED].

(t)          [RESERVED].

(u)         [RESERVED].

(v)         Without limiting the generality of the items
described above, any other documents or other items reasonably requested by the
Agent or any Lender.

(w)        [RESERVED].

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(x)          The Agent and the applicable Loan Party shall have
executed and delivered notices of assignment of the Accounts of the Loan
Parties to such Persons designated by the Agent.

The
acceptance by any Borrower of any Loans made or Letters of Credit issued on the
Initial Funding Date shall be deemed to be a representation and warranty made
by Fleetwood and the Borrowers to the effect that all of the conditions
precedent to the making of such Loans or the issuance of such Letters of Credit
set forth in clauses (a), (b), (c), (d), (h), (i), (n), (q), (s) and (x)
have been satisfied, and that no material adverse change has occurred since
April 27, 2003, except as disclosed by Fleetwood publicly in the assets,
liabilities, business, financial condition or results of operations of
Fleetwood and its Subsidiaries, with the same effect as delivery to the Agent
and the Lenders of a certificate signed by a Responsible Officer of the
Borrowers, dated the Initial Funding Date, to such effect.

Execution
and delivery to the Agent by a Lender of a counterpart of this Agreement shall
be deemed confirmation by such Lender (including any such Lender in its
capacity as the Agent) that (i) all conditions precedent in this Section 8.1
have been fulfilled to the satisfaction of such Lender, (ii) the decision of
such Lender to execute and deliver to the Agent an executed counterpart of this
Agreement was made by such Lender independently and without reliance on the
Agent or any other Lender as to the satisfaction of any condition precedent set
forth in this Section 8.1, and (iii) all documents sent to such
Lender for approval consent, or satisfaction were acceptable to such Lender.

8.2           Conditions Precedent to Each Loan.  The
obligation of the Lenders to make each Loan, including any additional Revolving
Loans and the Term Loan on the Closing Date, and the obligation of the Agent to
cause the Letter of Credit Issuer to issue any Letter of Credit shall be
subject to the further conditions precedent that on and as of the date of any
such extension of credit:

(a)         The following statements shall be true, and the
acceptance by any Borrower of any extension of credit shall be deemed to be a
statement to the effect set forth in clauses (i), (ii) and (iii)
with the same effect as the delivery to the Agent and the Lenders of a
certificate signed by a Responsible Officer, dated the date of such extension
of credit, stating that:

(i)            The representations and warranties contained in this
Agreement and the other Loan Documents are correct in all material respects on
and as of the date of such extension of credit as though made on and as of such
date, other than any such representation or warranty which relates to a
specified prior date and except to the extent the Agent and the Lenders have been
notified in writing by the Borrowers that any representation or warranty is not
correct and the Majority Lenders have explicitly waived in writing compliance
with such representation or warranty; and

(ii)           No event has occurred and is continuing, or would
result from such extension of credit, which constitutes a Default or an Event
of Default; and

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(iii)          No event has occurred and is continuing, or would
result from such extension of credit, which has had or would have a Material
Adverse Effect.

(b)         No such Borrowing shall exceed Availability; provided,
however, that the foregoing conditions precedent are not conditions to
each Revolving Credit Lender participating in or reimbursing the Bank or the
Agent for such Lenders’ Pro Rata Share of any Non-Ratable Loan or Agent Advance
made in accordance with the provisions of Sections 1.2(h) and (i).

(c)         In the case of any Borrowing of Delayed Draw Term
Loan, (i) the Appraisal Condition shall have been satisfied in a manner
satisfactory to the Agent; and (ii) such Borrowing of Delayed Draw Term Loan
shall not exceed Delayed Draw Aggregate Availability.

ARTICLE 9

DEFAULT; REMEDIES

9.1           Events of Default.  It shall constitute an event of
default (“Event of Default”) if any one or more of the following shall
occur for any reason:

(a)         any failure by any Borrower to pay (i) the principal
of or interest or premium on any of the Obligations when due, whether upon
demand or otherwise, or (ii) any fee or other amount owing hereunder within 3
Business Days after such amount is due;

(b)         any representation or warranty made or deemed made by
Fleetwood or the Borrowers in this Agreement or by any Loan Party in any of the
other Loan Documents, any Financial Statement, or any certificate furnished by
any Loan Party at any time to the Agent or any Lender shall prove to be untrue
in any material respect as of the date on which made, deemed made, or
furnished;

(c)         (i) any default shall occur in the observance or
performance of any of the covenants and agreements contained in
Sections 5.2(l), 7.2, 7.5, 7.9 through 7.30, or Section 11 of the
Security Agreement, (ii) any default shall occur in the observance or
performance of any of the covenants and agreements contained in Section 5.2
(other than Section 5.2(l)) or Section 5.3 and such default shall
continue for 5 Business Days or more; or (iii) any default shall occur in
the observance or performance of any of the other covenants or agreements
contained in any other Section of this Agreement or any other Loan Document, or
any other agreement entered into at any time to which Fleetwood or any
Subsidiary and the Agent or any Lender are party (including in respect of any
Bank Products) and such default shall continue for 30 days or more;

(d)         any failure to pay any principal of or premium or
interest on any Debt (other than the Obligations) of Fleetwood or any of its
Subsidiaries or of Fleetwood Trust in an outstanding principal amount which
exceeds $5,000,000, or under any agreement or instrument under or pursuant to
which any such Debt may

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have been issued, created, assumed,
or guaranteed by Fleetwood or any of its Subsidiaries or of Fleetwood Trust,
and such failure to pay shall continue for more than the period of grace, if
any, therein specified; or any default shall occur with respect to any Debt
(other than the Obligations) of Fleetwood or any of its Subsidiaries or of
Fleetwood Trust in an outstanding principal amount which exceeds $5,000,000, or
under any agreement or instrument under or pursuant to which any such Debt may
have been issued, created, assumed, or guaranteed by Fleetwood or any of its
Subsidiaries or Fleetwood Trust, and such default shall continue for more than
the period of grace, if any, therein specified, if the effect thereof (with or
without the giving of notice or further lapse of time or both) is to
accelerate, or to permit the holders of any such Debt to accelerate, the
maturity of any such Debt; or any such Debt shall be declared due and payable
or be required to be prepaid (other than by a regularly scheduled required prepayment
or a customary due on sale clause set forth in any capital lease
or other asset financing permitted hereby provided that such sale is
otherwise permitted by this Agreement) prior to
the stated maturity thereof;

(e)         Fleetwood or any of its Subsidiaries (other than an
Inactive Subsidiary or any other immaterial Excluded Subsidiary) shall (i) file
a voluntary petition in bankruptcy or file a voluntary petition or an answer or
otherwise commence any action or proceeding seeking reorganization, arrangement
or readjustment of its debts or for any other relief under the Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency act or law, state or
federal, now or hereafter existing, or consent to, approve of, or acquiesce in,
any such petition, action or proceeding; (ii) apply for or acquiesce in
the appointment of a receiver, assignee, liquidator, sequestrator, custodian,
monitor, trustee or similar officer for it or for all or any part of its
property; (iii) make an assignment for the benefit of creditors; or
(iv) be unable generally to pay its debts as they become due;

(f)          an involuntary petition shall be filed or an action
or proceeding otherwise commenced seeking reorganization, arrangement,
consolidation or readjustment of the debts of Fleetwood or any of its
Subsidiaries (other than an Inactive Subsidiary or any other immaterial
Excluded Subsidiary) or for any other relief under the Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency act or law, state or
federal, now or hereafter existing and such petition or proceeding shall not be
dismissed within 60 days after the filing or commencement thereof or an order
of relief shall be entered with respect thereto;

(g)         a receiver, assignee, liquidator, sequestrator
custodian, monitor, trustee or similar officer for Fleetwood or any of its
Subsidiaries or for all or any part of its property shall be appointed or a
warrant of attachment, execution or similar process shall be issued against any
part of the property of Fleetwood or any of its Subsidiaries;

(h)         except as expressly permitted under this Agreement,
Fleetwood or any of its Subsidiaries shall file a certificate of dissolution
under applicable state

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law or shall be liquidated,
dissolved or wound-up or shall commence or have commenced against it any action
or proceeding for dissolution, winding-up or liquidation, or shall take any
corporate action in furtherance thereof;

(i)          all or any material part of the property of Fleetwood
or any of its Subsidiaries shall be nationalized, expropriated or condemned,
seized or otherwise appropriated, or custody or control of such property or of
Fleetwood or such Subsidiary shall be assumed by any Governmental Authority or
any court of competent jurisdiction at the instance of any Governmental
Authority, except where contested in good faith by proper proceedings
diligently pursued where a stay of enforcement is in effect;

(j)          any Loan Document shall be terminated (except in
accordance with its terms), revoked or declared void or invalid or
unenforceable or challenged by any Loan Party;

(k)         one or more judgments, orders, decrees or arbitration
awards is entered against Fleetwood or any of its Subsidiaries involving in the
aggregate liability (to the extent not covered by independent third-party
insurance as to which the insurer has not denied coverage) as to any single or
related or unrelated series of transactions, incidents or conditions, of
$5,000,000 or more, and the same shall remain unsatisfied, unvacated and
unstayed pending appeal for a period of thirty (30) days after the entry
thereof;

(l)          any loss, theft, damage or destruction of any item or
items of Collateral or other property of Fleetwood or any of its Subsidiaries
occurs which could reasonably be expected to cause a Material Adverse Effect
and is not adequately covered by insurance;

(m)        there is filed against Fleetwood or any of its
Subsidiaries any action, suit or proceeding under any federal or state
racketeering statute (including the Racketeer Influenced and Corrupt Organization
Act of 1970), which action, suit or proceeding (i) is not dismissed within one
hundred twenty (120) days, and (ii) would reasonably be expected to result in
the confiscation or forfeiture of any material portion of the Collateral;

(n)         for any reason other than the failure of the Agent to
take any action available to it to maintain perfection of the Agent’s Liens
pursuant to the Loan Documents, any Loan Document ceases to be in full force
and effect in accordance with its terms or, except for any Lien released in
accordance with the Loan Documents, any Lien with respect to any material
portion of the Collateral intended to be secured thereby ceases to be, or is
not, valid, perfected and prior to all other Liens (other than Permitted Liens)
or is terminated, revoked or declared void;

(o)         an ERISA Event shall occur with respect to a Pension
Plan or Multi-employer Plan which has resulted or could reasonably be expected
to result

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in liability of Fleetwood or any
ERISA Affiliate under Title IV of ERISA to the Pension Plan, Multi-employer
Plan or the PBGC in an aggregate amount in excess of $10,000,000; (ii) the
aggregate amount of Unfunded Pension Liability among all Pension Plans at any
time exceeds $10,000,000; or (iii) Fleetwood or any ERISA Affiliate shall
fail to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multi-employer Plan in an aggregate amount in excess of
$10,000,000;

(p)         there occurs a Change of Control; or

(q)         there occurs an event having a Material Adverse
Effect.

9.2         Remedies.

(a)         If a Default or an Event of Default exists, the Agent
may, in its discretion, and shall, at the direction of the Majority Lenders, do
one or more of the following at any time or times and in any order, without
notice to or demand on the Borrowers: 
(i) reduce the Maximum Revolver Amount, or the advance rates
against Eligible Accounts and/or Eligible Inventory and/or Real Estate
Subfacility Assets used in computing the Borrowing Base, or reduce one or more
of the other elements used in computing the Borrowing Base; (ii) restrict the amount of or refuse to make
Revolving Loans; and (iii) restrict or refuse to provide Letters of Credit or
Credit Support.  If an Event of Default
exists, the Agent shall, at the direction of the Majority Lenders, do one or
more of the following, in addition to the actions described in the preceding
sentence, at any time or times and in any order, without notice to or demand on
the Borrowers:  (A) terminate the
Revolving Credit Commitments and this Agreement; (B) declare any or all
Obligations to be immediately due and payable; provided, however,
that upon the occurrence of any Event of Default described in Sections 9.1(e),
9.1(f), 9.1(g), or 9.1(h), the Revolving Credit
Commitments shall automatically and immediately expire and all Obligations
shall automatically become immediately due and payable without notice or demand
of any kind; (C) require the Borrowers to cash collateralize all outstanding
Letter of Credit Obligations; and (D) pursue its other rights and remedies
under the Loan Documents and applicable law.

(b)         If an Event of Default has occurred and is
continuing:  (i) the Agent shall
have for the benefit of the Lenders, in addition to all other rights of the
Agent and the Lenders, the rights and remedies of a secured party under the
Loan Documents and the UCC; (ii) the Agent may, at any time, take
possession of the Collateral and keep it on any Loan Party’s premises, at no
cost to the Agent or any Lender, or remove any part of it to such other place
or places as the Agent may desire, or the Borrowers shall, upon the Agent’s
demand, at the Borrowers’ cost, assemble the Collateral and make it available
to the Agent at a place reasonably convenient to the Agent; and (iii) the
Agent may sell and deliver any Collateral at public or private sales, for cash,
upon credit or otherwise, at such prices and upon such terms as the Agent deems
advisable, in its sole discretion, and may, if the

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Agent deems it reasonable, postpone
or adjourn any sale of the Collateral by an announcement at the time and place
of sale or of such postponed or adjourned sale without giving a new notice of
sale.  Without in any way requiring
notice to be given in the following manner, each Borrower agrees that any
notice by the Agent of sale, disposition or other intended action hereunder or
in connection herewith, whether required by the UCC or otherwise, shall
constitute reasonable notice to such Borrower if such notice is delivered
personally or by overnight courier against receipt, at least five (5) Business
Days prior to such action to the Borrowers’ address specified in or pursuant to
Section 13.8.  If any
Collateral is sold on terms other than payment in full at the time of sale, no
credit shall be given against the Obligations until the Agent or the Lenders
receive payment, and if the buyer defaults in payment, the Agent may resell the
Collateral without further notice to the Borrowers.  In the event the Agent seeks to take
possession of all or any portion of the Collateral by judicial process, each
Borrower irrevocably waives:  (A) the
posting of any bond, surety or security with respect thereto which might otherwise
be required; (B) any demand for possession prior to the commencement of any
suit or action to recover the Collateral; and (C) any requirement that the
Agent retain possession and not dispose of any Collateral until after trial or
final judgment.  Each Borrower agrees
that the Agent has no obligation to preserve rights to the Collateral or
marshal any Collateral for the benefit of any Person.  The Agent is hereby granted a license or
other right to use, without charge, each Borrower’s and Fleetwood’s labels,
patents, copyrights, name, trade secrets, trade names, trademarks, and
advertising matter, or any similar property, in completing production of,
advertising or selling any Collateral, and each Borrower’s and Fleetwood’s
rights under all licenses and all franchise agreements shall inure to the Agent’s
benefit for such purpose.  The proceeds
of sale shall be applied first to all expenses of sale, including attorneys’
fees, and then to the Obligations.  The
Agent will return any excess to the Borrowers and the Borrowers shall remain
liable for any deficiency.

(c)         If an Event of Default occurs, each Borrower hereby
waives to the greatest extent permitted by applicable law all rights to notice
and hearing prior to the exercise by the Agent of the Agent’s rights to
repossess the Collateral without judicial process or to reply, attach or levy
upon the Collateral without notice or hearing.

(d)         [RESERVED].

ARTICLE 10

TERM AND TERMINATION

10.1         Term and Termination.  The term of
this Agreement shall end on the Stated Termination Date unless sooner terminated
in accordance with the terms hereof.  The
Agent upon direction from the Majority Lenders may terminate this Agreement
without notice upon the occurrence of an Event of Default.  Upon the effective date of termination of
this Agreement for any reason whatsoever, all Obligations (including all unpaid
principal, accrued and unpaid interest and any accrued and unpaid fees) shall
become immediately due and payable and the

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Borrowers
shall immediately arrange for the cancellation and return of Letters of Credit
then outstanding.  Notwithstanding the
termination of this Agreement, until all Obligations are indefeasibly paid and
performed in full in cash, the Borrowers shall remain bound by the terms of
this Agreement and shall not be relieved of any of their Obligations hereunder
or under any other Loan Document, and the Agent and the Lenders shall retain
all their rights and remedies hereunder (including the Agent’s Liens in and all
rights and remedies with respect to all then existing and after-arising Collateral).

ARTICLE 11

AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS

11.1       Amendments and Waivers.

(a)         No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent with respect to any
departure by any Loan Party therefrom, shall be effective unless the same shall
be in writing and signed by the Majority Lenders (or by the Agent at the
written request of the Majority Lenders), Fleetwood and the Borrowers and then
any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however,

(i)            no such waiver, amendment, or consent shall, unless
in writing and signed by all the Lenders, Fleetwood and the Borrowers and
acknowledged by the Agent, do any of the following:

(A)            change the percentage of the Revolving Credit
Commitments, the Delayed Draw Commitments or of the aggregate unpaid principal
amount of the Loans which is required for the Lenders or any of them to take
any action hereunder;

(B)             amend this Section or any provision of this Agreement
providing for consent or other action by all Lenders;

(C)             release any Guaranties of the Obligations except in
connection with the disposition of the capital stock of a Loan Party or
Subsidiary that is not prohibited hereby;

(D)            change the definitions of “Majority Lenders” or “Required
Lenders”;

(E)             permit the Agent to contractually
subordinate its Lien on any Collateral to any other Lien, except as permitted
by the Credit Agreement;

(F)             increase the amount of Agent Advances
permitted pursuant to Section 1.2(i); or

(G)             amend Section 3.8;

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(ii)           no such waiver, amendment, or consent shall, unless
in writing and signed by all the Term Lenders and the Majority Revolving
Lenders, Fleetwood and the Borrowers and acknowledged by the Agent, do any of
the following:

(A)            postpone or delay any date fixed by this
Agreement or any other Loan Document for any payment of principal, interest,
fees or other amounts due to the Term Lenders (or any of them) hereunder or
under any other Loan Document;

(B)             reduce the principal of, or the rate of
interest specified herein on any Lender Term Loan, or any fees or other amounts
payable to the Term Lenders hereunder or under any other Loan Document;

(C)             release any Term Loan Collateral other
than as permitted by Section 2.8, Section 7.9 or Section 12.11
(provided that the Term Loan Collateral may be released with the consent of the
Term Lenders);

(D)            change the definitions of “Majority Term
Lenders” or “Required Term Lenders”;

(E)             increase
or extend the Delayed Draw Commitment of any Term Lender;

(F)             change the
definition of “Appraisal Condition”; or

(G)             increase the Maximum Delayed Draw Amount or Delayed
Draw Commitment Aggregate Availability.

(iii)          no such waiver, amendment, or consent shall, unless
in writing and signed by all the Revolving Credit Lenders and the Majority Term
Lenders, Fleetwood and the Borrowers and acknowledged by the Agent, do any of
the following:

(A)            increase or extend the Revolving Credit Commitment of
any Revolving Credit Lender;

(B)             postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees or other
amounts due to the Revolving Credit Lenders (or any of them) hereunder or under
any other Loan Document;

(C)             reduce the principal of, or the rate of interest
specified herein on any Loan, or any fees or other amounts payable to the
Revolving Credit Lenders hereunder or under any other Loan Document;

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(D)            increase any of the percentages or other amounts or
limits set forth in the definition of the Borrowing Base (or introduce new
categories of property as components of the Borrowing Base),  provided that, for the avoidance of
doubt, the Agent may establish Reserves from time to time in its reasonable
credit judgment;

(E)             release any Collateral (other than Term Loan
Collateral), except as permitted by Section 2.8, Section 7.9 or Section
12.11;

(F)             change the definitions of “Majority Revolving Lenders”
or “Required Revolving Lenders”; or

(G)             increase
the Maximum Revolver Amount, the Maximum Inventory Loan Amount, the Maximum
Real Estate Loan Amount, the Unused Letter of Credit Subfacility or the Maximum
Revolving Credit Facility Increase Amount; and

(iv)          no such waiver, amendment, or consent shall, unless
in writing and signed by the Required Lenders, Fleetwood and the Borrowers and
acknowledged by the Agent, amend Article 12;

provided, however,
the Agent may, in its sole discretion and notwithstanding the limitations
contained in clauses (iii)(D) and (G) above and any other terms
of this Agreement, make Agent Advances in accordance with Section 1.2(i)
or Section 13.19 and, provided  further, that no amendment,
waiver or consent shall, unless in writing and signed by the Agent, affect the
rights or duties of the Agent under this Agreement or any other Loan Document;
and provided  further, that Schedule 1.2 hereto
(Revolving Credit Commitments) may be amended from time to time by the Agent
alone to reflect assignments of Revolving Credit Commitments in accordance
herewith.

(b)         If, in connection with any proposed amendment, waiver
or consent (a “Proposed Change”):

(i)            requiring the consent of all Lenders, the consent of
Majority Lenders is obtained, but the consent of other Lenders is not obtained
(any such Lender whose consent is not obtained as described in this clause
(i) and in clause (ii) below being referred to as a “Non-Consenting
Lender”), or

(ii)           requiring the consent of Required Lenders, the
consent of Majority Lenders is obtained,

then, so long as the Agent is not a Non-Consenting Lender, at the Borrowers’
request, the Agent or an Eligible Assignee shall have the right (but not the
obligation) with the Agent’s approval, to purchase from the Non-Consenting
Lenders, and the Non-Consenting Lenders agree that they shall sell, all the
Non-Consenting Lenders’ Revolving Credit Commitments and Loans for an amount
equal to the principal balances thereof and all accrued interest and fees with
respect thereto through the date of sale pursuant to Assignment and Acceptance
Agreement(s), without premium or discount.

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11.2       Assignments; Participations.

(a)         Any Lender may, with the written consent of the Agent
and, so long as no Default or Event of Default then exists, Fleetwood (which
consents of the Agent and Fleetwood shall not be unreasonably withheld), assign
and delegate to one or more Eligible Assignees (provided that (x) no
consent shall be required in connection with any assignment and delegation by a
Lender to an Affiliate of such Lender and (y) no consent of Fleetwood shall be
required in connection with any assignment by Bank of America, N.A., in its
capacity as a Lender, to an Eligible Assignee in connection with the initial
syndication of the Loans on or after the Closing Date) (each an “Assignee”)
all, or any ratable part of all, of the Loans, the Commitments and the other
rights and obligations of such Lender hereunder, in a minimum amount of (x)
$5,000,000 (or, if less, the entire amount of such Lender’s Loan or Commitment
or other rights and obligations, as applicable) for the Term Loan and (y)
$10,000,000 (or, if less, the entire amount of such Lender’s Loan or Commitment
or other rights and obligations, as applicable) for Revolving Commitments (provided
that, unless either (I) an assignor Lender has assigned and delegated
all of its Loans and Commitments or (II) an assignor’s Commitment as of the
Closing Date was less than $10,000,000 for the Term Loan or $20,000,000 for the
Revolving Commitments, no such assignment and/or delegation shall be permitted
unless, after giving effect thereto, such assignor Lender retains a Commitment
in a minimum amount of (x) $5,000,000 for the Term Loan and (y) $10,000,000 for
Revolving Commitments); provided, however, that the Borrowers and
the Agent may continue to deal solely and directly with such Lender in
connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been given to the
Borrowers and the Agent by such Lender and the Assignee; (ii) such Lender
and its Assignee shall have delivered to the Borrowers and the Agent an
Assignment and Acceptance in the form of Exhibit F (“Assignment and
Acceptance”) together with any note or notes subject to such assignment and
(iii) the assignor Lender or Assignee has paid to the Agent a processing fee in
the amount of $3,500; and provided  further that no Lender may
assign all, or any ratable part of all, of the Loans, the Commitments and the
other rights and obligations of such Lender hereunder unless it shall
simultaneously assign a ratable portion of each of its Revolving Credit
Commitments, Revolving Loans and Term Loans hereunder.  The Borrowers agree to promptly execute and
deliver new promissory notes and replacement promissory notes as reasonably
requested by the Agent to evidence assignments of the Revolving Credit
Commitments in accordance herewith.

(b)         From and after the date that the Agent notifies the
assignor Lender that it has received an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations, including,
but not limited to, the

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obligation to participate in
Letters of Credit and Credit Support have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Lender
under the Loan Documents, and (ii) the assignor Lender shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Agreement (and in the
case of an Assignment and Acceptance covering all or the remaining portion of
an assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto).

(c)         By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm
to and agree with each other and the other parties hereto as follows:  (i) other than as provided in such Assignment
and Acceptance, such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other Loan Document furnished pursuant hereto or the
attachment, perfection, or priority of any Lien granted by any Loan Party to
the Agent or any Lender in the Collateral; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Fleetwood or any of its Subsidiaries or the performance
or observance by any Loan Party of any of its obligations under this Agreement
or any other Loan Document furnished pursuant hereto; (iii) such Assignee
confirms that it has received a copy of this Agreement, together with such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such Assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
Assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Agent by the terms hereof, together with such powers, including the
discretionary rights and incidental power, as are reasonably incidental
thereto; and (vi) such Assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.

(d)         Immediately upon satisfaction of the requirements of Section
11.2(a), this Agreement shall be deemed to be amended to the extent, but
only to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Revolving Credit Commitments arising
therefrom.  The Revolving Credit
Commitment allocated to each Assignee shall reduce such Revolving Credit
Commitments of the assigning Lender pro  tanto.

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(e)         Any Lender may at any time sell to one or more
commercial banks, financial institutions, or other Persons not Affiliates of
any Loan Party (a “Participant”) participating interests in any Loans,
the Revolving Credit Commitment of that Lender and the other interests of that
Lender (the “originating Lender”) hereunder and under the other Loan
Documents; provided, however, that (i) the originating
Lender’s obligations under this Agreement shall remain unchanged, (ii) the
originating Lender shall remain solely responsible for the performance of such
obligations, (iii) the Borrowers and the Agent shall continue to deal
solely and directly with the originating Lender in connection with the
originating Lender’s rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Lender shall transfer or grant any
participating interest under which the Participant has rights to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document except the matters set forth in Section 11.1(a) (i),
(ii) and (iii) with respect to the Loans in which such Participant has an
interest, and all amounts payable by the Borrowers hereunder shall be
determined as if such Lender had not sold such participation; except that, if
amounts outstanding under this Agreement are due and unpaid, or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of
its participating interest in amounts owing under this Agreement to the same extent
and subject to the same limitation as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement.

(f)          Notwithstanding any other provision in this
Agreement, any Lender may at any time create a security interest in, or pledge,
all or any portion of its rights under and interest in this Agreement in favor
of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR §203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.

ARTICLE 12

THE AGENT

12.1         Appointment and Authorization.  Each Lender
hereby designates and appoints Bank as its Agent under this Agreement and the
other Loan Documents and each Lender hereby irrevocably authorizes the Agent to
take such action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto.  The Agent agrees to act as such on the
express conditions contained in this Article 12.  The provisions of this Article 12
are solely for the benefit of the Agent and the Lenders and no Loan Party shall
have no rights as a third party beneficiary of any of the provisions contained
herein.  Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or

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otherwise
exist against the Agent.  Without
limiting the generality of the foregoing sentence, the use of the term “agent”
in this Agreement with reference to the Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law.  Instead,
such term is used merely as a matter of market custom, and is intended to create
or reflect only an administrative relationship between independent contracting
parties.  Except as expressly otherwise
provided in this Agreement, the Agent shall have and may use its sole
discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions which the
Agent is expressly entitled to take or assert under this Agreement and the
other Loan Documents, including (a) the determination of the applicability of
ineligibility criteria with respect to the calculation of the Borrowing Base,
(b) the making of Agent Advances pursuant to Section 1.2(i), and (c) the
exercise of remedies pursuant to Section 9.2, and any action so taken or
not taken shall be deemed consented to by the Lenders.

12.2         Delegation of Duties.  The Agent
may execute any of its duties under this Agreement or any other Loan Document
by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such
duties.  The Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects as long as such selection was made without gross negligence or
willful misconduct.

12.3         Liability of the Agent.  None of the
Agent-Related Persons shall (i) be liable for any action taken or omitted
to be taken by any of them under or in connection with this Agreement or any
other Loan Document or the transactions contemplated hereby (except for its own
gross negligence or willful misconduct), or (ii) be responsible in any manner
to any of the Lenders for any recital, statement, representation or warranty
made by the Borrower or any Subsidiary or Affiliate of Fleetwood, or any
officer thereof, contained in this Agreement or in any other Loan Document, or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Agent under or in connection with, this Agreement or
any other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of any Loan Party or any other party to any Loan Document to
perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of Fleetwood or any of its Subsidiaries or Affiliates.

12.4         Reliance by the Agent.  The Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Borrowers), independent accountants and
other experts selected by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Majority Lenders as it deems appropriate and, if it so requests, it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.  The Agent shall in
all cases be fully protected in acting, or

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in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Majority Lenders (or all Lenders if
so required by Section 11.1) and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the Lenders.

12.5         Notice of Default.  The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
unless the Agent shall have received written notice from a Lender or the
Borrowers referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a “notice of default.”  The Agent will notify the Lenders of its
receipt of any such notice.  The Agent
shall take such action with respect to such Default or Event of Default as may
be requested by the Majority Lenders in accordance with Section 9; provided,
however, that unless and until the Agent has received any such request,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable.

12.6         Credit Decision.  Each Lender acknowledges that none
of the Agent-Related Persons has made any representation or warranty to
it, and that no act by the Agent hereinafter taken, including any review of the
affairs of Fleetwood, its Subsidiaries and its Affiliates, shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Lender.  Each Lender represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
prospects, operations, property, financial and other condition and
creditworthiness of Fleetwood, its Subsidiaries and its Affiliates, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Borrowers.  Each Lender
also represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financial and other condition and creditworthiness of the Borrower.  Except for notices, reports and other
documents expressly herein required to be furnished to the Lenders by the
Agent, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of
Fleetwood or any of its Subsidiaries which may come into the possession of any
of the Agent-Related Persons.

12.7         Indemnification.  Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand
the Agent-Related Persons (to the extent not reimbursed by or on behalf
of the Borrowers and without limiting the obligation of the Borrowers to do
so), in accordance with their Pro Rata Shares, from and against any and all
Indemnified Liabilities as such term is defined in Section 13.11; provided,
however, that no Lender shall be liable for the payment to the Agent-Related
Persons of any portion of such Indemnified Liabilities resulting solely from
such Person’s gross negligence or willful misconduct.  Without limitation of the foregoing, each
Lender shall reimburse the Agent upon demand for its Pro Rata Share of any
costs or out-of-pocket expenses (including Attorney Costs) incurred
by the Agent in connection with the preparation, execution, delivery,
administration,

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modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, any other Loan Document, or any document contemplated by or
referred to herein, to the extent that the Agent is not reimbursed for such
expenses by or on behalf of the Borrowers. 
The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the Agent.

12.8         The Agent in Individual Capacity.  The Bank and
its Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business with
Fleetwood and its Subsidiaries and Affiliates as though the Bank were not the
Agent hereunder and without notice to or consent of the Lenders.  The Bank or its Affiliates may receive
information regarding Fleetwood, its Subsidiaries, its Affiliates and Account
Debtors (including information that may be subject to confidentiality
obligations in favor of a Loan Party or such Subsidiary) and acknowledge that
the Agent and the Bank shall be under no obligation to provide such information
to them.  With respect to its Loans, the
Bank shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the Agent, and the terms
“Lender” and “Lenders” include the Bank in its individual capacity.

12.9         Successor Agent.  The Agent may resign as Agent upon
at least 30 days’ prior notice to the Lenders and the Borrowers, such
resignation to be effective upon the acceptance of a successor agent to its
appointment as Agent.  In the event the
Bank sells all of its Revolving Credit Commitment and Revolving Loans as part
of a sale, transfer or other disposition by the Bank of substantially all of
its loan portfolio, the Bank shall resign as Agent and such purchaser or
transferee shall become the successor Agent hereunder.  Subject to the foregoing, if the Agent
resigns under this Agreement, the Majority Lenders shall appoint from among the
Lenders a successor agent for the Lenders. 
If no successor agent is appointed prior to the effective date of the
resignation of the Agent, the Agent may appoint, after consulting with the
Lenders and the Borrowers, a successor agent from among the Lenders.  Upon the acceptance of its appointment as
successor agent hereunder, such successor agent shall succeed to all the
rights, powers and duties of the retiring Agent and the term “Agent”
shall mean such successor agent and the retiring Agent’s appointment, powers
and duties as the Agent shall be terminated. 
After any retiring Agent’s resignation hereunder as the Agent, the
provisions of this Article 12 shall continue to inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Agent under this Agreement.

12.10     Withholding Tax.

(a)         If any Lender is a “foreign corporation, partnership
or trust” within the meaning of the Code and such Lender claims exemption from,
or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the
Code, such Lender agrees with and in favor of the Borrowers or the Agent, to
deliver to the Borrowers, with a copy to the Agent:

(i)            if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States of America tax treaty,
properly completed

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IRS Forms W-8BEN and W-8ECI before
the payment of any interest in the first calendar year and before the payment
of any interest in each third succeeding calendar year during which interest
may be paid under this Agreement;

(ii)           if such Lender claims that interest paid under this
Agreement is exempt from United States of America withholding tax because it is
effectively connected with a United States of America trade or business of such
Lender, two properly completed and executed copies of IRS Form W-8ECI before
the payment of any interest is due in the first taxable year of such Lender and
in each succeeding taxable year of such Lender during which interest may be
paid under this Agreement, and IRS Form W-9; and

(iii)          such other form or forms as may be required under the
Code or other laws of the United States of America as a condition to exemption
from, or reduction of, United States of America withholding tax.

Such Lender agrees to promptly notify the Borrowers and the Agent of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.

(b)         If any Lender claims exemption from, or reduction of,
withholding tax under a United States of America tax treaty by providing IRS
Form FW-8BEN and such Lender sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations owing to such Lender, such
Lender agrees to notify the Borrowers and the Agent of the percentage amount in
which it is no longer the beneficial owner of Obligations of the Borrowers to
such Lender.  To the extent of such
percentage amount, the Borrowers and the Agent will treat such Lender’s IRS
Form W-8BEN as no longer valid.

(c)         If any Lender claiming exemption from United States
of America withholding tax by filing IRS Form W-8ECI with the Agent sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations owing to such Lender, such Lender agrees to undertake sole responsibility
for complying with the withholding tax requirements imposed by Sections 1441
and 1442 of the Code.

(d)         If any Lender is entitled to a reduction in the
applicable withholding tax, the Borrowers may withhold from any interest
payment to such Lender an amount equivalent to the applicable withholding tax
after taking into account such reduction. 
If the forms or other documentation required by subsection (a) of
this Section are not delivered to the Borrowers, then the Borrowers may
withhold from any interest payment to such Lender not providing such forms or
other documentation an amount equivalent to the applicable withholding tax.

(e)         If the IRS or any other Governmental Authority of the
United States of America or other jurisdiction asserts a claim that the
Borrowers or the Agent did not properly withhold tax from amounts paid to or
for the account of any Lender (because the appropriate form was not delivered,
was not properly executed, or

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because such Lender failed to
notify the Borrowers or the Agent of a change in circumstances which rendered
the exemption from, or reduction of, withholding tax ineffective, or for any
other reason) such Lender shall indemnify the Borrowers or the Agent as the
case may be, fully for all amounts paid, directly or indirectly, by the
Borrowers or the Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Borrowers or the Agent under this Section, together with all costs and expenses
(including Attorney Costs).  The
obligation of the Lenders under this subsection shall survive the payment of
all Obligations and the resignation or replacement of the Agent.

12.11     Collateral Matters.

(a)         The Lenders hereby irrevocably authorize the Agent,
at its option and in its sole discretion, to release any Agent’s Liens upon any
Collateral (i) upon the termination of the Revolving Credit Commitments
and payment and satisfaction in full by the Borrowers of all Loans and
reimbursement obligations in respect of Letters of Credit and Credit Support,
and the termination of all outstanding Letters of Credit (whether or not any of
such obligations are due) and all other Obligations; (ii) constituting
property being sold or disposed of if the Borrowers certify to the Agent that
the sale or disposition is made in compliance with Section 7.9, or Section
7.19 (and the Agent may rely conclusively on any such certificate, without
further inquiry) and the proceeds are applied to the Obligations to the extent
required by this Agreement; (iii) constituting property in which a Loan
Party owned no interest at the time the Lien was granted or at any time
thereafter; (iv) constituting property leased to a Loan Party under a lease
which has expired or been terminated in a transaction permitted under this
Agreement; (v) constituting property subject to a Capital Lease or
purchase money Debt permitted by this Agreement if required by the lender or
lessor; (vi) constituting Replaced Property (as such term is
defined in Section 2.8), provided that the conditions to
release set forth in such Section 2.8 have been satisfied; or
(vii) constituting Real Estate not set forth on the Addendum to Schedule
6.11 (which sets forth the Real Estate intended to be subject to Mortgages) as
of the Closing Date.  In addition (a) any Guaranty may be released
if the Guarantor is sold in a transaction permitted under this Agreement, (b)
Liens on Collateral (other than Term Loan Collateral) may be released with the
consent of the Revolving Credit Lenders and the Majority Term Lenders and
(c) Liens on the Term Loan Collateral may be released with the consent of
only the Term Lenders.  Except as
provided above, the Agent will not release any of the Agent’s Liens without the
prior written authorization of the Lenders; provided that the Agent may,
in its discretion, release the Agent’s Liens on Collateral (other than Term
Loan Collateral) valued in the aggregate not in excess of $3,000,000 during
each Fiscal Year without the prior written authorization of the Lenders and the
Agent may release the Agent’s Liens on Collateral (other than Term Loan
Collateral) valued in the aggregate not in excess of $5,000,000 during each
Fiscal Year with the prior written authorization of Majority Lenders.  Upon request by the Agent or the Borrowers at
any time, the Lenders will confirm in writing the Agent’s authority to release
any Agent’s Liens upon particular types or items of Collateral or any Guaranty
pursuant to this Section 12.11.

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(b)         Upon receipt by the Agent of an authorization, if
any, required pursuant to Section 12.11(a) from the Lenders of the Agent’s
authority to release Agent’s Liens upon particular types or items of Collateral
or any Guaranty, and upon at least 3 Business Days prior written request by the
Borrowers, the Agent shall (and is hereby irrevocably authorized by the Lenders
to) execute such documents as may be necessary to evidence the release of the
Agent’s Liens upon such Collateral or any Guaranty; provided, however,
that (i) the Agent shall not be required to execute any such document on terms
which, in the Agent’s opinion, would expose the Agent to liability or create
any obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of the Loan Parties in respect
of) all interests retained by the Loan Parties, including the proceeds of any sale,
all of which shall continue to constitute part of the Collateral.

(c)         The Agent shall have no obligation whatsoever to any
of the Lenders to assure that the Collateral exists or is owned by any Loan
Party or is cared for, protected or insured or has been encumbered, or that the
Agent’s Liens have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care, disclosure
or fidelity, or to continue exercising, any of the rights, authorities and
powers granted or available to the Agent pursuant to any of the Loan Documents,
it being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Agent may act in any manner it may deem
appropriate, in its sole discretion given the Agent’s own interest in the
Collateral in its capacity as one of the Lenders and that the Agent shall have
no other duty or liability whatsoever to any Lender as to any of the foregoing.

12.12     Restrictions on Actions by Lenders; Sharing of
Payments.

(a)         Each of the Lenders agrees that it shall not, without
the express consent of all Lenders, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of all Lenders, set off against
the Obligations, any amounts owing by such Lender to any Loan Party or any
accounts of any Loan Party now or hereafter maintained with such Lender.  Each of the Lenders further agrees that it
shall not, unless specifically requested to do so by the Agent, take or cause
to be taken any action to enforce its rights under this Agreement or against
any Loan Party, including the commencement of any legal or equitable
proceedings, to foreclose any Lien on, or otherwise enforce any security
interest in, any of the Collateral.

(b)         If at any time or times any Lender shall receive (i)
by payment, foreclosure, setoff or otherwise, any proceeds of Collateral or any
payments with

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respect to the Obligations to such
Lender arising under, or relating to, this Agreement or the other Loan
Documents, except for any such proceeds or payments received by such Lender
from the Agent pursuant to the terms of this Agreement, or (ii) payments
from the Agent in excess of such Lender’s Pro Rata Share of all such
distributions by the Agent, such Lender shall promptly (1) turn the same over
to the Agent, in kind, and with such endorsements as may be required to
negotiate the same to the Agent, or in same day funds, as applicable, for the
account of all of the Lenders and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (2) purchase,
without recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment received
shall be applied ratably as among the Lenders in accordance with their Pro Rata
Shares; provided, however, that if all or part of such excess
payment received by the purchasing party is thereafter recovered from it, those
purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor
shall be returned to such purchasing party, but without interest except to the
extent that such purchasing party is required to pay interest in connection
with the recovery of the excess payment.

12.13       Agency for Perfection.  Each Lender
hereby appoints each other Lender as agent for the purpose of perfecting the
Lenders’ security interest in assets which, in accordance with Article 9 of the
UCC can be perfected by possession. 
Should any Lender (other than the Agent) obtain possession of any such
Collateral, such Lender shall notify the Agent thereof, and, promptly upon the
Agent’s request therefor shall deliver such Collateral to the Agent or in
accordance with the Agent’s instructions.

12.14       Payments by the Agent to Lenders.  All payments
to be made by the Agent to the Lenders shall be made by bank wire transfer or
internal transfer of immediately available funds to each Lender pursuant to
wire transfer instructions delivered in writing to the Agent on or prior to the
Initial Funding Date (or if such Lender is an Assignee, on the applicable
Assignment and Acceptance), or pursuant to such other wire transfer
instructions as each party may designate for itself by written notice to the
Agent.  Concurrently with each such
payment, the Agent shall identify whether such payment (or any portion thereof)
represents principal, premium or interest on the Revolving Loans, the Term Loan
or otherwise.  Unless the Agent receives
notice from the Borrowers prior to the date on which any payment is due to the
Lenders that the Borrowers will not make such payment in full as and when
required, the Agent may assume that the Borrowers have made such payment in
full to the Agent on such date in immediately available funds and the Agent may
(but shall not be so required), in reliance upon such assumption, distribute to
each Lender on such due date an amount equal to the amount then due such
Lender.  If and to the extent the
Borrowers have not made such payment in full to the Agent, each Lender shall
repay to the Agent on demand such amount distributed to such Lender, together
with interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Lender until the date repaid.

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12.15     Settlement.

(a)                           (i)            Each Lender’s funded portion of the Revolving Loans
is intended by the Lenders to be equal at all times to such Lender’s Pro Rata
Share of the outstanding Revolving Loans. 
Notwithstanding such agreement, the Agent, the Bank, and the other
Lenders agree (which agreement shall not be for the benefit of or enforceable
by the Borrowers) that in order to facilitate the administration of this
Agreement and the other Loan Documents, settlement among them as to the
Revolving Loans, the Non-Ratable Loans and Agent Advances shall take place on a
periodic basis in accordance with the following provisions:

(ii)           The Agent shall request settlement (“Settlement”)
with the Lenders on at least a weekly basis, or on a more frequent basis at the
Agent’s election, (A) on behalf of the Bank, with respect to each outstanding
Non-Ratable Loan, (B) for itself, with respect to each Agent Advance, and (C)
with respect to collections received, in each case, by notifying the Lenders of
such requested Settlement by telecopy, telephone or other similar form of
transmission, of such requested Settlement, no later than 11:00 a.m. (Los
Angeles time) on the date of such requested Settlement (the “Settlement Date”).  Each Lender (other than the Bank, in the case
of Non-Ratable Loans and the Agent in the case of Agent Advances) shall
transfer the amount of such Lender’s Pro Rata Share of the outstanding
principal amount of the Non-Ratable Loans and Agent Advances with respect to
each Settlement to the Agent, to Agent’s account, not later than 1:00 p.m. (Los
Angeles time), on the Settlement Date applicable thereto.  Settlements may occur during the continuation
of a Default or an Event of Default and whether or not the applicable
conditions precedent set forth in Article 8 have then been
satisfied.  Such amounts made available
to the Agent shall be applied against the amounts of the applicable Non-Ratable
Loan or Agent Advance and, together with the portion of such Non-Ratable Loan
or Agent Advance representing the Bank’s Pro Rata Share thereof, shall
constitute Revolving Loans of such Lenders. 
If any such amount is not transferred to the Agent by any Lender on the
Settlement Date applicable thereto, the Agent shall be entitled to recover such
amount on demand from such Lender together with interest thereon at the Federal
Funds Rate for the first three (3) days from and after the Settlement Date and
thereafter at the Interest Rate then applicable to the Revolving Loans (A) on
behalf of the Bank, with respect to each outstanding Non-Ratable Loan, and (B)
for itself, with respect to each Agent Advance.

(iii)          Notwithstanding the foregoing, not more than one (1)
Business Day after demand is made by the Agent (whether before or after the
occurrence of a Default or an Event of Default and regardless of whether the
Agent has requested a Settlement with respect to a Non-Ratable Loan or Agent
Advance), each other Lender (A) shall irrevocably and unconditionally purchase
and receive from the Bank or the Agent, as applicable, without recourse or
warranty, an undivided interest and participation in such Non-Ratable Loan or
Agent Advance equal to such Lender’s Pro Rata Share of such Non-Ratable Loan

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or Agent Advance and (B) if
Settlement has not previously occurred with respect to such Non-Ratable Loans
or Agent Advances, upon demand by Bank or the Agent, as applicable, shall pay
to Bank or the Agent, as applicable, as the purchase price of such
participation an amount equal to one-hundred percent (100%) of such Lender’s
Pro Rata Share of such Non-Ratable Loans or Agent Advances.  If such amount is not in fact made available
to the Agent by any Lender, the Agent shall be entitled to recover such amount
on demand from such Lender together with interest thereon at the Federal Funds
Rate for the first three (3) days from and after such demand and thereafter at
the Interest Rate then applicable to Base Rate Revolving Loans.

(iv)          From and after the date, if any, on which any Lender
purchases an undivided interest and participation in any Non-Ratable Loan or
Agent Advance pursuant to clause (iii) above, the Agent shall promptly
distribute to such Lender, such Lender’s Pro Rata Share of all payments of principal
and interest and all proceeds of Collateral received by the Agent in respect of
such Non-Ratable Loan or Agent Advance.

(v)           Between Settlement Dates, the Agent, to the extent no
Agent Advances are outstanding, may pay over to the Bank any payments received
by the Agent, which in accordance with the terms of this Agreement would be
applied to the reduction of the Revolving Loans, for application to the Bank’s
Revolving Loans including Non-Ratable Loans. 
If, as of any Settlement Date, collections received since the then
immediately preceding Settlement Date have been applied to the Bank’s Revolving
Loans (other than to Non-Ratable Loans or Agent Advances in which such Lender
has not yet funded its purchase of a participation pursuant to
clause (iii) above), as provided for in the previous sentence, the Bank
shall pay to the Agent for the accounts of the Lenders, to be applied to the
outstanding Revolving Loans of such Lenders, an amount such that each Lender
shall, upon receipt of such amount, have, as of such Settlement Date, its Pro
Rata Share of the Revolving Loans. 
During the period between Settlement Dates, the Bank with respect to
Non-Ratable Loans, the Agent with respect to Agent Advances, and each Lender with
respect to the Revolving Loans other than Non-Ratable Loans and Agent Advances,
shall be entitled to interest at the applicable rate or rates payable under
this Agreement on the actual average daily amount of funds employed by the
Bank, the Agent and the other Lenders.

(vi)          Unless the Agent has received written notice from a
Borrower or a Lender to the contrary, the Agent may assume that the applicable
conditions precedent set forth in Article 8 have been satisfied and the
requested Borrowing will not exceed Availability on any Funding Date for a
Revolving Loan or Non-Ratable Loan.

(b)         Lenders’ Failure to Perform.  All
Revolving Loans (other than Non-Ratable Loans and Agent Advances) shall be made
by the Lenders simultaneously and in accordance with their Pro Rata
Shares.  It is understood that (i) no
Lender shall be responsible for any failure by any other Lender to perform its
obligation to

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make any Revolving Loans hereunder,
nor shall any Revolving Credit Commitment of any Lender be increased or
decreased as a result of any failure by any other Lender to perform its
obligation to make any Revolving Loans hereunder, (ii) no failure by any Lender
to perform its obligation to make any Revolving Loans hereunder shall excuse
any other Lender from its obligation to make any Revolving Loans hereunder, and
(iii) the obligations of each Lender hereunder shall be several, not joint and
several.

(c)         Defaulting Lenders.  Unless the Agent receives notice
from a Lender on or prior to the Initial Funding Date or, with respect to any
Borrowing after the Initial Funding Date, at least one Business Day prior to
the date of such Borrowing, that such Lender will not make available as and
when required hereunder to the Agent that Lender’s Pro Rata Share of a
Borrowing, the Agent may assume that each Lender has made such amount available
to the Agent in immediately available funds on the Funding Date.  Furthermore, the Agent may, in reliance upon
such assumption, make available to the Borrower on such date a corresponding
amount.  If any Lender has not
transferred its full Pro Rata Share to the Agent in immediately available funds
and the Agent has transferred corresponding amount to the applicable Borrower
on the Business Day following such Funding Date that Lender shall make such
amount available to the Agent, together with interest at the Federal Funds Rate
for that day.  A notice by the Agent
submitted to any Lender with respect to amounts owing shall be conclusive,
absent manifest error.  If each Lender’s
full Pro Rata Share is transferred to the Agent as required, the amount
transferred to the Agent shall constitute that Lender’s Revolving Loan for all
purposes of this Agreement.  If that
amount is not transferred to the Agent on the Business Day following the
Funding Date, the Agent will notify the Borrowers of such failure to fund and,
upon demand by the Agent, the Borrowers shall pay such amount to the Agent for
the Agent’s account, together with interest thereon for each day elapsed since
the date of such Borrowing, at a rate per annum equal to the Interest Rate
applicable at the time to the Revolving Loans comprising that particular
Borrowing.  The failure of any Lender to
make any Revolving Loan on any Funding Date or any Delayed Draw Term Loan on
any Delayed Draw Date (any such Lender, prior to the cure of such failure,
being hereinafter referred to as a “Defaulting Lender”) shall not
relieve any other Lender of its obligation hereunder to make a Revolving Loan
or Delayed Draw Term Loan on that Funding Date or Delayed Draw Date, as
applicable.  No Lender shall be
responsible for any other Lender’s failure to advance such other Lenders’ Pro
Rata Share of any Borrowing.

(d)         Retention of Defaulting Lender’s Payments.  The Agent
shall not be obligated to transfer to a Defaulting Lender any payments made by
any Borrower to the Agent for the Defaulting Lender’s benefit; nor shall a
Defaulting Lender be entitled to the sharing of any payments hereunder.  Amounts payable to a Defaulting Lender shall
instead be paid to or retained by the Agent. 
In its discretion, the Agent may loan any Borrower the amount of all
such payments received or retained by it for the account of such Defaulting
Lender.  Any amounts so loaned to any
Borrower shall bear interest at the rate applicable to Base Rate

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Revolving Loans and for all other
purposes of this Agreement shall be treated as if they were Revolving Loans, provided,
however, that for purposes of voting or consenting to matters with
respect to the Loan Documents and determining Pro Rata Shares, such Defaulting
Lender shall be deemed not to be a “Lender”. 
Until a Defaulting Lender cures its failure to fund its Pro Rata Share
of any Borrowing (A) such Defaulting Lender shall not be entitled to any
portion of the Unused Line Fee and (B) the Unused Line Fee shall accrue in
favor of the Lenders which have funded their respective Pro Rata Shares of such
requested Borrowing and shall be allocated among such performing Lenders
ratably based upon their relative Revolving Credit Commitments.  This Section shall remain effective with
respect to such Lender until such time as the Defaulting Lender shall no longer
be in default of any of its obligations under this Agreement.  The terms of this Section shall not be
construed to increase or otherwise affect the Revolving Credit Commitment of
any Lender, or relieve or excuse the performance by the Borrowers of their
duties and obligations hereunder.

(e)         Removal of Defaulting Lender.  At the
Borrowers’ request, the Agent or an Eligible Assignee reasonably acceptable to the
Agent and the Borrowers shall have the right (but not the obligation) to
purchase from any Defaulting Lender, and each Defaulting Lender shall, upon
such request, sell and assign to the Agent or such Eligible Assignee, all of
the Defaulting Lender’s outstanding Revolving Credit Commitments and/or Delayed
Draw Commitments hereunder.  Such sale
shall be consummated promptly after the Agent has arranged for a purchase by
the Agent or an Eligible Assignee pursuant to an Assignment and Acceptance, and
at a price equal to the outstanding principal balance of the Defaulting Lender’s
Loans, plus accrued interest and fees, without premium or discount.  Any such purchase from a Defaulting Lender
shall not effect a release of such Defaulting Lender from any claim suit or
liability hereunder or under any Loan Document.

12.16     Letters of Credit; Intra-Lender Issues.

(a)         Notice of Letter of Credit Balance.  On each
Settlement Date the Agent shall notify each Lender of the issuance of all
Letters of Credit since the prior Settlement Date.

(b)         Participations in Letters of Credit.

(i)            Purchase of Participations.  Immediately
upon issuance of any Letter of Credit in accordance with Section 1.4(d),
each Revolving Credit Lender shall be deemed to have irrevocably and unconditionally
purchased and received without recourse or warranty, an undivided interest and
participation equal to such Lender’s Pro Rata Share of the face amount of such
Letter of Credit or the Credit Support provided through the Agent to the Letter
of Credit Issuer, if not the Bank, in connection with the issuance of such
Letter of Credit (including all obligations of the Borrowers with respect
thereto, and any security therefor or guaranty pertaining thereto).

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(ii)           Sharing of Reimbursement Obligation Payments.  Whenever the
Agent receives a payment from any Borrower on account of reimbursement
obligations in respect of a Letter of Credit or Credit Support as to which the
Agent has previously received for the account of the Letter of Credit Issuer
thereof payment from a Revolving Credit Lender, the Agent shall promptly pay to
such Revolving Credit Lender such Revolving Credit Lender’s Pro Rata Share of
such payment from such Borrower.  Each
such payment shall be made by the Agent on the next Settlement Date.

(iii)          Documentation.  Upon the request of any Revolving
Credit Lender, the Agent shall furnish to such Revolving Credit Lender copies
of any Letter of Credit, Credit Support for any Letter of Credit, reimbursement
agreements executed in connection therewith, applications for any Letter of
Credit, and such other documentation as may reasonably be requested by such
Revolving Credit Lender.

(iv)          Obligations Irrevocable.  The
obligations of each Revolving Credit Lender to make payments to the Agent with
respect to any Letter of Credit or with respect to their participation therein
or with respect to any Credit Support for any Letter of Credit or with respect
to the Revolving Loans made as a result of a drawing under a Letter of Credit
and the obligations of the Borrower for whose account the Letter of Credit or
Credit Support was issued to make payments to the Agent, for the account of the
Revolving Credit Lenders, shall be irrevocable and shall not be subject to any
qualification or exception whatsoever, including any of the following
circumstances:

(1)           any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;

(2)           the existence of any claim, setoff, defense or other
right which any Borrower may have at any time against a beneficiary named in a
Letter of Credit or any transferee of any Letter of Credit (or any Person for
whom any such transferee may be acting), any Revolving Credit Lender, the
Agent, the issuer of such Letter of Credit, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between any Borrower or any other Person and the beneficiary named
in any Letter of Credit);

(3)           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;

(4)           the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan Documents;

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(5)           the occurrence of any Default or Event of Default; or

(6)           the failure of any Borrower to satisfy the applicable
conditions precedent set forth in Article 8.

(c)         Recovery or Avoidance of Payments; Refund of Payments
In Error.  In the event any payment by or on behalf of
any Borrower received by the Agent with respect to any Letter of Credit or
Credit Support provided for any Letter of Credit and distributed by the Agent
to the Revolving Credit Lenders on account of their respective participations
therein is thereafter set aside, avoided or recovered from the Agent in
connection with any receivership, liquidation or bankruptcy proceeding, the
Revolving Credit Lenders shall, upon demand by the Agent, pay to the Agent
their respective Pro Rata Shares of such amount set aside, avoided or
recovered, together with interest at the rate required to be paid by the Agent
upon the amount required to be repaid by it. 
Unless the Agent receives notice from the Borrowers prior to the date on
which any payment is due to the Revolving Credit Lenders that the Borrowers
will not make such payment in full as and when required, the Agent may assume
that the Borrowers have made such payment in full to the Agent on such date in
immediately available funds and the Agent may (but shall not be so required),
in reliance upon such assumption, distribute to each Revolving Credit Lender on
such due date an amount equal to the amount then due such Revolving Credit
Lender.  If and to the extent the
Borrowers have not made such payment in full to the Agent, each Revolving
Credit Lender shall repay to the Agent on demand such amount distributed to
such Revolving Credit Lender, together with interest thereon at the Federal
Funds Rate for each day from the date such amount is distributed to such
Revolving Credit Lender until the date repaid.

(d)         Indemnification by Lenders.  To the
extent not reimbursed by the Borrowers and without limiting the obligations of
the Borrowers hereunder, the Revolving Credit Lenders agree to indemnify the
Letter of Credit Issuer ratably in accordance with their respective Pro Rata
Shares, for any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including attorneys’ fees) or
disbursements of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against the Letter of Credit Issuer in any way relating
to or arising out of any Letter of Credit or the transactions contemplated
thereby or any action taken or omitted by the Letter of Credit Issuer under any
Letter of Credit or any Loan Document in connection therewith; provided
that no Revolving Credit Lender shall be liable for any of the foregoing to the
extent it arises from the gross negligence or willful misconduct of the Person
to be indemnified.  Without limitation of
the foregoing, each Revolving Credit Lender agrees to reimburse the Letter of
Credit Issuer promptly upon demand for its Pro Rata Share of any costs or
expenses payable by the Borrowers to the Letter of Credit Issuer, to the extent
that the Letter of Credit Issuer is not promptly reimbursed for such costs and
expenses by the Borrowers.  The agreement
contained in this Section shall survive payment in full of all other
Obligations.

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12.17       Concerning the Collateral and the Related Loan
Documents.  Each Lender authorizes and directs the Agent
to enter into the other Loan Documents for the ratable benefit and obligation
of the Agent and the Lenders.  Each
Lender agrees that any action taken by the Agent, Majority Lenders or Required
Lenders, as applicable, in accordance with the terms of this Agreement or the
other Loan Documents, and the exercise by the Agent, the Majority Lenders, or
the Required Lenders, as applicable, of their respective powers set forth
therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.  The Lenders acknowledge that the Revolving
Loans, Term Loans, Agent Advances, Non-Ratable Loans, Hedge Agreements, Bank
Products and all interest, fees and expenses hereunder constitute one Debt,
secured pari  passu by all of the Collateral.

12.18       Field Audit and Examination Reports; Disclaimer by
Lenders.  By signing this Agreement, each Lender:

(a)         is deemed to have requested that the Agent furnish
such Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a “Report” and collectively, “Reports”)
prepared by or on behalf of the Agent;

(b)         expressly agrees and acknowledges that neither the
Bank nor the Agent (i) makes any representation or warranty as to the accuracy
of any Report, or (ii) shall be liable for any information contained in any
Report;

(c)         expressly agrees and acknowledges that the Reports
are not comprehensive audits or examinations, that the Agent or the Bank or
other party performing any audit or examination will inspect only specific
information regarding the Borrowers and will rely significantly upon the Borrowers’
books and records, as well as on representations of the Borrowers’ personnel;

(d)         agrees to keep all Reports confidential and strictly
for its internal use, and not to distribute except to its participants, or use
any Report in any other manner in accordance with the provisions of Section
13.17; and

(e)         without limiting the generality of any other
indemnification provision contained in this Agreement, agrees:  (i) to hold the Agent and any such other
Lender preparing a Report harmless from any action the indemnifying Lender may
take or conclusion the indemnifying Lender may reach or draw from any Report in
connection with any loans or other credit accommodations that the indemnifying
Lender has made or may make to any Borrower, or the indemnifying Lender’s
participation in, or the indemnifying Lender’s purchase of, a loan or loans of
any Borrower; and (ii) to pay and protect, and indemnify, defend and hold the
Agent and any such other Lender preparing a Report harmless from and against,
the claims, actions, proceedings, damages, costs, expenses and other amounts
(including Attorney Costs) incurred by the Agent and any such other Lender
preparing a Report as the direct or indirect result of any third parties who
might obtain all or part of any Report through the indemnifying Lender.

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12.19       Relation Among Lenders.  The Lenders
are not partners or co-venturers, and no Lender shall be liable for the acts or
omissions of, or (except as otherwise set forth herein in case of the Agent)
authorized to act for, any other Lender.

12.20       Co-Agents.  None of the Lenders identified on the facing
page or signature pages of this Agreement as a “co-agent” shall have any
right, power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Lenders as such.  Without limiting the foregoing, none of the
Lenders so identified as a “co-agent” shall have or be deemed to have any
fiduciary relationship with any Lender. 
Each Lender acknowledges that it has not relied, and will not rely, on
any of the Lenders so identified in deciding to enter into this Agreement or in
taking or not taking action hereunder.

12.21       Collateral Priority.  The Lenders hereby agree
that, as between the Lenders, the Liens created on the Collateral other than
the Term Loan Collateral constitute (x) first priority, perfected Liens in
favor of the Agent, for the ratable benefit of the Agent and the Revolving
Credit Lenders, and (y) second priority, perfected Liens in favor of the Agent,
for the ratable benefit of the Agent and the Term Lenders, and the Liens
created on the Term Loan Collateral constitute (x) first priority, perfected
Liens in favor of the Agent, for the ratable benefit of the Agent and the Term
Lenders, and (y) second priority, perfected Liens in favor of the Agent, for
the ratable benefit of the Agent and the Revolving Credit Lenders, except in
each case for Permitted Liens.

12.22       Foreclosure/Environmental Reports.  Unless
otherwise agreed by all Lenders, Agent will not foreclose on any real property
Collateral unless, prior to such foreclosure Agent and the Lenders have
received an environmental report, which report shall be reasonably acceptable
in form and substance to Agent and Required Lenders, from an environmental
consultant, selected by Agent.  Borrower
shall pay the costs of obtaining any such environmental report.

ARTICLE 13

MISCELLANEOUS

13.1         No Waivers; Cumulative Remedies.  No failure
by the Agent or any Lender to exercise any right, remedy, or option under this
Agreement or any present or future supplement thereto, or in any other
agreement between or among the Borrowers (or any of them), the Loan Parties (or
any of them) and the Agent and/or any Lender, or delay by the Agent or any
Lender in exercising the same, will operate as a waiver thereof.  No waiver by the Agent or any Lender will be
effective unless it is in writing, and then only to the extent specifically
stated.  No waiver by the Agent or the
Lenders on any occasion shall affect or diminish the Agent’s and each Lender’s
rights thereafter to require strict performance by the Borrowers of any
provision of this Agreement or by any Loan Party of any provision of any Loan
Document.  The Agent and the Lenders may
proceed directly to collect the Obligations without any prior recourse to the
Collateral.  The Agent’s and each Lender’s
rights under this Agreement will be cumulative and not exclusive of any other
right or remedy which the Agent or any Lender may have.

13.2         Severability.  The illegality or unenforceability
of any provision of this Agreement or any Loan Document or any instrument or
agreement required hereunder shall not in any way affect or impair the legality
or enforceability of the remaining provisions of this Agreement or any
instrument or agreement required hereunder.

 92
 

 

13.3       Governing Law; Choice of Forum; Service of Process.

(a)         THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT
ISSUES WITH RESPECT TO CREATION, PERFECTION OR ENFORCEMENT OF LIENS UNDER ARTICLE
9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES
SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF CALIFORNIA; PROVIDED THAT
THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

(b)         ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF CALIFORNIA OR OF THE UNITED STATES OF AMERICA LOCATED IN LOS ANGELES COUNTY,
CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE
BORROWERS, THE AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE PERSONAL JURISDICTION OF THOSE COURTS.  EACH OF THE BORROWERS, THE AGENT AND THE
LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO.  NOTWITHSTANDING THE FOREGOING:  (1) THE AGENT AND THE LENDERS SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY LOAN PARTY OR ITS PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY
OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE
OBLIGATIONS AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS
FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.

(c)         FLEETWOOD AND EACH BORROWER HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY PERSONAL DELIVERY OR OVERNIGHT COURIER DIRECTED TO
FLEETWOOD AND EACH THE BORROWERS AT ITS ADDRESS SET

 93
 

 

FORTH IN SECTION 13.8
AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE
SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID.  NOTHING CONTAINED HEREIN SHALL AFFECT THE
RIGHT OF AGENT OR THE LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER MANNER
PERMITTED BY LAW.

13.4         WAIVER OF JURY TRIAL.  FLEETWOOD,
EACH BORROWER, THE LENDERS AND THE AGENT EACH IRREVOCABLY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. FLEETWOOD, EACH
BORROWER, THE LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY
OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF.  THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.

13.5         Survival of Representations and Warranties.  All of the
representations and warranties contained in this Agreement shall survive the
execution, delivery, and acceptance thereof by the parties, notwithstanding any
investigation by the Agent or the Lenders or their respective agents.

13.6         Other Security and Guaranties.  The Agent,
may, without notice or demand and without affecting the Borrowers’ obligations
hereunder, from time to time:  (a) take
from any Person and hold collateral (other than the Collateral) for the payment
of all or any part of the Obligations and exchange, enforce or release such
collateral or any part thereof; and (b) accept and hold any endorsement or
guaranty of payment of all or any part of the Obligations and release or
substitute any such endorser or guarantor, or any Person who has given any Lien
in any other collateral as security for the payment of all or any part of the
Obligations, or any other Person in any way obligated to pay all or any part of
the Obligations.

13.7         Fees and Expenses.  The Borrowers agree jointly and
severally to pay to the Agent, for its benefit, on demand, all costs and
expenses that the Agent pays or incurs in connection with the negotiation,
preparation, syndication, consummation, administration, enforcement, and
termination of this Agreement or any of the other Loan Documents, including:
(a) Attorney Costs; (b) reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ and paralegals’ fees and disbursements) for
any amendment, supplement, waiver,

 94
 

 

consent,
or subsequent closing in connection with the Loan Documents and the
transactions contemplated thereby; (c) reasonable out-of-pocket costs and
expenses of lien and title searches and title insurance; (d) taxes, fees
and other charges for recording the Mortgages, filing financing statements and
continuations, and other actions to perfect, protect, and continue the Agent’s
Liens (including reasonable out-of-pocket costs and expenses paid or incurred
by the Agent in connection with the consummation of Agreement); (e) sums
paid or incurred to pay any amount or take any action required of any Loan
Party under the Loan Documents that it fails to pay or take;
(f) reasonable out-of-pocket costs of appraisals performed in accordance
with the provisions hereof, inspections, and verifications of the Collateral,
including travel, lodging, and meals for inspections of the Collateral and the
Loan Parties’ operations by the Agent plus the Agent’s then customary charge
for field examinations and audits and the preparation of reports thereof (such
charge is currently $750 per day (or portion thereof) for each Person retained
or employed by the Agent with respect to each field examination or audit); and
(g) reasonable out-of-pocket costs and expenses of forwarding loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining Payment Accounts and lock boxes, and reasonable out-of-pocket costs
and expenses of preserving and protecting the Collateral.  In addition, the Borrowers jointly and
severally agree to pay costs and expenses incurred by the Agents (including
Attorneys’ Costs) to the Agents, for their benefit, on demand, and to the other
Lenders for their benefit, on demand, and all reasonable fees, expenses and
disbursements incurred by such other Lenders for one law firm retained by such
other Lenders as a group, in each case, paid or incurred to obtain payment of
the Obligations, enforce the Agent’s Liens, sell or otherwise realize upon the
Collateral, and otherwise enforce the provisions of the Loan Documents, or to
defend any claims made or threatened against the Agent or any Lender arising
out of the transactions contemplated hereby (including preparations for and
consultations concerning any such matters). 
The foregoing shall not be construed to limit any other provisions of
the Loan Documents regarding costs and expenses to be paid by the Borrowers or
any other Loan Party.  All of the
foregoing costs and expenses shall be charged to the Borrowers’ Loan Account as
Revolving Loans as described in Section 3.7.

13.8         Notices.  Except as otherwise provided herein, all
notices, demands and requests that any party is required or elects to give to
any other shall be in writing, or by a telecommunications device capable of
creating a written record, and any such notice shall become effective
(a) upon personal delivery thereof, including, but not limited to,
delivery by overnight mail and courier service, (b) five (5) days after it
shall have been mailed by United States mail, first class, certified or
registered, with postage prepaid, or (c) in the case of notice by such a
telecommunications device, when receipt is confirmed, in each case addressed to
the party to be notified as follows:

If to
the Agent or to the Bank:

Bank of America, N.A.

55 South Lake Avenue, Suite 900

Pasadena, California  91101

Attention:  Todd R. Eggertsen

Telecopy No.:  (626) 397-1273/1274

 95
 

 

with
copies to:

Latham & Watkins LLP

633 West Fifth Street, Suite 4000

Los Angeles, California  90071

Attention:  Andrew Fayé, Esq.

Telecopy No.:  (213) 891-8763

If to
Fleetwood or any Borrower:

Fleetwood Holdings Inc.

Fleetwood Enterprises, Inc.

3125 Myers Street

Riverside, California  92503

Attention:  Chief Financial Officer

Telecopy No.:  (951) 351-3373

Attention:  General Counsel

Telecopy No.:  (951) 977-2097

with
copies to:

Gibson, Dunn & Crutcher LLP

333 South Grand Avenue

Los Angeles, California  90071-3197

Attention:  Jeff Hudson, Esq.

Telecopy No.:  (213) 229-6332

or to
such other address as each party may designate for itself by like notice.  Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to the persons designated above to receive copies shall not adversely affect
the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.

13.9         Waiver of Notices.  Unless
otherwise expressly provided herein, each Borrower waives presentment, and
notice of demand or dishonor and protest as to any instrument, notice of intent
to accelerate the Obligations and notice of acceleration of the Obligations, as
well as any and all other notices to which it might otherwise be entitled.  No notice to or demand on any Borrower which
the Agent or any Lender may elect to give shall entitle any Borrower to any or
further notice or demand in the same, similar or other circumstances.

13.10       Binding Effect.  The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective
representatives, successors, and assigns of the parties hereto; provided,
however, that no interest herein may be assigned by any Borrower without
prior written consent of the Agent and each Lender.  The rights and benefits of the Agent and the
Lenders hereunder shall, if such Persons so agree, inure to any party acquiring
any interest in the Obligations or any part thereof.

 96
 

 

13.11     Indemnity of the Agent and the Lenders by the
Borrower.

(a)         The Borrowers jointly and severally agree to defend,
indemnify and hold the Agent-Related Persons, and each Lender and each of its
respective officers, directors, employees, counsel, representatives, agents and
attorneys-in-fact (each, an “Indemnified Person”) harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and
disbursements (including Attorney Costs) of any kind or nature whatsoever which
may at any time (including at any time following repayment of the Loans and the
termination, resignation or replacement of the Agent or replacement of any
Lender) be imposed on, incurred by or asserted against any such Person in any
way relating to or arising out of this Agreement or any document contemplated
by or referred to herein, or the transactions contemplated hereby, or any
action taken or omitted by any such Person under or in connection with any of
the foregoing, including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate proceeding)
related to or arising out of this Agreement, any other Loan Document, or the
Loans or the use of the proceeds thereof, whether or not any Indemnified Person
is a party thereto (all the foregoing, collectively, the “Indemnified
Liabilities”); provided, that the Borrowers shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified Liabilities to
the extent finally determined by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. The agreements in this Section shall survive payment of all other
Obligations.

(b)         The Borrowers agree to indemnify, defend and hold
harmless the Agent and the Lenders from any loss or liability directly or
indirectly arising out of the use, generation, manufacture, production,
storage, release, threatened release, discharge, disposal or presence of a
hazardous substance relating to any Loan Party’s operations, business or
property.  This indemnity will apply
whether the hazardous substance is on, under or about any Loan Party’s property
or operations or property leased to any Loan Party’s.  The indemnity includes but is not limited to
Attorneys Costs.  The indemnity extends
to the Agent and the Lenders, their parents, affiliates, subsidiaries and all
of their directors, officers, employees, agents, successors, attorneys and
assigns.  “Hazardous substances” means
any substance, material or waste that is or becomes designated or regulated as “toxic,”
“hazardous,” “pollutant,” or “contaminant” or a similar designation or
regulation under any federal, state or local law (whether under common law,
statute, regulation or otherwise) or judicial or administrative interpretation
of such, including petroleum or natural gas. 
This indemnity will survive repayment of all other Obligations.

13.12       Limitation of Liability.  NO CLAIM MAY
BE MADE BY FLEETWOOD, ANY BORROWER, ANY LENDER OR OTHER PERSON AGAINST THE
AGENT, ANY LENDER, OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL,
REPRESENTATIVES, AGENTS OR ATTORNEYS-IN-FACT OF ANY OF THEM FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF

 97
 

 

ANY
CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR
RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND
FLEETWOOD, EACH BORROWER AND EACH LENDER HEREBY WAIVE, RELEASE AND AGREE NOT TO
SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT
KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

13.13       Final Agreement.  This Agreement and the other Loan
Documents are intended by Fleetwood, each Borrower, the Agent and the Lenders
to be the final, complete, and exclusive expression of the agreement between
them.  This Agreement supersedes any and
all prior oral or written agreements relating to the subject matter hereof
except for the Fee Letter.  No
modification, rescission, waiver, release, or amendment of any provision of
this Agreement or any other Loan Document shall be made, except by a written
agreement signed by the Borrowers and a duly authorized officer of each of the
Agent and the requisite Lenders.

13.14       Counterparts.  This Agreement may be executed in
any number of counterparts, and by the Agent, each Lender, Fleetwood and the
Borrower in separate counterparts, each of which shall be an original, but all
of which shall together constitute one and the same agreement; signature pages
may be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.

13.15       Captions.  The captions contained in this Agreement are
for convenience of reference only, are without substantive meaning and should
not be construed to modify, enlarge, or restrict any provision.

13.16       Right of Setoff.  In addition to any rights and
remedies of the Lenders provided by law, if an Event of Default exists or the
Loans have been accelerated, each Lender is authorized at any time and from
time to time, without prior notice to Fleetwood or the Borrowers, any such
notice being waived by Fleetwood and the Borrowers to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Lender or any Affiliate of such Lender
to or for the credit or the account of Fleetwood and the Borrowers against any
and all Obligations owing to such Lender, now or hereafter existing,
irrespective of whether or not the Agent or such Lender shall have made demand
under this Agreement or any Loan Document and although such Obligations may be
contingent or unmatured.  Each Lender
agrees promptly to notify the Borrowers and the Agent after any such set-off
and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such set-off
and application.  NOTWITHSTANDING THE
FOREGOING, NO LENDER SHALL EXERCISE ANY RIGHT OF SET-OFF, BANKER’S LIEN, OR THE
LIKE AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF FLEETWOOD OR ANY LOAN PARTY
HELD OR MAINTAINED BY SUCH LENDER WITHOUT THE PRIOR WRITTEN UNANIMOUS CONSENT
OF THE LENDERS.

 98
 

 

13.17     Confidentiality.

(a)         Fleetwood and each Borrower hereby consents that the
Agent and each Lender may issue and disseminate to the public general
information describing the credit accommodation entered into pursuant to this
Agreement, including the name and address of Fleetwood or the Borrowers and a
general description of the business of Fleetwood and its Subsidiaries and may
use Fleetwood’s and the Borrowers’ names in advertising and other promotional
material.

(b)         Each Lender severally agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
non-public financial information provided to the Lenders and relating to
Fleetwood or any Borrower, non-public information relating to major
transactions not in the ordinary course of business and to be entered into by
Fleetwood or any Borrower, and all other information identified as “confidential”
or “secret” by Fleetwood or the Borrowers and provided to the Agent or such
Lender by or on behalf of the Borrowers, under this Agreement or any other Loan
Document, except to the extent that such information (i) was or becomes
generally available to the public other than as a result of disclosure by the
Agent or such Lender, or (ii) was or becomes available on a nonconfidential basis
from a source other than Fleetwood or the Borrowers, provided that such
source is not bound by a confidentiality agreement with Fleetwood or the
Borrowers known to the Agent or such Lender; provided, however,
that the Agent and any Lender may disclose such information (1) at the request
or pursuant to any requirement of any Governmental Authority to which the Agent
or such Lender is subject or in connection with an examination of the Agent or
such Lender by any such Governmental Authority; (2) pursuant to subpoena or
other court process; (3) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (4) to the extent reasonably
required in connection with any litigation or proceeding (including, but not
limited to, any bankruptcy proceeding) to which the Agent, any Lender or their
respective Affiliates may be party involving any Loan Document, any Loan Party
or the use of the proceeds of the Loans; (5) to the extent reasonably required
in connection with the exercise of any remedy hereunder or under any other Loan
Document; (6) to the Agent’s or such Lender’s independent auditors,
accountants, attorneys and other professional advisors; (7) to any prospective
Participant or Assignee under any Assignment and Acceptance, actual or
potential, provided that such prospective Participant or Assignee agrees
to keep such information confidential to the same extent required of the Agent
and the Lenders hereunder; (8) as expressly permitted under the terms of any
other document or agreement regarding confidentiality to which Fleetwood or any
Borrower is party or is deemed party with the Agent or such Lender, and (9) to
its Affiliates.

13.18       Conflicts with Other Loan Documents.  Unless
otherwise expressly provided in this Agreement (or in another Loan Document by
specific reference to the applicable provision contained in this Agreement), if
any provision contained in this Agreement conflicts with any provision of any
other Loan Document, the provision contained in this Agreement shall govern and
control.

 99
 

 

13.19       Reinstatement.  To the maximum extent permitted by law, this
Agreement, and the Obligations, shall continue to be effective or be
reinstated, as the case may be, if at any time any amount received by any Agent
or Lender in respect of the Obligations is rescinded or must otherwise be
restored or returned by any such Person upon the insolvency, administration,
bankruptcy, dissolution, liquidation or reorganization of any Borrower or any
other Person or upon the appointment of any receiver, intervenor, conservator,
trustee or similar official for any Borrower or any other Person or any
substantial part of its assets, or otherwise, all as though such payments had
not been made.

ARTICLE 14

GUARANTY

14.1         Guaranty.  Each of Fleetwood and FMC hereby absolutely
and unconditionally guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all Obligations of each Borrower,
now outstanding or hereafter arising under or in connection with this Agreement
or any other Loan Document, whether for principal of any Loan or the interest
thereon (including any interest which accrues after the filing of any
proceeding in bankruptcy, or would have accrued but for such filing) or Letters
of Credit or liabilities thereunder or for fees, taxes, additional
compensation, expense reimbursements, indemnification or otherwise as provided
in this Agreement and the other Loan Documents, pursuant to, subject to, and
limited by the terms and conditions of the Fleetwood Guaranty and the FMC
Guaranty, respectively, and the terms and conditions of each of the Fleetwood
Guaranty and the FMC Guaranty are hereby incorporated by reference.

[Signatures on Following Page]

 100

 

IN WITNESS WHEREOF, the parties have
entered into this Credit Agreement on the date first above written.

	
  “BORROWERS”

  	
   

  	
  FLEETWOOD HOLDINGS INC.

  

  FLEETWOOD HOMES OF ARIZONA, INC.

  

  FLEETWOOD HOMES OF CALIFORNIA,

  INC.

  

  FLEETWOOD HOMES OF FLORIDA, INC.

  

  FLEETWOOD HOMES OF GEORGIA, INC.

  

  FLEETWOOD HOMES OF IDAHO, INC.

  

  FLEETWOOD HOMES OF INDIANA, INC.

  

  FLEETWOOD HOMES OF KENTUCKY,

  INC.

  

  FLEETWOOD HOMES OF NORTH

  CAROLINA, INC.

  

  FLEETWOOD HOMES OF OREGON, INC.

  

  FLEETWOOD HOMES OF

  PENNSYLVANIA, INC.

  

  FLEETWOOD HOMES OF TENNESSEE,

  INC.

  

  FLEETWOOD HOMES OF TEXAS, L.P.

  By:          FLEETWOOD GENERAL PARTNER

  OF TEXAS, INC., its General Partner

  

  FLEETWOOD HOMES OF VIRGINIA, INC.

  

  FLEETWOOD HOMES OF WASHINGTON,

  INC.

  

  FLEETWOOD MOTOR HOMES OF

  CALIFORNIA, INC.

  

  FLEETWOOD MOTOR HOMES OF

  INDIANA, INC.

  

  FLEETWOOD MOTOR HOMES OF

  PENNSYLVANIA, INC.

  

 S-1
 

 

 

	
  

  	
   

  	
  FLEETWOOD TRAVEL TRAILERS OF

  CALIFORNIA, INC.

  

  FLEETWOOD TRAVEL TRAILERS OF

  INDIANA, INC.

  

  FLEETWOOD TRAVEL TRAILERS OF

  KENTUCKY, INC.

  

  FLEETWOOD TRAVEL TRAILERS OF

  MARYLAND, INC.

  

  FLEETWOOD TRAVEL TRAILERS OF

  OHIO, INC.

  

  FLEETWOOD TRAVEL TRAILERS OF

  OREGON, INC.

  

  FLEETWOOD TRAVEL TRAILERS OF

  TEXAS, INC.

  

  FLEETWOOD FOLDING TRAILERS, INC.

  

  GOLD SHIELD, INC.

  

  GOLD SHIELD OF INDIANA, INC.

  

  CONTINENTAL LUMBER PRODUCTS,

  INC.

  

  FLEETWOOD GENERAL PARTNER OF

  TEXAS, INC.

  

  FLEETWOOD HOMES INVESTMENT, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Boyd R. Plowman

  
	
   

  	
   

  	
  Name:

  	
  Boyd R. Plowman

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President and Chief

  Financial Officer

  

 S-2
 

 

 

	
  “GUARANTOR”

  	
   

  	
  FLEETWOOD ENTERPRISES, INC.,
  as the

  Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Boyd R. Plowman

  
	
   

  	
   

  	
  Name:

  	
  Boyd R. Plowman

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President and Chief

  Financial Officer

  

 S-3
 

 

 

	
  “AGENT”

  	
   

  	
  BANK OF AMERICA, N.A.,
  as the Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Todd Eggertsen

  
	
   

  	
   

  	
   

  	
  Todd Eggertsen

  
	
   

  	
   

  	
   

  	
  Vice President

  

 S-4
 

 

 

	
  “LENDERS”

  	
   

  	
  BANK OF AMERICA, N.A.,
  as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Todd Eggertsen

  
	
   

  	
   

  	
   

  	
  Todd Eggertsen

  
	
   

  	
   

  	
   

  	
  Vice President

  

 S-5
 

 

 

	
  “LENDERS”

  	
   

  	
  WELLS FARGO FOOTHILL, INC. fka

  FOOTHILL CAPITAL CORPORATION, as a

  Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Juan Barrera

  
	
   

  	
   

  	
   

  	
  Juan Barrera

  
	
   

  	
   

  	
   

  	
  Vice President

  

 S-6
 

 

 

	
  “LENDERS”

  	
   

  	
  THE CIT GROUP/BUSINESS CREDIT, INC.,

  as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jang Kim

  
	
   

  	
   

  	
   

  	
  Jang Kim

  
	
   

  	
   

  	
   

  	
  Vice President

  

 S-7
 

 

 

	
  “LENDERS”

  	
   

  	
  TEXTRON FINANCIAL CORPORATION,
  as

  a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Norbert Schmidt

  
	
   

  	
   

  	
   

  	
  Norbert Schmidt

  
	
   

  	
   

  	
   

  	
  Vice President

  

 

 S-8

 

ANNEX A

to

Credit Agreement

Definitions

Capitalized
terms used in the Loan Documents shall have the following respective meanings
(unless otherwise defined therein), and all section references in the following
definitions shall refer to sections of the Agreement:

“1998
Subordinated Debentures” means Fleetwood’s 6% Convertible Subordinated
Debentures due February 15, 2028 in the original principal amount of
$296,400,000.

“2003 Subordinated
Debentures” means $100,000,000 in original principal amount of unsecured,
convertible senior subordinated debentures issued by Fleetwood on December 22,
2003 on terms and conditions as in effect on such date.

“Accounts”
means, as to any Person, all of such Person’s now owned or hereafter acquired
or arising accounts, as defined in the UCC, including any rights to payment for
the sale or lease of goods or rendition of services, whether or not they have
been earned by performance.

“Account
Debtor” means each Person obligated in any way on or in connection with an
Account.

“ACH
Transactions” means any cash management or related services including the
automatic clearinghouse transfer of funds by the Bank for the account of any
Loan Party pursuant to agreement or overdrafts.

“Adjusted
Net Earnings from Operations” means, with respect to any fiscal period the
net income of Fleetwood and its consolidated Subsidiaries after provision for
income taxes for such fiscal period, as determined in accordance with GAAP and
reported on the Financial Statements for such period, excluding any and all of
the following included in such net income: 
(a) gain or loss arising from the sale of any capital assets; (b) gain
arising from any write-up or any loss from any write down in the book value of
any asset; (c) earnings of any Person, substantially all the assets of which
have been acquired by Fleetwood or any of its Subsidiaries in any manner, to
the extent realized by such other Person prior to the date of acquisition; (d)
earnings of any Person in which any Person other than Fleetwood or any of its
Subsidiaries has an ownership interest unless (and only to the extent) such
earnings shall actually have been received by Fleetwood or any of its
Subsidiaries in the form of cash distributions; (e) earnings of any Person to
which assets of Fleetwood or any of its Subsidiaries shall have been sold,
transferred or disposed of, or into which any Subsidiary shall have been
merged, or which has been a party with Fleetwood or any of its Subsidiaries to
any consolidation or other form of reorganization, prior to the date of such
transaction; (f) gain arising from the acquisition of debt or equity securities
of Fleetwood or any of its Subsidiaries or from cancellation or forgiveness of
Debt; (g) gain (or loss) arising from extraordinary items, as determined
in accordance with GAAP, or from any other non-recurring items; (h) interest
income; (i) other income not earned from operations; (j) any write-down or
write-off of goodwill under FAS 142; (k) any non-cash

 A-1
 

 

adjustment
required as a result of a change in GAAP that occurs after the Closing Date;
(l) write-downs of Fixed Assets (other than Eligible Real Estate or Term
Loan Collateral) or good will that requires a write-down in accordance with
GAAP; (m) expenses arising as a result of fees paid to the Agent or the Lenders
pursuant to Section 2.7 of the Agreement; (n) non-cash gains/losses from
discontinued operations; and (o) non-cash stock-based compensation expense.

“Affected Lender” has the meaning specified in Section 4.6(a).

“Affiliate”
means, as to any Person, any other Person which, directly or indirectly, is in
control of, is controlled by, or is under common control with, such Person or
which owns, directly or indirectly, ten percent (10%) or more of the
outstanding equity interest of such Person. 
A Person shall be deemed to control another Person if the controlling
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of the other Person, whether through
the ownership of voting securities, by contract, or otherwise.

“Agent”
means the Administrative Agent.

“Agent
Advances” has the meaning specified in Section 1.2(i).

“Agent
Fee Letter” means that certain fee letter dated January 5, 2007, between
the Agent and Fleetwood.

“Agent’s
Liens” means the Liens in the Collateral granted to the Agent, for the
benefit of the Lenders, Bank, and the Agent pursuant to the Loan Documents.

“Agent-Related
Persons” means the Agent, together with its Affiliates, and the officers,
directors, employees, counsel, representatives, agents and attorneys-in-fact of
the Agent and such Affiliates.

“Agents”
means the Agent.

“Aggregate
Revolver Outstandings” means, at any date of determination:  the sum of the following for all Borrowers:
(a) the unpaid balance of Revolving Loans, (b) the aggregate amount of Pending
Revolving Loans, (c) one hundred percent (100%) of the aggregate undrawn face
amount of all outstanding Letters of Credit, and (d) the aggregate amount of
any unpaid reimbursement obligations in respect of Letters of Credit.

“Agreement”
means the Credit Agreement to which this Annex A is attached, as from
time to time amended, supplemented, modified or restated.

“Anniversary
Date” means each anniversary of the Closing Date.

“Annual Appraisal Date”
means each Anniversary Date.

“Applicable
Margin” means with respect to the Revolving Loans, the Term Loan,
all other Obligations, the Unused Line Fee and the Letter of Credit Fee, a rate
per annum corresponding to the Levels set forth below opposite the Fixed Charge
Coverage Ratio set forth

 A-2
 

 

below determined for the
four-Fiscal Quarter Period ended as of the end of the most recent Fiscal
Quarter.  Effective as of the Closing
Date, adjustments in Applicable Margins shall be determined by reference to the
following grid:

Fixed
Charge Coverage Ratio:

	
  If Fixed
  Charge Coverage Ratio is:

  	
   

  	
  Level

  
	
  Greater than or
  equal to 1.30:1.00

  	
   

  	
  Level I

  
	
  Greater than or
  equal to 1.10:1.00, but less
  than 1.30:1.00

  	
   

  	
  Level II

  
	
  Greater than or
  equal to 0.75:1.00, but less
  than 1.10:1.00

  	
   

  	
  Level III

  
	
  Greater than or
  equal to 0.40:1.00, but less
  than 0.75:1.00

  	
   

  	
  Level IV

  
	
  Less than
  0.40:1.00

  	
   

  	
  Level V

  

Low to High

	
   

  	
   

  	
  Applicable Margins

  	
   

  
	
   

  	
   

  	
  Level I

  	
   

  	
  Level II

  	
   

  	
  Level III

  	
   

  	
  Level IV

  	
   

  	
  Level V

  	
   

  
	
  Base Rate Lender
  Term Loans

  	
   

  	
  0.25

  	
  %

  	
  0.25

  	
  %

  	
  0.50

  	
  %

  	
  0.75

  	
  %

  	
  1.00

  	
  %

  
	
  LIBOR Lender
  Term Loans

  	
   

  	
  2.00

  	
  %

  	
  2.25

  	
  %

  	
  2.50

  	
  %

  	
  2.75

  	
  %

  	
  3.00

  	
  %

  
	
  Base Rate
  Revolving Loans

  	
   

  	
  -0.25

  	
  %

  	
  -0.25

  	
  %

  	
  0.00

  	
  %

  	
  0.25

  	
  %

  	
  0.50

  	
  %

  
	
  LIBOR Revolving
  Loans

  	
   

  	
  1.50

  	
  %

  	
  1.75

  	
  %

  	
  2.00

  	
  %

  	
  2.25

  	
  %

  	
  2.50

  	
  %

  
	
  Unused Line Fees

  	
   

  	
  0.25

  	
  %

  	
  0.375

  	
  %

  	
  0.375

  	
  %

  	
  0.50

  	
  %

  	
  0.50

  	
  %

  
	
  Letter of Credit Fees

  	
   

  	
  1.25

  	
  %

  	
  1.50

  	
  %

  	
  1.75

  	
  %

  	
  2.00

  	
  %

  	
  2.00

  	
  %

  

 

All
adjustments in the Applicable Margin shall be based on the unaudited Financial
Statements delivered pursuant to Section 5.2(b) and shall be implemented
on the first day of the calendar month commencing at least 5 days after the
date of delivery to the Lenders of the Financial Statements evidencing the need
for an adjustment, provided, however, that if the Applicable
Margins are adjusted at the end of any Fiscal Year based upon unaudited
Financial Statements delivered pursuant to Section 5.2(b) and if Fixed
Charge Coverage Ratio determined from the audited Financial Statements for such
Fiscal Year requires an adjustment in the Applicable Margins that would result
in higher Applicable Margins, then the Applicable Margins shall be adjusted
retroactively based on such audited Financial Statements and any increased
amount owed by the Borrowers as a result thereof shall be paid on the next
applicable payment date.  Failure to
timely deliver any Financial Statements shall, in addition to any other remedy
provided for in this Agreement, result in an increase in the Applicable Margins
to the highest level set forth in the foregoing grid, until the first day of
the first calendar month following the delivery of those Financial Statements
demonstrating that such an increase is not required.  If a Default or Event of Default has occurred
and is continuing at the time any reduction in the Applicable Margins is to be
implemented, such reduction shall not occur.

 “Appraisal Condition” means, at any
time prior to the Facility Increase Termination Date, either (a) (i) with
respect to the Borrowing of the Delayed Draw Term Loan, seventy-five percent
(75%) of the aggregate fair market value of FMC’s Term Loan Collateral subject
to a Mortgage, as set forth in Updated Appraisals, is greater than $18,071,425,
or (ii) with respect to the Borrowing of any Revolver Loans, seventy-five
percent (75%) of the aggregate fair market value of FMC’s Real Estate
Subfacility Assets subject to a Mortgage, as set forth in Updated Appraisals,
is greater than $11,250,000; or (b) the Administrative Agent shall have
confirmed to FMC that Updated Appraisals shall not be required.

 A-3
 

 

“Appraised
Orderly Liquidation Value” means the orderly liquidation value of any
property set forth in any appraisal delivered in connection with this Agreement
or the Security Agreement.

“Assigned
Contracts” means, collectively, all of the Loan Parties’ rights and
remedies under, and all moneys and claims for money due or to become due to any
Loan Party under those contracts set forth on Schedule 1.1 attached
hereto, and any other material contracts, and any and all amendments,
supplements, extensions, and renewals thereof including all rights and claims
of any Loan Party now or hereafter existing: 
(i) under any insurance, indemnities, warranties, and guarantees
provided for or arising out of or in connection with any of the foregoing
agreements; (ii) for any damages arising out of or for breach or default under
or in connection with any of the foregoing contracts; (iii) to all other
amounts from time to time paid or payable under or in connection with any of
the foregoing agreements; or (iv) to exercise or enforce any and all covenants,
remedies, powers and privileges thereunder.

“Assignee”
has the meaning specified in Section 11.2(a).

“Assignment
and Acceptance” has the meaning specified in Section 11.2(a).

“Assuming Lender”
has the meaning specified in Section 4.6(b).

“Attorney
Costs” means and includes all reasonable fees, expenses and disbursements
of any law firm or other counsel engaged by the Agent and, without duplication,
the reasonably allocated costs and expenses of internal legal services of the
Agent.

“Availability”
means, at any time (a) the lesser of (i) the Maximum Revolver Amount minus the
Aggregate Revolver Outstandings or (ii) the Borrowing Base minus the Aggregate
Revolver Outstandings minus (b) Reserves other than Reserves deducted in
calculating the Borrowing Base.

“Bank”
means Bank of America, N.A., a national banking association, or any successor
entity thereto.

“Bank
Products” means any one or more of the following types of services or
facilities extended to Fleetwood or any of its Subsidiaries by the Bank or any
affiliate of the Bank in reliance on the Bank’s agreement to indemnify such
affiliate:  (i) credit cards; (ii) ACH
Transactions; (iii) cash management, including controlled disbursement
services; and (iv) Hedge Agreements.

“Bank
Product Reserves” means all reserves which the Agent from time to time
establishes in its reasonable discretion for the Bank Products then provided or
outstanding.

“Bankruptcy
Code” means Title 11 of the United States Code (11 U.S.C. § 101 et
seq.).

 A-4
 

 

“Base
Rate” means, for any day, the rate of interest in effect for such day as
publicly announced from time to time by the Bank in Charlotte, North Carolina
as its “prime rate” (the “prime rate” being a rate set by the Bank based upon
various factors including the Bank’s costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate).  Any change in the prime rate announced by the
Bank shall take effect at the opening of business on the day specified in the
public announcement of such change.  Each
Interest Rate based upon the Base Rate shall be adjusted simultaneously with
any change in the Base Rate.

“Base
Rate Loans” means the Base Rate Revolving Loans and the Base Rate Lender
Term Loans.

“Base
Rate Revolving Loan” means a Revolving Loan during any period in which it
bears interest based on the Base Rate.

“Base
Rate Lender Term Loan” means any portion of a Lender Term Loan during any
period in which such portion bears interest based on the Base Rate.

“Blocked
Account Agreement” means an agreement among a Borrower, the Agent and a
Clearing Bank, in form and substance reasonably satisfactory to the Agent,
concerning the collection of payments which represent the proceeds of Accounts
or of any other Collateral.

 “Borrowers” has the meaning given that
term in the preamble to the Agreement.

“Borrowing”
means a borrowing hereunder consisting of Revolving Loans, the Initial Term
Loan or the Delayed Draw Term Loan, in each case, made on the same day by the
Lenders to a Borrower or by Bank in the case of a Borrowing funded by
Non-Ratable Loans or by the Agent in the case of a Borrowing consisting of an
Agent Advance, or the issuance of Letters of Credit hereunder.

“Borrowing Base” means an amount equal to (a)
the sum of (i) eighty-five percent (85%) of the Net Amount of its Eligible
Accounts, plus (ii) the lesser of (A) the Maximum Inventory Loan Amount
and (B) the sum of (1) the lesser of (I) fifty-five percent (55%) of its
Eligible Inventory, valued at the lower of cost on a first-in, first-out basis
or market (other than motor home chassis) and (II) eighty-five percent (85%) of
the appraised orderly liquidation value of its Eligible Inventory (other than
motor home chassis) and (2) the lesser of (I) eighty percent (80%) of its Eligible
Inventory, valued at the lower of cost on a first-in, first-out basis or market
(consisting of motor home chassis) and (II) ninety percent (90%) of the
appraised orderly liquidation value of its Eligible Inventory (consisting of
motor home chassis), plus (iii) the lesser of (A) seventy-five percent
(75%) of the appraised fair market value of its Real Estate Subfacility Assets
subject to a Mortgage and (B) the Maximum Real Estate Loan Amount minus
(b) Reserves from time to time established by the Agent in its reasonable
credit judgment.  Notwithstanding
anything to the contrary in the Loan Documents, (i) the amount advanced against
the Accounts and Inventory of Fleetwood Folding Trailer shall not exceed
$8,000,000 and (ii) the amount advanced against aggregate manufactured housing
Inventory shall not exceed the lesser of (A) $10,000,000 and (B) 30%
of the Borrowing Base attributable to aggregate Eligible Inventory.

 A-5
 

 

“Borrowing
Base Certificate” means a certificate, in form and substance reasonably
satisfactory to Agent, by which Borrowers certify calculation of the Borrowing
Base.  All calculations of the Borrowing
Base in connection with the preparation of any Borrowing Base Certificate shall
originally be made by FMC and certified to the Agent; provided, that the
Agent shall have the right to review and adjust, in the exercise of its
reasonable credit judgment, any such calculation (1) to reflect its reasonable
estimate of declines in value of any of the Collateral described therein, and
(2) to the extent that such calculation is not in accordance with this
Agreement.

“Business
Day” means (a) any day that is not a Saturday, Sunday, or a day on which
banks in Los Angeles, California or Charlotte, North Carolina are required or
permitted to be closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with the LIBOR Rate or LIBOR Rate Loans,
any day that is a Business Day pursuant to clause (a) above and that is
also a day on which trading in Dollars is carried on by and between banks in
the London interbank market.

“Business
Unit” means (a) for purposes of Section 5.2(c), Section 5.2(f)
and Section 8.1(o),  the Borrowers; and (b) for all other
purposes, (i) the Borrowers, (ii) Fleetwood Folding Trailer,
(iii) the Excluded Subsidiaries; (iv) the Inactive Subsidiaries; and
(v) Fleetwood.

“Canadian
Security Agreement” means the Canadian Security Agreement, dated as of the
Original Closing Date between Fleetwood Canada and the Agent for the benefit of
the Agent and the Lenders.

“Capital
Adequacy Regulation” means any guideline, request or directive of any
central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.

“Capital
Expenditures” means all payments due during any relevant period (whether or
not paid during any fiscal period) in respect of the cost of any fixed asset or
improvement, or replacement, substitution, or addition thereto, which has a
useful life of more than one year, including, without limitation, those costs
arising in connection with the direct or indirect acquisition of such asset by
way of increased product or service charges or in connection with a Capital
Lease.

“Capital
Stock” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock or other equity interests,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants, rights, options to purchase or other
rights to acquire any of the foregoing.

“Capital
Lease” of a Person means any lease of property by such Person which, in
accordance with GAAP, should be reflected as a capital lease on the balance sheet
of such Person.

 A-6
 

 

“Cash
Collateral” has the meaning specified in Section 1.4(g).

“Change of Control”
means either (i) a change shall occur in the Board of Directors of
Fleetwood so that a majority of the Board of Directors of Fleetwood ceases to
consist of the individuals who constituted the Board of Directors of Fleetwood
on the Closing Date (or individuals whose election or nomination for election
was approved by a vote of more than 50% of the directors then in office who
either were directors of Fleetwood on the Closing Date or whose election or
nomination for election previously was so approved); or (ii) any Person or
Group (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission), shall become or be the owner, directly or indirectly, beneficially
or of record, of shares representing more than 20% of the aggregate ordinary
voting power represented by the issued and outstanding Capital Stock of
Fleetwood on a fully diluted basis; or (iii) except as permitted
hereunder, any Loan Party (other than Fleetwood) ceases to be a direct or
indirect wholly-owned Subsidiary of Fleetwood; or (iv) a “change of control,” “fundamental
change” or any similar term, as any such term is defined in the indenture under
which the 1998 Subordinated Debentures or the 2003 Subordinated Debentures are
issued.

“Chattel
Paper” means, as to any Person, all of such Person’s now owned or hereafter
acquired chattel paper, as defined in the UCC, including electronic chattel
paper.

“Clearing
Bank” means the Bank or any other banking institution with which a Payment
Account has been established pursuant to a Blocked Account Agreement.

“Closing Date”
means the date of the Agreement.

“Closing Fee”
has the meaning specified in Section 2.4.

“Code”
means the Internal Revenue Code of 1986.

“COLI
Policies” means those insurance policies identified on Schedule A
attached hereto.

“Collateral”
means all of the Loan Parties’ personal property, any Mortgaged Property, and
all other assets of any Person (other than the COLI Policies), from time to
time subject to the Agent’s Liens securing payment or performance of the
Obligations.

“Commitment”
means, at any time with respect to a Lender, the principal amount set forth
beside such Lender’s name under the heading “Commitment” on Schedule 1.2
attached hereto or on the signature page of the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder in accordance with the
provisions of Section 11.2, as such Commitment may be adjusted from time
to time in accordance with the provisions of Section 11.2, and “Commitments”
means, collectively the aggregate amount of the commitments of all of the
Lenders.

“Contaminant”
means any waste, pollutant, hazardous substance, toxic substance, hazardous
waste, special waste, petroleum or petroleum-derived substance or waste,
asbestos in any form or condition, polychlorinated biphenyls (“PCBs”),
or any constituent of any such substance or waste.

 A-7
 

 

“Continuation/Conversion
Date” means the date on which a Loan is converted into or continued as a
LIBOR Rate Loan.

“Contribution
Agreement” means the Contribution, Indemnity and Subrogation Agreement,
dated as of the Original Closing Date, among the Loan Parties.

“Copyright”
has the meaning specified in Copyright Security Agreement.

“Copyright
Security Agreement” means the Amended and Restated Copyright Security
Agreement, dated as of the Closing Date, executed and delivered by a Loan Party
to the Agent, for the benefit of the Agent and the Lenders, to evidence and
perfect the Agent’s security interest in such Loan Party’s present and future
copyrights and related licenses and rights.

“Credit
Support” has the meaning specified in Section 1.4(a).

“Debt”
means, with respect to any Person and without duplication, all liabilities,
obligations and indebtedness of such Person to any other Person, of any kind or
nature, now or hereafter owing, arising, due or payable, howsoever evidenced,
created, incurred, acquired or owing, whether primary, secondary, direct,
contingent, fixed or otherwise, consisting of indebtedness for borrowed money
or the deferred purchase price of property, excluding trade payables incurred
in the ordinary course of business, but including (a) all Obligations; (b) all
obligations and liabilities of any other Person secured by any Lien on the such
Person’s property, even though such Person shall not have assumed or become
liable for the payment thereof; provided, however, that all such
obligations and liabilities which are limited in recourse to such property
shall be included in Debt only to the extent of the book value of such property
as would be shown on a balance sheet of such Person prepared in accordance with
GAAP; (c) all obligations or liabilities created or arising under any Capital
Lease or conditional sale or other title retention agreement with respect to
property used or acquired by such Person, even if the rights and remedies of
the lessor, seller or lender thereunder are limited to repossession of such
property; provided, however, that all such obligations and
liabilities which are limited in recourse to such property shall be included in
Debt only to the extent of the book value of such property as would be shown on
a balance sheet of such Person prepared in accordance with GAAP; (d) all
obligations and liabilities under Guaranties; (e) the present value
(discounted at the Base Rate) of lease payments due under synthetic leases; and
(f) all obligations and liabilities under any preferred stock (including the
Trust Securities) or similar securities.

“Default”
means any event or circumstance which, with the giving of notice, the lapse of
time, or both, would (if not cured, waived, or otherwise remedied during such
time) constitute an Event of Default.

“Default Rate”
means a fluctuating per annum interest rate at all times equal to the sum of
(a) the otherwise applicable Interest Rate plus (b) two percent
(2%) per annum.  Each Default Rate shall
be adjusted simultaneously with any change in the applicable Interest
Rate.  In addition, the Default Rate
shall result in an increase in the Letter of Credit Fee by 2 percentage points
per annum during any period for which the Default Rate is applied.

“Defaulting
Lender” has the meaning specified in Section 12.15(c).

 A-8
 

 

“Delayed
Draw Aggregate Availability” means, at any time, the lesser of (a) the
Maximum Delayed Draw Amount and (b) seventy-five percent (75%) of the
aggregate fair market value of FMC’s Term Loan Collateral subject to a
Mortgage, as set forth in Updated Appraisals minus $18,071,425.

“Delayed
Draw Commitment” means, at any time with respect to a Lender, the principal
amount set forth beside such Lender’s name under the heading “Delayed Draw
Commitment” on Schedule 1.2 attached hereto or on the signature page
of the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 11.2, as such
Delayed Draw Commitment may be adjusted from time to time in accordance with
the provisions of Section 11.2 and Section 13.19, and “Delayed
Draw Commitments” means, collectively, the aggregate amount of such
commitments of all Lenders.

“Delayed Draw Date”
means the date on which the Borrowing of the
Delayed Draw Term Loan occurs.

“Delayed
Draw Loan Note” and “Delayed Draw Loan Notes” have the meanings
specified in Section 1.9(a).

“Delayed
Draw Term Loan” has the meaning specified in Section 1.9(a).

“Delayed
Draw Lender Term Loan” has the meaning specified in Section 1.9(a).

“Designated
Account” has the meaning specified in Section 1.2(c).

“Distribution”
means, in respect of any Person: (a) the payment or making of any dividend
or other distribution of property in respect of Capital Stock of such Person,
other than distributions in Capital Stock of the same class; or (b) the
redemption or other acquisition by such Person of its Capital Stock.

“Documents”
means, with respect to any Person, all documents as such term is defined in the
UCC, including bills of lading, warehouse receipts or other documents of title,
now owned or hereafter acquired by such Person.

“DOL”
means the United States Department of Labor or any successor department or
agency.

“Dollar”
and “$” means dollars in the lawful currency of the United States.  Unless otherwise specified, all payments
under the Agreements shall be made in Dollars.

“EBITDA”
means, with respect to any fiscal period, Adjusted Net Earnings from
Operations, plus, to the extent deducted in the determination of
Adjusted Net Earnings from Operations for that fiscal period, interest
expenses, Federal, state, local and foreign income taxes, depreciation and
amortization.

“Eligible Accounts”
means the Accounts of FMC (which for purposes of this definition only shall
include Fleetwood Canada) which the Agent in the exercise of its reasonable
commercial discretion determines to be Eligible Accounts.  Without limiting the discretion of the

 A-9
 

 

Agent
to establish other criteria of ineligibility, Eligible Accounts shall not,
unless the Agent in its sole discretion elects (which discretion cannot be
exercised without the consent of all Lenders), include any Account:

(a)           with respect to which more than 60
days have elapsed since the date of the original invoice therefor;

(b)           with respect to which any of the
representations, warranties, covenants, and agreements contained in the
Security Agreement are incorrect or have been breached;

(c)           with respect to which Account (or any
other Account due from such Account Debtor), in whole or in part, two or more
checks, promissory notes, drafts, trade acceptances or other instruments for
the payment of money have been received, presented for payment and returned
uncollected for any reason within any six month period;

(d)           which represents a progress billing
(as hereinafter defined); for the purposes hereof, “progress billing” means any
invoice for goods sold or leased or services rendered under a contract or
agreement pursuant to which the Account Debtor’s obligation to pay such invoice
is conditioned upon a Borrower’s completion of any further performance under
the contract or agreement;

(e)           with respect to which any one or more
of the following events has occurred to the Account Debtor on such
Account:  death or judicial declaration
of incompetency of an Account Debtor who is an individual; the filing by or
against the Account Debtor of a request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or
other relief under the bankruptcy, insolvency, or similar laws of the United
States, any state or territory thereof, or any foreign jurisdiction, now or
hereafter in effect; the making of any general assignment by the Account Debtor
for the benefit of creditors; the appointment of a receiver or trustee for the
Account Debtor or for any of the assets of the Account Debtor, including,
without limitation, the appointment of or taking possession by a “custodian,”
as defined in the Bankruptcy Code; the institution by or against the Account
Debtor of any other type of insolvency proceeding (under the bankruptcy laws of
the United States or otherwise) or of any formal or informal proceeding for the
dissolution or liquidation of, settlement of claims against, or winding up of
affairs of, the Account Debtor; the sale, assignment, or transfer of all or any
material part of the assets of the Account Debtor (unless the transferee is, in
the Agent’s judgment, able to pay); the nonpayment generally by the Account
Debtor of its debts as they become due; or the cessation of the business of the
Account Debtor as a going concern;

(f)            if fifty percent (50%) or more of
the aggregate Dollar amount of outstanding Accounts owed at such time by the
Account Debtor thereon is classified as ineligible under clause (a)
above;

(g)           owed by an Account Debtor which: (i)
does not maintain its chief executive office in the United States of America or
Canada (other than the Province of Newfoundland); or (ii) is not organized
under the laws of the United States of America or Canada or any state or
province thereof; or (iii) is the government of any foreign country or

 A-10
 

 

sovereign
state, or of any state, province, municipality, or other political subdivision
thereof, or of any department, agency, public corporation, or other
instrumentality thereof; except to the extent that such Account is secured or
payable by a letter of credit satisfactory to the Agent in its discretion;

(h)           owed by an Account Debtor which is an
Affiliate or employee of Fleetwood or any of its Subsidiaries;

(i)            except as provided in clause (k)
below, with respect to which either the perfection, enforceability, or validity
of the Agent’s Liens in such Account, or the Agent’s right or ability to obtain
direct payment to the Agent of the proceeds of such Account, is governed by any
federal, state, or local statutory requirements other than those of the UCC;

(j)            owed by an Account Debtor to which Fleetwood
or any of its Subsidiaries, is indebted in any way, or which is subject to any
right of setoff or recoupment by the Account Debtor, unless the Account Debtor
has entered into an agreement acceptable to the Agent to waive setoff rights;
or if the Account Debtor thereon has disputed liability or made any claim with
respect to any other Account due from such Account Debtor; but in each such
case only to the extent of such indebtedness, setoff, recoupment, dispute, or
claim;

(k)           owed by the government of the United
States of America, or any department, agency, public corporation, or other
instrumentality thereof, unless the Federal Assignment of Claims Act of 1940,
as amended (31 U.S.C. § 3727 et  seq.), and any other steps
necessary or desirable to perfect the Agent’s Liens therein, have been complied
with to the Agent’s satisfaction with respect to such Account;

(l)            owed by any state, municipality, or
other political subdivision of the United States of America, or any department,
agency, public corporation, or other instrumentality thereof and as to which
the Agent determines that its Lien therein is not or cannot be perfected;

(m)          which represents a sale on a
bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment,
or other repurchase or return basis;

(n)           which is evidenced by a promissory
note or other instrument or by chattel paper;

(o)           if the Agent believes, in the
exercise of its reasonable commercial judgment, that such Account may not be
collected for any reason;

(p)           with respect to which the Account
Debtor is located in any state requiring the filing of a Notice of Business
Activities Report or similar report in order to permit a Borrower to seek
judicial enforcement in such State of payment of such Account, unless such Borrower
has qualified to do business in such state or has filed a Notice of Business
Activities Report or equivalent report for the then current year;

(q)           which arises out of a sale not made
in the ordinary course of a Borrower’s business;

 A-11
 

 

(r)            with respect to which the goods
giving rise to such Account have not been shipped and delivered to and accepted
by the Account Debtor or the services giving rise to such Account have not been
performed by a Borrower, and, if applicable, accepted by the Account Debtor, or
the Account Debtor revokes its acceptance of such goods or services;

(s)           owed by an Account Debtor which is
obligated to FMC or Fleetwood, as applicable respecting Accounts the aggregate
unpaid balance of which exceeds ten percent (10%) of the aggregate unpaid
balance of all Accounts owed to FMC or Fleetwood, as applicable at such time by
all of the Account Debtors, but only to the extent of such excess;

(t)            which is not subject to a first
priority and perfected security interest securing the Revolving Loans in favor
of the Agent for the benefit of the Lenders; and

(u)           an Account representing a dealer
rebate or other sales program accrual.

If any Account at any time ceases to
be an Eligible Account, then such Account shall promptly be excluded from the
calculation of Eligible Accounts.

“Eligible
Assignee” means (a) a commercial bank, commercial finance company or other
asset based lender, having total assets in excess of $1,000,000,000; (b) any
Lender listed on the signature page of this Agreement; (c) any Affiliate of any
Lender; and (d) if an Event of Default has occurred and is continuing, any
Person reasonably acceptable to the Agent.

“Eligible
Inventory” means Inventory, which the Agent, in its reasonable commercial
discretion, determines to be Eligible Inventory.  Without limiting the discretion of the Agent
to establish other criteria of ineligibility, Eligible Inventory shall not,
unless the Agent in its sole discretion elects (which discretion cannot be
exercised without the consent of all Lenders), include any Inventory:

(a)           that is not owned by the applicable
Borrower;

(b)           that is not subject to the Agent’s
Liens, which are perfected as to such Inventory, or that are subject to any
other Lien whatsoever (other than the Liens described in clauses (a) or (d)
of the definition of Permitted Liens provided that such Permitted Liens
(i) are junior in priority to the Agent’s Liens or subject to Reserves and (ii)
do not impair directly or indirectly the ability of the Agent to realize on or
obtain the full benefit of the Collateral);

(c)           that does not consist of finished
goods or raw materials;

(d)           that consists of work-in-process,
chemicals, samples, prototypes, supplies, or packing and shipping materials;

(e)           that is not in good condition, is
defective or unmerchantable, or does not meet all standards imposed by any
Governmental Authority having regulatory authority over such goods, their use
or sale;

(f)            that is obsolete;

 A-12
 

 

(g)           that is located outside the United
States of America (or that is in-transit from vendors or suppliers);

(h)           that is located in a public warehouse
or in possession of a bailee or in a facility leased by the Borrower, if the
warehouseman, the bailee or the lessor has not delivered to the Agent, a
subordination or landlord agreement in form and substance satisfactory to the
Agent or if a Reserve for rents or storage charges has not been established for
Inventory at that location;

(i)            that contains or bears any
Proprietary Rights licensed to a Borrower by any Person, if the Agent is not
satisfied that it may sell or otherwise dispose of such Inventory in accordance
with the terms of the Security Agreement and Section 9.2 without
infringing the rights of the licensor of such Proprietary Rights or violating
any contract with such licensor (and without payment of any royalties other
than any royalties due with respect to the sale or disposition of such
Inventory pursuant to the existing license agreement), and as to which the
applicable Borrower has not delivered to the Agent a consent or sublicense
agreement from such licensor in form and substance acceptable to the Agent if
requested;

(j)            that is not reflected in the details
of a current inventory report delivered to the Agent; or

(k)           that is Inventory placed on
consignment.

If any
Inventory at any time ceases to be Eligible Inventory, such Inventory shall
promptly be excluded from the calculation of Eligible Inventory.

“Eligible
Real Estate” means the Real Estate of FMC and Fleetwood which the Agent in
the exercise of its reasonable commercial discretion determines to be Eligible
Real Estate.  Without limiting the
discretion of the Agent to establish other criteria of ineligibility, Eligible
Real Estate shall not, unless the Agent in its sole discretion elects (which
discretion cannot be exercised without the consent of Majority Lenders),
include any Real Estate:

(a)             that is not owned in
fee simple by FMC or Fleetwood and listed on Schedule B attached hereto;

(b)           that is not subject to a recorded
Mortgage which creates a first priority Lien to secure the Revolving Loans or
that are subject to any other Lien whatsoever (other than the Liens securing
the Term Loan and the Liens described in clauses (a), (d) or (e) of the
definition of Permitted Liens provided that all such Liens are (i)
junior in priority to the Agent’s Liens securing the Revolving Loans or subject
to Reserves and (ii) do not impair directly or indirectly the ability of the
Agent to realize on or obtain the full benefit of the Collateral);

(c)           that is not marketable;

(d)           that has not been appraised by an
appraiser satisfactory to the Agent;

(e)           that is located outside the United
States; or

 A-13
 

 

(f)            that is subject to a lease or
sublease in favor of any Person if the tenant or subtenant, as the case may be,
has not delivered to the Agent a subordination and attornment agreement in form
and substance satisfactory to the Agent.

If any
Real Estate at any time ceases to be Eligible Real Estate, such Real Estate
shall promptly be excluded from the calculation of Eligible Real Estate.

“Environmental
Claims” means all claims, however asserted, by any Governmental Authority
or other Person alleging potential liability or responsibility for violation of
any Environmental Law, or for a Release or injury to the environment.

“Environmental Compliance Reserve”
means any reserve which the Agent establishes in its reasonable discretion
after prior written notice to the Borrowers from time to time for amounts that
are reasonably likely to be expended by Fleetwood or any of its Subsidiaries in
order for such Person and its operations and property (a) to comply with any
notice from a Governmental Authority asserting material non-compliance with
Environmental Laws, or (b) to correct any such material non-compliance
identified in a report delivered to the Agent and the Lenders pursuant to Section 7.7.

“Environmental
Laws” means all federal, state or local laws, statutes, common law duties,
rules, regulations, ordinances and codes, together with all administrative
orders, directed duties, licenses, authorizations and permits of, and
agreements with, any Governmental Authority, in each case relating to
environmental, health, safety and land use matters.

“Environmental Lien”
means a Lien in favor of any Governmental Authority for (a) any liability
under Environmental Laws, or (b) damages arising from, or costs incurred
by such Governmental Authority in response to, a Release or threatened Release
of a Contaminant into the environment.

“Equipment”
means, with respect to any Person, all of such Person’s now owned and hereafter
acquired machinery, equipment, furniture, furnishings, fixtures, and other
tangible personal property (except Inventory), including embedded software,
motor vehicles with respect to which a certificate of title has been issued,
aircraft, dies, tools, jigs, molds and office equipment, as well as all of such
types of property leased by such Person and all of such Person’s rights and
interests with respect thereto under such leases (including, without
limitation, options to purchase); together with all present and future
additions and accessions thereto, replacements therefor, component and
auxiliary parts and supplies used or to be used in connection therewith, and
all substitutes for any of the foregoing, and all manuals, drawings,
instructions, warranties and rights with respect thereto; wherever any of the
foregoing is located.

“ERISA”
means the Employee Retirement Income Security Act of 1974, and regulations
promulgated thereunder.

“ERISA
Affiliate” means any trade or business (whether or not incorporated) under
common control with Fleetwood or any of its Subsidiaries within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code
for purposes of provisions relating to Section 412 of the Code).

 A-14
 

 

“ERISA
Event” means (a) a Reportable Event with respect to a Pension Plan,
(b) a withdrawal by Fleetwood or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA, (c) a complete or partial withdrawal by Fleetwood or any ERISA
Affiliate from a Multi-employer Plan or notification that a Multi-employer Plan
is in reorganization, (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multi-employer Plan, (e) the occurrence of an event or condition
which might reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan or Multi-employer Plan, or (f) the imposition of any
material liability under Title IV of ERISA, other than for PBGC premiums due
but not delinquent under Section 4007 of ERISA, upon Fleetwood or any ERISA
Affiliate.

“Event of Default”
has the meaning specified in Section 9.1.

“Exchange
Act” means the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder.

“Excluded
Subsidiaries” means, collectively, all Subsidiaries identified on Schedule
6.5 attached hereto as an “Excluded
Subsidiary”.

 “Existing Commitments” means the “Revolving
Credit Commitments” as defined in the Second Amended and Restated Credit
Agreement which are outstanding on the Amendment and Restatement Closing Date
immediately prior to the effectiveness of this Agreement.

 “Existing Lenders” means the “Lenders”
as defined in the Second Amended and Restated Credit Agreement.

“Existing Loans”
means “Loans” as defined in the Second Amended and Restated Credit Agreement
which are outstanding on the Closing Date immediately prior to the
effectiveness of this Agreement.

“Existing
Mortgages” means “Mortgages” as defined in the Second Amended and
Restated Credit Agreement which were filed in
connection with the Second Amended and Restated Credit Agreement.

“Existing
Mortgage Title Policies” means the existing mortgage title policies
insuring that the Existing Mortgages constitute first priority mortgage liens
subject only to Permitted Liens under clauses (a), (b), (d) and (e) of the
definition of “Permitted Liens” under the Second Amended and Restated Credit Agreement.

“Facility
Increase Termination Date” means the earliest to occur of (i) sixty (60)
days after the date that all Updated Appraisals for each item of Real Estate
that constitutes Term Loan Collateral or a Real Estate Subfacility Asset have
been delivered to the Agent, (ii) July 31, 2007, (iii) the date the Total
Facility is terminated either by the Borrowers pursuant to Section 3.2

 A-15
 

 

or by
the Majority Lenders pursuant to Section 9.2, (iv) the date the
Agreement is otherwise terminated for any reason whatsoever pursuant to the
terms of the Agreement and (v) the date the Revolving Credit
Commitments are terminated or have expired.

“FDIC”
means the Federal Deposit Insurance Corporation, and any Governmental Authority
succeeding to any of its principal functions.

“Federal
Funds Rate” means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day; provided that (a)
if such day is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if no such rate is so
published on such next succeeding Business Day, the Federal Funds Rate for such
day shall be the average rate charged to the Bank on such day on such
transactions as determined by the Agent.

“Federal
Reserve Board” means the Board of Governors of the Federal Reserve System
or any successor thereto.

“Fee
Letters” means the Agent Fee Letter and the separate fee letters, if any,
dated the date hereof, between the Agent and each of the Lenders.

 “Financial Statements” means, according
to the context in which it is used, the financial statements referred to in Sections 5.2
and 6.6 or any other financial statements required to be given to the
Lenders pursuant to this Agreement.

“First Amended and
Restated Credit Agreement” means that certain Amended and Restated Credit
Agreement dated as of the First Amendment and Restatement Date, by and among
Fleetwood, the Borrowers, the Lenders, and the Agent, and the other parties
thereto, as amended by that certain First Amendment to Amended and Restated
Credit Agreement and Consent of Guarantors dated as of June 4, 2004, as amended
by that certain Second Amendment to Amended and Restated Credit Agreement and
Consent of Guarantors dated as of November 29, 2004, and as amended by that
certain Third Amendment to Amended and Restated Credit Agreement and Consent of
Guarantors dated as of March 2, 2005.

“First Amendment and
Restatement Date” means May 14, 2004.

“Fiscal
Quarter” means any fiscal quarter of any Fiscal Year.

“Fiscal
Year” means Fleetwood’s fiscal year for financial accounting purposes,
which currently ends on the last Sunday in April.

“Fixed
Assets” means, as to any Person, the Equipment and Real Estate of such
Person.

 A-16
 

 

“Fixed
Charge Coverage Ratio” means, with respect to any fiscal period, the ratio
of EBITDA to Fixed Charges.

“Fixed Charges”
means, with respect to any fiscal period, for Fleetwood on a consolidated
basis, without duplication (a) interest expense paid in cash;
(b) Capital Expenditures (excluding Capital Expenditures funded with Debt
other than the Revolving Loans); (c) scheduled principal payments of Debt; (d)
Distributions paid in cash by Fleetwood or the Fleetwood Trust (including in
Fixed Charges any Distribution paid in cash during the Fiscal Quarter ended
April, 2006 in respect of the regularly scheduled interest payable on the 1998
Subordinated Debentures on February 15, 2006, but excluding from Fixed Charges
Distributions paid in cash during the Fiscal Quarter ended April, 2006 in
respect of deferred interest accrual on the 1998 Subordinated Debentures in an
amount not to exceed $58,800,000); and (e) without duplication of clause (d),
payments made in cash on Subordinated Debt.

“Fleetwood”
has the meaning given such term in the preamble.

“Fleetwood
Canada” means Fleetwood Canada Ltd., an Ontario corporation.

“Fleetwood
Folding Trailer” means Fleetwood Folding Trailers, Inc., a Delaware
corporation.

“Fleetwood
Guaranty” means the Third Amended and Restated Guaranty dated as of the
Closing Date from Fleetwood to the Agent, for its benefit and the benefit of
the Lenders.

“Fleetwood Liquidity”
means, for any calendar month, thirty day period or single day, as applicable,
the sum of (a) the average daily Availability during such calendar month,
thirty day period or single day, as applicable, plus (b) the average
daily Qualified Cash Equivalents held by the Loan Parties, during such calendar
month, thirty day period or single day.

“Fleetwood Trust”
means Fleetwood Capital Trust, a business trust organized under the laws of the
State of Delaware, whose sole assets consist of the 1998 Subordinated
Debentures.

“Flexibility
Conditions” means as of any date and with respect to any transaction,
(a) no Default or Event of Default has occurred and is continuing as of
such date both before and after giving effect to such transaction, and
(b) Fleetwood Liquidity (i) for the thirty day period ending as of the
date of the applicable transaction, is greater than $50,000,000 both before and
after giving effect to such transaction and (ii) on the date of the applicable
transaction, is greater than $25,000,000 both before and after giving effect to
such transaction.

“FMC”
means, collectively and jointly and severally, the Borrowers.

“FMC
Guaranty” means the Third Amended and Restated FMC Guaranty dated as of the
Closing Date from FMC to the Agent, for its benefit and the benefit of the
Lenders.

 “Funding Date” means the date on which
a Borrowing occurs.

 A-17

 

“FVC” means FVC, Inc.

“GAAP” means generally
accepted accounting principles and practices set forth from time to time in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting profession), which,
in the case of Section 7.24, shall be as are applicable to the circumstances
as of the Closing Date.

“General Intangibles” means,
with respect to any Person, all of such Person’s now owned or hereafter
acquired general intangibles, choses in action and causes of action and all
other intangible personal property of such Person of every kind and nature
(other than Accounts), including, without limitation, all contract rights,
payment intangibles, Proprietary Rights, corporate or other business records,
inventions, designs, blueprints, plans, specifications, patents, patent applications,
trademarks, service marks, trade names, trade secrets, goodwill, copyrights,
computer software, customer lists, registrations, licenses, franchises, tax
refund claims, any funds which may become due to such Person in connection with
the termination of any Plan or other employee benefit plan or any rights
thereto and any other amounts payable to such Person from any Plan or other
employee benefit plan, rights and claims against carriers and shippers, rights
to indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which such Person
is beneficiary, rights to receive dividends, distributions, cash, Instruments
and other property in respect of or in exchange for pledged equity interests or
Investment Property and any letter of credit, guarantee, claim, security
interest or other security held by or granted to such Person.

“Governmental Authority” means
any nation or government, any state or other political subdivision thereof, any
central bank (or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.

“Guarantors” means,
collectively, Fleetwood, Fleetwood Canada and Fleetwood International Inc., a
California corporation, and any Subsidiary of Fleetwood which becomes a
Guarantor in accordance with the requirements of this Agreement.

“Guaranty” means, with
respect to any Person, all obligations of such Person which in any manner
directly or indirectly guarantee or assure, or in effect guarantee or assure,
the payment or performance of any indebtedness, dividend or other obligations
of any other Person (the “guaranteed obligations”), or assure or in
effect assure the holder of the guaranteed obligations against loss in respect
thereof, including any such obligations incurred through an agreement,
contingent or otherwise: (a) to purchase the guaranteed obligations or any
property constituting security therefor; (b) to advance or supply funds for the
purchase or payment of the guaranteed obligations or to maintain a working
capital or other balance sheet condition; or (c) to lease property or to
purchase any debt or equity securities or other property or services.

 A-18
 

 

“Hedge Agreement” means, with
respect to any Person, any and all transactions, agreements or documents now
existing or hereafter entered into, which provide for an interest rate, credit,
commodity or equity swap, cap, floor, collar, forward foreign exchange
transaction, currency swap, cross currency rate swap, currency option, or any
combination of, or option with respect to, these or similar transactions, for
the purpose of hedging such Person’s exposure to fluctuations in interest or
exchange rates, loan, credit exchange, security or currency valuations or
commodity prices.

“Holdings” has the meaning
given such term in the preamble.

“Inactive Subsidiaries”
means, collectively, all Subsidiaries identified on Schedule 6.5
attached hereto as an “Inactive
Subsidiary” and any other Subsidiary formed from time to time after the Closing
Date and so designated by the Borrowers, so long as such other Subsidiaries, in
the aggregate own assets of less than $250,000 and have revenues of less than
$1,000,000.

“Initial Funding Date” shall
mean the date of the funding of the initial Revolving Loans or the Initial Term
Loan, as applicable, under this Agreement, amended and restated as of the date
hereof.

“Initial Lender Term Loan”
has the meaning specified in Section 1.3(a).

“Initial Term Loan” has the
meaning specified in Section 1.3(a).

“Initial Loan Note” and “Initial
Loan Notes” have the meanings specified in Section 1.3(a).

“Instruments” means, with
respect to any Person, all instruments as such term is defined in the UCC, now
owned or hereafter acquired by such Person.

“Interest Period” means, as
to any LIBOR Rate Loan, the period commencing on the Funding Date of such Loan
or on the Continuation/Conversion Date on which the Loan is converted into or
continued as a LIBOR Rate Loan, and ending on the date one, two, three or six
months thereafter as selected by the Borrower in its Notice of Borrowing, in
the form attached hereto as Exhibit D, or Notice of
Continuation/Conversion, in the form attached hereto as Exhibit E, provided
that:

(a)           if any Interest Period
would otherwise end on a day that is not a Business Day, that Interest Period
shall be extended to the following Business Day unless the result of such
extension would be to carry such Interest Period into another calendar month,
in which event such Interest Period shall end on the preceding Business Day;

(b)           any Interest Period
pertaining to a LIBOR Rate Loan that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period; and

(c)           no Interest Period shall
extend beyond the Stated Termination Date.

 A-19
 

 

“Interest Rate” means
each or any of the interest rates, including the Default Rate, set forth in Section 2.1.

“Inventory” means, with
respect to any Person, all of such Person’s now owned and hereafter acquired
inventory, goods and merchandise, wherever located, to be furnished under any
contract of service or held for sale or lease, all returned goods, raw
materials, work-in-process, finished goods (including embedded software), other
materials and supplies of any kind, nature or description which are used or
consumed in such Person’s business or used in connection with the packing,
shipping, advertising, selling or finishing of such goods, merchandise, and all
documents of title or other Documents representing them.

“Investment Property” means,
with respect to any Person, all of such Person’s right title and interest in
and to any and all: (a) securities whether certificated or uncertificated; (b)
securities entitlements; (c) securities accounts; (d) commodity contracts; or
(e) commodity accounts.

“IRS” means the Internal
Revenue Service and any Governmental Authority succeeding to any of its
principal functions under the Code.

“Latest Projections” means
the projections most recently received by the Agent pursuant to Section 5.2(f)
of the Existing Credit Facility or this Agreement.

“Lender” and “Lenders”
have the meanings specified in the introductory paragraph hereof and shall
include any Revolving Credit Lender and the Agent to the extent of any Agent
Advance outstanding and the Bank to the extent of any Non-Ratable Loan
outstanding; provided that no such Agent Advance or Non-Ratable Loan
shall be taken into account in determining any Lender’s Pro Rata Share.

“Lender Term Loan” means the
Delayed Draw Lender Term Loan and the Initial Lender Term Loan.

“Letter of Credit”
has the meaning specified in Section 1.4(a).

“Letter of Credit Fee” has
the meaning specified in Section 2.6.

“Letter of Credit Issuer”
means the Bank, any Affiliate of the Bank or any other financial institution
that issues any Letter of Credit pursuant to this Agreement.

“LIBOR Rate” means, for any Interest
Period, with respect to LIBOR Rate Loans, the rate of interest per annum
determined pursuant to the following formula:

LIBOR
Rate  = 
                  Offshore Base
Rate         
        

1.00 - Eurodollar Reserve Percentage

Where,

“Offshore
Base Rate” means the rate per annum appearing on Telerate Page 3750 (or any
successor page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first

 A-20
 

 

day of
such Interest Period for a term comparable to such Interest Period.  If for any reason such rate is not available,
the Offshore Base Rate shall be, for any Interest Period, the rate per annum
appearing on Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to such
Interest Period; provided, however, if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates.  If
for any reason none of the foregoing rates is available, the Offshore Base Rate
shall be, for any Interest Period, the rate per annum determined by the Agent
as the rate of interest at which dollar deposits in the approximate amount of
the LIBOR Rate Loan comprising part of such Borrowing would be offered by the
Bank’s London Branch to major banks in the offshore dollar market at their
request at or about 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest
Period.

“Eurodollar
Reserve Percentage” means, for any day during any Interest Period, the
reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in
effect on such day applicable to member banks under regulations issued from
time to time by the Federal Reserve Board for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency
liabilities”).  The Offshore Rate for
each outstanding LIBOR Rate Loan shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.

“LIBOR Rate Loans” means,
collectively, the LIBOR Revolving Loans and the LIBOR Lender Term Loans.

“LIBOR Revolving Loan” means
a Revolving Loan during any period in which it bears interest based on the
LIBOR Rate.

“LIBOR Lender Term Loan”
means any portion of a Lender Term Loan during any period in which such portion
bears interest based on the LIBOR Rate.

“Lien” means:  (a) any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute, or
contract, and including a security interest, charge, claim, or lien arising
from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, agreement, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes; (b) to the
extent not included under clause (a), any reservation, exception,
encroachment, easement, right-of-way, covenant, condition, restriction, lease
or other title exception or encumbrance affecting property; and (c) any
contingent or other agreement to provide any of the foregoing.

“Loan Account” means the loan
account of FMC, which account shall be maintained by the Agent.

 A-21
 

 

“Loan Documents” means this Agreement,
the Revolving Notes, the Term Loan Notes, the Patent and Trademark Security
Agreement, the Copyright Security Agreement, the Security Agreement, the
Canadian Security Agreement, the Pledge Agreement, the Mortgages, the Parent
Guaranty, the FMC Guaranty, the Subsidiary Guaranty, the Contribution
Agreement, any Hedge Agreement entered into with a Lender and any other
agreements, instruments, and documents heretofore, now or hereafter evidencing,
securing, guaranteeing or otherwise relating to the Obligations, the
Collateral, or any other aspect of the transactions contemplated by this
Agreement.

“Loan Parties” means
collectively, the Borrowers and the Guarantors.

“Loans” means, collectively,
all loans and advances provided for in Article 1.

“Majority Lenders” means at
any date of determination Lenders whose Pro Rata Shares aggregate more than
50%.

“Majority Revolving Lenders”
means at any time Revolving Credit Lenders whose Pro Rata Shares aggregate more
than 50%.

“Majority Term Lenders” means
at any time Term Lenders whose Pro Rata Shares aggregate more than 50%.

“Manufactured Housing Inventory
Limit” has the meaning provided in Section 1.2(a)(i).

“Margin Stock” means “margin
stock” as such term is defined in Regulation T, U or X of the Federal Reserve
Board.

“Material Adverse Effect”
means (a) a material adverse change in, or a material adverse effect upon, the
operations, business, properties, or condition (financial or otherwise) of
Fleetwood and its Subsidiaries, taken as a whole, (b) a material impairment of
the ability of a Borrower or any Affiliate of a Borrower to perform under any
Loan Document to which it is a party; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against any Loan Party of
any Loan Document to which it is a party.

“Material Contracts” means
the agreements, contracts and other documents as filed with the Securities
Exchange Commission as exhibits to Fleetwood’s Form 10-K for the fiscal year
ended April 30, 2006, Form 10-Q for the quarterly period ended July 30, 2006,
and any of Fleetwood’s Forms 10-K or Forms 10-Q filed after the date hereof, in
each case, in accordance with Item 601(b)(4) and Item 601(b)(10) (or their
equivalents) of Regulation S-K, as promulgated under the Securities Exchange
Act of 1934 as amended.

“Maximum Delayed Draw Amount”
means $3,928,575.

“Maximum Inventory Loan Amount”
means (i) from and including May 1 through and including November 30 of
each calendar year, $110,000,000 and (ii) from and including December 1 through
and including April 30 of each calendar year, $135,000,000.

 A-22
 

 

“Maximum Rate” has the
meaning specified in Section 2.3.

“Maximum Real Estate Loan Amount” means
$11,250,000, provided that such amount, on or prior to the Facility Increase
Termination Date, shall automatically increase by the Revolving Credit Facility Increase Amount upon the Appraisal Condition
having been satisfied in a manner satisfactory to the Agent; provided further
that such amount shall reduce (i) on the first day of each Fiscal
Quarter commencing January 29, 2007 by an amount equal to $375,000, and (ii)
from time to time pursuant to Section 3.4(b); provided further that such amount
shall reduce to $0 if the Appraisal Condition is not satisfied in a manner satisfactory to the Agent on or
prior to July 31, 2007.

“Maximum Revolver Amount”
means $160,000,000; provided that the Maximum Revolver Amount shall be
$185,000,000 during the period from and including December 1 through and
including April 30 of each calendar year.

“Maximum Revolving Credit
Facility Increase Amount” means $3,750,000.

“Mexican Subsidiary” means a Fleetwood
de Mexico, S.A. de C.V. formed under the laws
of Mexico which shall be (i) a Subsidiary of Fleetwood International Inc., (ii)
a Subsidiary of one or more additional Subsidiaries of Fleetwood, and (iii)
formed pursuant to organizational documents reasonably satisfactory to the
Agent.

“Minimum Liquidity Event”
means, (1) as of any calculation date, either (a) Fleetwood, on a
consolidated basis, has Fleetwood Liquidity of $50,000,000 or less for the
calendar month immediately preceding such calculation date or (b) for
the calendar month immediately preceding such
calculation date, the average daily Availability during such calendar
month was $20,000,000 or less or (2) on any
date from and after the Closing Date, Fleetwood, on a consolidated basis, had
Fleetwood Liquidity of $25,000,000 or less.

“Mortgages” means and
includes any and all of the mortgages, deeds of trust, deeds to secure debt,
assignments and other instruments executed and delivered by any Loan Party to
or for the benefit of the Agent by which the Agent, on behalf of the Lenders,
acquires a Lien on the Real Estate or a collateral assignment of a Loan Party’s
interest under leases of Real Estate, and all amendments, modifications and
supplements thereto.

“Mortgage Amendment” has the
meaning provided in Section 7.28(b).

“Mortgaged Property” means the Real Estate
identified as such on Schedule 6.11
attached hereto (as substituted pursuant
to Section 2.8 from time to time). 
For the avoidance of doubt, following the substitution of any Replaced
Property with any Substituted Property in accordance with Section 2.8, such
Replaced Property shall no longer constitute Mortgaged Property for any purpose
hereunder and Schedule 6.11 shall be deemed modified accordingly.

“Multi-employer Plan” means a
“multi-employer plan” as defined in Section 4001(a)(3) of ERISA which is or was
at any time during the current year or the immediately preceding six (6) years
contributed to by Fleetwood or any ERISA Affiliate.

 A-23
 

 

“Net Amount of Eligible Accounts”
means, at any time, the gross amount of Eligible Accounts less sales, excise or
similar taxes, and less returns, discounts, claims, credits allowances, accrued
rebates, offsets, deductions, counterclaims, disputes and other defenses of any
nature at any time issued, owing, granted, outstanding, available or claimed.

“Net Proceeds” has the
meaning specified in Section 3.4(d).

“New Lender” has the meaning
specified in Section 13.19.

“New Lender Effective Date”
has the meaning specified in Section 13.19.

“Non-Consenting Lender” has
the meaning specified in Section 11.1(c)(i).

“Non-Ratable Loan” and “Non-Ratable
Loans” have the meanings specified in Section 1.2(h).

“Notes” means the Revolving
Loan Notes and the Term Loan Notes.

“Notice of Borrowing” has the
meaning specified in Section 1.2(b).

“Notice of
Continuation/Conversion” has the meaning specified in Section 2.2(b).

“Obligations” means, with
respect to any Loan Party, all present and future loans, advances, liabilities,
obligations, covenants, duties, and debts owing by such Loan Party to the Agent
and/or any Lender, arising under or pursuant to this Agreement or any of the
other Loan Documents, whether or not evidenced by any note, or other instrument
or document, whether arising from an extension of credit, opening of a letter
of credit, acceptance, loan, guaranty, indemnification or otherwise, whether
direct or indirect, absolute or contingent, due or to become due, primary or
secondary, as principal or guarantor, and including all principal, interest,
(including any interest which accrues after the filing of a proceeding under
the Bankruptcy Code or which would have accrued but for such filing) charges,
expenses, fees, attorneys’ fees, filing fees and any other sums chargeable to
the Borrowers hereunder or under any of the other Loan Documents.  “Obligations” includes, without limitation,
(a) all debts, liabilities, and obligations now or hereafter arising from or in
connection with the Letters of Credit and (b) all debts, liabilities and
obligations now or hereafter arising from or in connection with Bank Products.

“Original Closing Date” means
July 27, 2001.

“Original Credit Agreement”
means that certain Credit Agreement dated as of the Original Closing Date, by
and among Fleetwood, the Borrowers, the Lenders, the Agent and the other
parties thereto, as amended.

“Other Taxes” means any with
respect to any Lender or the Agent present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement or any other Loan Documents
but excluding, in the case of each Lender and the Agent, such taxes (including
income, franchise or branch profits taxes) as are imposed on or measured by the
Agent’s or each Lender’s net income in any

 A-24
 

 

jurisdiction (whether federal, state
or local and including any political subdivision thereof) under the laws of
which such Lender or the Agent, as the case may be, is organized or maintains a
lending office.

“Parent Guaranty” means the
Third Amended and Restated Parent Guaranty dated as of the Closing Date from
Fleetwood to the Agent, for its benefit and the benefit of the Lenders.

“Participant” means any
Person who shall have been granted the right by any Lender to participate in
the financing provided by such Lender under this Agreement and the other Loan
Documents, and who shall have entered into a participation agreement in form
and substance satisfactory to such Lender.

“Patent” has the meaning
specified in Patent and Trademark Security Agreement.

“Patent and Trademark Security
Agreement” means the Amended and Restated Patent and Trademark Security
Agreement, dated as of the Closing Date, executed and delivered by a Loan Party
to the Agent, for the benefit of the Agent and the Lenders, to evidence and
perfect the Agent’s security interest in such Loan Party’s present and future
patents, trademarks, and related licenses and rights.

“Payment Account” means each
bank account established pursuant to the Security Agreement, to which the
proceeds of Accounts and other Collateral are deposited or credited, and which
is maintained in the name of the Agent or of FMC or any other Loan Party, as
applicable, as the Agent may determine, on terms acceptable to the Agent.

“PBGC” means the Pension
Benefit Guaranty Corporation or any Governmental Authority succeeding to the
functions thereof.

“Pending Revolving Loans”
means, at any time, the aggregate principal amount of all Revolving Loans
requested in any Notice of Borrowing received by the Agent which have not yet
been advanced.

“Pension Plan” means a
pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA
which Fleetwood or any ERISA Affiliate sponsors, maintains, or to which it
makes, is making, or is obligated to make contributions, or in the case of a
Multi-employer Plan has made contributions at any time during the immediately
preceding six (6) plan years.

“Permitted Liens” means:

(a)           Liens for taxes not delinquent or
statutory Liens for taxes in an amount not to exceed $3,000,000 provided that
the payment of such taxes which are due and payable is being contested in good
faith and by appropriate proceedings diligently pursued and as to which
adequate financial reserves have been established on books and records of
Fleetwood and its Subsidiaries and a stay of enforcement of any such Lien is in
effect;

 A-25
 

 

(b)           the Agent’s Liens;

(c)           Liens consisting of deposits made in
the ordinary course of business in connection with, or to secure payment of,
obligations under worker’s compensation, unemployment insurance, social
security and other similar laws, or to secure the performance of bids, tenders
or contracts (other than for the repayment of Debt) or to secure indemnity,
performance or other similar bonds for the performance of bids, tenders or
contracts (other than for the repayment of Debt) or to secure statutory
obligations (other than liens arising under ERISA or Environmental Liens) or
surety or appeal bonds, or to secure indemnity, performance or other similar
bonds;

(d)           Liens securing the claims or demands
of materialmen, mechanics, carriers, warehousemen, landlords and other like
Persons, provided that if any such Lien arises from the nonpayment of
such claims or demand when due, such claims or demands do not exceed $1,000,000
in the aggregate at any time;

(e)           Liens constituting encumbrances in
the nature of reservations, exceptions, encroachments, easements, rights of
way, covenants running with the land, and other similar title exceptions or
encumbrances affecting any Real Estate; provided that they do not in the
aggregate materially detract from the value of the Real Estate or materially
interfere with its use in the ordinary conduct of the Borrower’s business;

(f)            Liens arising from judgments and
attachments in connection with court proceedings provided that the
attachment or enforcement of such Liens would not result in an Event of Default
hereunder and such Liens are being contested in good faith by appropriate
proceedings, adequate reserves have been set aside and no material Property is
subject to a material risk of imminent loss or forfeiture and a stay of
execution pending appeal or proceeding for review is in effect;

(g)           Liens on the assets of any Loan Party
described on Schedule 6.9 hereto securing the Debt identified on Schedule
6.9 hereto as “Secured Debt” and refinancings, renewals and extensions
thereof permitted pursuant to Section 7.13(f);

(h)           Interests of lessors under operating
leases;

(i)            other Liens securing Debt not in
excess of $1,000,000 in the aggregate at any time outstanding;

(j)            [RESERVED];

(k)           [RESERVED];

(l)            Liens on assets of the Excluded
Subsidiaries, as long as the holder of such Lien has no recourse to any Loan
Party or its assets;

(m)          Liens securing Debt permitted under Section
7.13(d), (e), (s), (t), and (u); provided
that such Liens securing Debt permitted under Section
7.13 (u) shall be released in accordance with Section 7.9(f);
and

 A-26
 

 

(n)           bankers liens and rights of set off
with respect to customary depositary arrangements entered into in the ordinary
conduct of business.

“Permitted Released Collateral”
has the meaning provided in Section 2.7(d).

“Person” means any
individual, sole proprietorship, partnership, limited liability company, joint
venture, trust, unincorporated organization, association, corporation,
Governmental Authority, or any other entity.

“Plan” means an employee
benefit plan (as defined in Section 3(3) of ERISA) which Fleetwood or any ERISA
Affiliate sponsors or maintains or to which Fleetwood or any ERISA Affiliate
makes, is making, or is obligated to make contributions and includes any
Pension Plan.

“Pledge Agreement” means the
Amended and Restated Pledge Agreement dated as of the Closing Date by the Loan
Parties in favor of the Agent, for the benefit of the Agent and the Lenders.

“Property Release” has the
meaning provided in Section 2.7.

“Property Substitution” has
the meaning provided in Section 2.8.

“Proprietary Rights” means,
as to any Person, all of such Person’s now owned and hereafter arising or
acquired:  licenses, franchises, permits,
patents, patent rights, copyrights, works which are the subject matter of
copyrights, trademarks, service marks, trade names, trade styles, patent,
trademark and service mark applications, and all licenses and rights related to
any of the foregoing, including those patents, trademarks, service marks, trade
names and copyrights set forth on Schedule 6.12 attached hereto and
all other rights under any of the foregoing, all extensions, renewals,
reissues, divisions, continuations, and continuations-in-part of any of the
foregoing, and all rights to sue for past, present and future infringement of
any of the foregoing.

“Pro Rata Share” of a Lender
means (a) with respect to all provisions relating to Revolving Loans or Letters
of Credit or the Revolving Credit Commitments and as used in the definition of
Required Revolving Lenders, a fraction (expressed as a percentage), the
numerator of which is the amount of such Lender’s Revolving Credit Commitment
at such time and the denominator of which is the Revolving Credit Commitments
of all Lenders at such time, or if no Revolving Credit Commitment is outstanding,
a fraction (expressed as a percentage), the numerator of which is the Aggregate
Revolver Outstandings owed to such Lender and the denominator of which is the
Aggregate Revolver Outstandings; (b) with respect to all provisions relating to
the Term Loan and as used in the definition of Required Term Lenders, a
fraction (expressed as a percentage), the numerator of which is the outstanding
Lender Term Loan of such Term Lender and the denominator of which is the
outstanding Term Loan; and (c) otherwise and as used in the definition of
Required Lenders, a fraction (expressed as a percentage), the numerator of
which is the amount of such Lender’s Revolving Credit Commitment at such time
plus the outstanding Lender Term Loans of such Lender plus the amount of such
Lender’s Delayed Draw Commitment and the denominator of which is the Revolving
Credit Commitments of all Lenders at such time plus the outstanding Term Loan
plus the Delayed Draw Commitments of all Lenders, or if no Revolving Credit
Commitment is

 A-27
 

 

outstanding, a fraction (expressed
as a percentage), the numerator of which is the Aggregate Revolver Outstandings
of such Lender plus the outstanding Lender Term Loans of such Lender plus the
amount of such Lender’s Delayed Draw Commitment and the denominator of which is
the Aggregate Revolver Outstandings plus the outstanding Term Loan plus the
amount of the Delayed Draw Commitment of all Lenders.

“Qualified Cash Equivalents”
means, as of any date for any Person, the balance of cash and marketable securities
held by such Person in the United States on such date, which cash and
marketable securities are held in an account with the Agent and are subject to
a first priority, perfected Lien in favor of the Agent and the use of which is
not otherwise restricted, by law or by agreement.

“RCI Obligations” means any obligations of FVC
owing to Resort Condominiums International, LLC, or its affiliates in respect
of payment for services rendered by Resort Condominiums International, LLC or
its affiliates, to FVC or its affiliates.

“Real Estate” means, as to
any Person, all of such Person’s now or hereafter owned or leased estates in
real property, including, without limitation, all fees, leaseholds and future
interests, together with all of such Person’s now or hereafter owned or leased
interests in the improvements thereon, the fixtures attached thereto and the
easements appurtenant thereto.

“Real Estate Subfacility Assets” means the Real
Estate identified as such on the Addendum to Schedule
6.11 attached hereto (as substituted pursuant to Section 2.8 from
time to time).  For the avoidance of
doubt, following the substitution of any Replaced Property with any Substituted
Property in accordance with Section 2.8, such Replaced Property shall no longer
constitute Real Estate Subfacility Assets for any purpose hereunder and Schedule
6.11 shall be deemed modified accordingly.

“Release” means a release,
spill, emission, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration of a Contaminant into the indoor or outdoor
environment or into or out of any Real Estate or other property, including the
movement of Contaminants through or in the air, soil, surface water,
groundwater or Real Estate or other property.

“Release Date” has
the meaning provided in Section 2.7.

“Replaced Property” has the
meaning provided in Section 2.8.

“Reportable Event” means, any
of the events set forth in Section 4043(b) of ERISA or the regulations
thereunder, other than any such event for which the 30-day notice requirement
under ERISA has been waived in regulations issued by the PBGC.

“Repurchase Obligations”
means the liabilities of Fleetwood to wholesale floor plan lenders to
repurchase Inventory sold by FMC to retail dealers.

“Required Lenders” means
at any time Lenders whose Pro Rata Shares aggregate (a) more than 80% or (b) if
Bank’s Pro Rata Share is 35.3% or less, more than 66-2/3%.

 A-28
 

 

“Required Revolving Lenders” means
at any time Revolving Credit Lenders whose Pro Rata Shares aggregate (a) more
than 80% or (b) if Bank’s Pro Rata Share is 35.3% or less, more than
66-2/3%.

“Required Term Lenders” means
at any time when there are two or fewer Term Lenders, all Term Lenders, and at
all other times, Term Lenders whose Pro Rata Shares aggregate (a) more than 80%
or (b) if Bank’s Pro Rata Share is 35.3% or less, more than 66-2/3%.

“Requirement of Law” means,
as to any Person, any law (statutory or common), treaty, rule or regulation or
determination of an arbitrator or of a Governmental Authority, in each case
applicable to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.

“Reserves” means reserves
that limit the availability of credit hereunder, consisting of reserves against
Availability, Eligible Accounts, or Eligible Inventory or Real Estate
Subfacility Assets established by the Agent in good faith from time to time in
the Agent’s reasonable credit judgment. 
Without limiting the generality of the foregoing, the following reserves
shall be deemed to be a reasonable exercise of the Agent’s credit
judgment:  (a) Bank Product Reserves, (b)
reserves for rent at leased locations subject to statutory or contractual
landlord liens, and where the Agent has not received an acceptable agreement
from the landlord, in an amount equal to three months rent for each such
location, (c) Environmental Compliance Reserves, and (d) warehousemen’s or
bailees’ charges in an amount equal to three months charges due to such
warehouseman or bailee.

“Responsible Officer” means,
as to any Loan Party, the chief executive officer or the president, or any
other officer having substantially the same authority and responsibility; or,
with respect to compliance with financial covenants and the preparation of the
Borrowing Base Certificate, the chief financial officer, vice
president-treasurer or vice president-controller, or any other officer of such
Loan Party having substantially the same authority and responsibility.

“Restricted Investment”
means any acquisition of property in exchange for cash or other property,
whether in the form of an acquisition of stock, Debt, or other indebtedness or
obligation, or the purchase or acquisition of any other property, or a loan,
advance, capital contribution, or subscription, except the following:  (a) acquisitions of (i) Equipment to be used
in the business so long as the acquisition costs thereof constitute Capital
Expenditures permitted hereunder and (ii) Real Estate to be used in the
business so long as the acquisition costs are deemed “Capital Expenditures” for
purposes of Section 7.22 hereof, and, in each case, if financed, are
financed in amounts not in excess of the amounts permitted hereby; (b)
acquisitions of Inventory in the ordinary course of business; (c) acquisitions
of current assets acquired in the ordinary course of business; (d) direct
obligations of the United States of America, or any agency thereof, or
obligations guaranteed by the United States of America, provided that
such obligations mature within one year from the date of acquisition thereof;
(e) acquisitions of certificates of deposit maturing within one year from the
date of acquisition, bankers’ acceptances, Eurodollar bank deposits, or
overnight bank deposits, in each case issued by, created by, or with a bank or
trust company organized under the laws of the United States of America or any
state thereof having capital and surplus aggregating at least $100,000,000;

 A-29
 

 

(f) acquisitions of commercial paper
given a rating of “A2” or better by Standard & Poor’s Corporation or “P2”
or better by Moody’s Investors Service, Inc. and maturing not more than 90 days
from the date of creation thereof; (g) Hedge Agreements; (h) extensions of
credit in the nature of accounts receivable or notes receivable arising from
the sale or lease of goods or services in the ordinary course of business; (i)
any assets received in satisfaction of judgments against third parties,
foreclosure of Liens or good faith settlement of litigation, disputes or debts;
(j) operating leases in the ordinary course of business; (k) licenses in
the ordinary course of business consistent with past practices and (l)
intercompany Debt of Subsidiaries of Fleetwood otherwise permitted under this
Agreement.

“Revolving Credit Commitment”
means, at any time with respect to a Lender, the principal amount set forth
beside such Lender’s name under the heading “Revolving Credit Commitment”
on Schedule 1.2 attached hereto or on the signature page of the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 11.2, as such
Revolving Credit Commitment may be adjusted from time to time in accordance
with the provisions of Section 11.2 and Section 13.19, and “Revolving
Credit Commitments” means, collectively, the aggregate amount of the
commitments of all Lenders.

“Revolving Credit Commitment Increase Date”
means the date upon which the Maximum Real Estate Loan Amount increases in
accordance with the definition thereof upon satisfaction of the Appraisal
Condition.

“Revolving Credit Facility
Increase Amount” means, at any time, the lesser of (a) the Maximum
Revolving Credit Facility Increase Amount and (b) seventy-five percent
(75%) of the aggregate fair market value of FMC’s Real Estate Subfacility
Assets subject to a Mortgage, as set forth in Updated Appraisals minus
$11,250,000.

“Revolving Credit Lender”
means any Lender which has a Revolving Credit Commitment or, if the Revolving
Credit Commitments have been terminated, any Lender which has any Revolving
Loan outstanding or any participation interest in any outstanding Letter of
Credit.

“Revolving Loan Note” and “Revolving
Loan Notes” have the meanings specified in Section 1.2(a)(ii).

 “Revolving Loans” has the meaning
specified in Section 1.2 and includes each Agent Advance and Non-Ratable
Loan.

“Second Amendment and Restatement
Date” means July 1, 2005.

“Second Amended and Restated Credit Agreement”
means that certain Second Amended and Restated Credit Agreement dated as of the
Second Amended and Restated Closing Date, by and among Fleetwood, the
Borrowers, the Lenders, and the Agent, and the other parties thereto, as
amended by that certain First Amendment to Second Amended and Restated Credit
Agreement (and Consent of Guarantors), dated as of July 22, 2006, as amended by
that certain Second Amendment to Second Amended and Restated Credit Agreement
and Consent of Guarantors dated as of November 1, 2005, and as amended by that
certain Third Amendment to Second Amended and Restated Credit Agreement and
Consent of Guarantors dated as of May 9, 2006.

 A-30
 

 

“Securities Act” means the
Securities Act of 1933 and the rules and regulations promulgated thereunder.

“Security Agreement” means
the Second Amended and Restated Security Agreement dated as of the Closing Date
among the Loan Parties and the Agent for the benefit of the Agent and the
Lenders.

“Settlement” and “Settlement Date”
have the meanings specified in Section 12.15(a)(ii).

“Solvent” means, when used
with respect to any Person, that at the time of determination:

(a)           the assets of such Person
(including any contribution rights under any Loan Document), at a fair
valuation, are in excess of the total amount of its debts (including contingent
liabilities); and

(b)           the present fair
saleable value of its assets is greater than its probable liability on its
existing debts as such debts become absolute and matured; and

(c)           it is then able and
expects to be able to pay its debts (including contingent debts and other
commitments) as they mature; and

(d)           it has capital
sufficient to carry on its business as conducted and as proposed to be
conducted.

For purposes of determining whether
a Person is Solvent, the amount of any contingent liability shall be computed
as the amount that, in light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.

“Stated Termination Date”
means July 31, 2010; provided that the Stated Termination Date with respect to
the Term Loans shall be July 31, 2007, if the Appraisal Condition is not
satisfied on or prior thereto.

 “Subordinated
Debt” means the unsecured Debt from time to time outstanding under the 1998
Subordinated Debentures, the 2003 Subordinated Debentures, and the maximum
liability of Fleetwood on any subordinated Guaranty of the Trust Securities.

“Subsidiary” of a Person
means any corporation, association, partnership, limited liability company,
joint venture or other business entity of which more than fifty percent (50%)
of the voting Capital Stock, is owned or controlled directly or indirectly by
the Person, or one or more of the Subsidiaries of the Person, or a combination
thereof.  Unless the context otherwise
clearly requires, references herein to a “Subsidiary” refer to a Subsidiary of
Fleetwood.

 A-31
 

 

“Subsidiary Guaranty” means
the Third Amended and Restated Subsidiary Guaranty dated as of the Closing Date
from Subsidiaries of Fleetwood (other than the Borrowers and the Excluded
Subsidiaries) to the Agent, for its benefit and the benefit of the Lenders.

“Substituted Property” has
the meaning provided in Section 2.8.

“Substituted Property Appraisal”
has the meaning provided in Section 2.8(d).

“Supporting Letter of Credit”
has the meanings specified in Section 1.4(g).

“Supporting Obligations”
means all supporting obligations as such term is defined in the UCC.

 “Taxes” means, with respect to any
Lender or the Agent, any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Agent, (i) such taxes (including
income, franchise or branch profits taxes) as are imposed on or measured by the
Agent’s or each Lender’s net income in any jurisdiction (whether federal, state
or local and including any political subdivision thereof) under the laws of
which such Lender or the Agent, as the case may be, is organized or maintains a
lending office or (ii) in the case of any Lender that is a “foreign
corporation, partnership or trust” within the meaning of the Code, any
withholding tax that is imposed on amounts payable to such Lender at the time
such Lender becomes a party hereto (or designates a new lending office) or is
attributable to such Lender’s failure (other than as a result of the
introduction of any Requirement of Law or any change in any Requirement of Law
or in the interpretation or administration of any Requirement of Law) to comply
with Section 12.10, except to the extent that such Lender (or its
assignor, if any) was entitled, at the time of the designation or a new lending
office (or assignment), to receive additional amounts from the Borrowers with
respect to such withholding taxes pursuant to Article IV hereof.

“Term Lender” means a Lender
which has made a Lender Term Loan, as long as any portion of such Lender Term
Loan is outstanding.

“Term Loan” means the Initial
Term Loan and the Delayed Draw Term Loan.

“Term Loan
Collateral” means the Real Estate identified as such Schedule 6.11 attached hereto (as substituted
pursuant to Section 2.8 from time to time).  For the avoidance of doubt, following the
substitution of any Replaced Property with any Substituted Property in
accordance with Section 2.8, such Replaced Property shall no longer constitute
Term Loan Collateral for any purpose hereunder and Schedule 6.11 shall
be deemed modified accordingly.

“Term Loan Notes” means the
Initial Term Loan Notes and the Delayed Draw Term Loan Notes.

“Term Loan Obligations” means
any Obligations outstanding under any Term Loans.

“Termination Date” means the
earliest to occur of (i) the Stated Termination Date, (ii) the date the Total
Facility is terminated either by the Borrowers pursuant to Section 3.2
or by

 A-32
 

 

the Majority Lenders pursuant to Section
9.2, (iii) the date the Agreement is otherwise terminated for any reason
whatsoever pursuant to the terms of the Agreement and (iv) the date the
Revolving Credit Commitments are terminated or have expired.

 “Total Facility” has the meaning
specified in Section 1.1.

“Trademark” has the meaning
specified in Patent and Trademark Security Agreement.

“Trust Securities” means,
collectively, (a) the 6% Convertible Trust Preferred Securities issued by Fleetwood Trust in February 1998 with a liquidation
preference of $50 per share, guaranteed on a subordinated unsecured
basis by Fleetwood, (b) any convertible preferred securities issued by
Fleetwood Trust in exchange therefore to the extent and only to the extent that
issuance of such securities is permitted under this Agreement, (c) any
additional securities issued by Fleetwood Trust concurrently with, and having
the same terms as, the securities issued in such exchange to the extent and
only to the extent that issuance of such securities is permitted under this
Agreement, and (d) the 6% Convertible
Trust Common Securities issued by Fleetwood Trust to Fleetwood in February 1998.

“UCC” means the Uniform
Commercial Code, as in effect from time to time, of the State of California or
of any other state the laws of which are required as a result thereof to be
applied in connection with the issues of perfection, continuation or
enforcement of security interests.

“Unfunded Pension Liability”
means the excess of a Plan’s benefit liabilities under Section 4001(a)(16) of
ERISA, over the current value of that Plan’s assets, determined in accordance with
the assumptions used for funding the Pension Plan pursuant to Section 412 of
the Code for the applicable plan year.

“Unused Letter of Credit
Subfacility” means an amount equal to $75,000,000 minus the sum of
(a) the aggregate undrawn amount of all outstanding Letters of Credit plus,
without duplication, (b) the aggregate unpaid reimbursement obligations with
respect to all Letters of Credit.

“Unused Line Fee” has the
meaning specified in Section 2.5.

“Updated Appraisals” means appraisals (in form
and substance and by an appraiser reasonably satisfactory to Agent), dated no
more than 180 days prior to, in the case of the Borrowing of the Delayed Draw
Term Loan, the Delayed Draw Date or, in the case of any increase to the
Revolving Credit Commitment, the Revolving Credit Commitment Increase Date.

“Weekly Borrowing Base Certificate” has the
meaning specified in Section 5.2(l).

Accounting Terms.  Any
accounting term used in the Agreement shall have, unless otherwise specifically
provided herein, the meaning customarily given in accordance with GAAP, and all
financial computations in the Agreement shall be computed, unless otherwise
specifically provided therein, in accordance with GAAP as consistently applied
and using the same method for inventory valuation as used in the preparation of
the Financial Statements.

 A-33
 

 

Interpretive
Provisions.

(a)           The
meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms.

(b)           The
words “hereof,” “herein,” “hereunder” and similar words refer to the Agreement
as a whole and not to any particular provision of the Agreement; and
Subsection, Section, Schedule and Exhibit references are to the Agreement
unless otherwise specified.

(c)           (i)            The
term “documents” includes any and all instruments, documents, agreements,
certificates, indentures, notices and other writings, however evidenced.

(ii)           The term “including” is not limiting
and means “including without limitation.”

(iii)          In the computation of periods of time
from a specified date to a later specified date, the word “from” means “from
and including,” the words “to” and “until” each mean “to but excluding” and the
word “through” means “to and including.”

(iv)          The word “or” is not exclusive.

(d)           Unless
otherwise expressly provided herein, (i) references to agreements (including
the Agreement) and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications thereto, but only to the extent
such amendments and other modifications are not prohibited by the terms of any
Loan Document, and (ii) references to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute or regulation.

(e)           The
captions and headings of the Agreement and other Loan Documents are for
convenience of reference only and shall not affect the interpretation of the
Agreement.

(f)            The
Agreement and other Loan Documents may use several different limitations, tests
or measurements to regulate the same or similar matters.  All such limitations, tests and measurements
are cumulative and shall each be performed in accordance with their terms.

(g)           For
purposes of Section 9.1, a breach of a financial covenant contained
in Sections 7.22 or 7.24 shall be deemed to have occurred as of any
date of determination thereof by the Agent or as of the last day of any
specified measuring period, regardless of when the Financial Statements
reflecting such breach are delivered to the Agent.

(h)           The
Agreement and the other Loan Documents are the result of negotiations among and
have been reviewed by counsel to the Agent, Fleetwood, the Borrowers and the
other parties, and are the products of all parties.  Accordingly, they shall not be construed
against the Lenders or the Agent merely because of the Agent’s or Lenders’
involvement in their preparation.

 A-34Exhibit 10.1

STEVEN J. HILTON

SECOND AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

(Effective as of January 1, 2007)

This Employment
Agreement (“Agreement”)
is entered into on January 10, 2007 by and between Meritage Homes Corporation, a Maryland corporation (“Company”) and Steven J. Hilton, an
individual (“Executive”)
effective as of January 1, 2007 (“Effective Date”).

RECITALS

WHEREAS, the
Company and the Executive previously entered into an amended and restated
employment agreement defining the terms and conditions of Executive’s
employment with the Company, dated as of July 1, 2003, as subsequently amended
(“Original Agreement”);

WHEREAS, under the
Original Agreement, Executive’s title was Co-Chairman and Co-Chief Executive
Officer of the Company;

WHEREAS, pursuant
to a change in the Company’s executive personnel, the Board of Directors of the
Company (“Board”) has changed the Executive’s title to Chairman and Chief
Executive Officer of the Company;

WHEREAS, the
Original Agreement provided Executive with a certain benefits, including a
right to benefits under the Company’s Supplemental Executive Retirement
Benefits Program (“SERBP”);

WHEREAS, the
Company and Executive believe that is in the best interest of each to make
certain other changes to Executive’s terms and conditions of his employment
with the Company, including the Executive waiving any rights to any benefits
under the SERBP; and

WHEREAS, the
Company desires to continue to obtain the services of Executive, and Executive
desires to provide services to the Company, in accordance with the terms,
conditions and provisions of this Agreement.

NOW THEREFORE, in
consideration of the covenants and mutual agreements set forth herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and in reliance upon the representations, covenants and
mutual agreements contained herein, the Company and Executive agree to amend
and restate the Original Agreement as follows:

1.             Employment.  Subject
to the terms and conditions of this Agreement, the Company agrees to employ
Executive as Chairman and Chief Executive Officer of the Company, and Executive
agrees to diligently perform the duties associated with such positions.  Executive will report directly to the
Board.  Executive will devote
substantially all of his business time, attention and energies to the business
of the Company and will comply with the charters, policies and guidelines
established by the Company from time to time applicable to its directors and
senior management executives.

 

2.             Term.  Executive will be employed under this
Agreement until December 31, 2008, unless Executive’s employment is terminated
earlier pursuant to Section 7. 
Thereafter, the Agreement will automatically renew for additional periods
of one year (“Renewal Term(s)”), unless on or before September 15, 2007 (or
September 15 of any Renewal Term), either Executive or the Company notifies the
other in writing that it wishes to terminate employment under this Agreement at
the end of the term then in effect.

3.             Director Status.  For so long as Executive is Chief Executive
Officer, the Company shall use commercially reasonable efforts, subject to
applicable law and regulation of the New York Stock Exchange (“NYSE”), to cause Executive to be nominated
for election as a director and to be recommended to the stockholders for
election as a director.  Upon any
termination of employment as Chief Executive Officer, Executive will be deemed
to have resigned from the Board, unless (a) the Executive is not terminated for
Cause (as defined below) and owns 5% or more of the Company’s common stock then
outstanding, or (b) within 30 days thereof a majority of the independent
directors of the Board (as defined by rules of the NYSE) vote to enable
Executive to continue serving on the Board through the balance of his term.

4.             Base Salary.  The Company will pay Executive a base salary
(“Base Salary”) at the annual
rate of $1,017,500 per year.  The Board
may adjust Executive’s Base Salary from time to time, provided that the Base
Salary may not be reduced without Executive’s consent.  The Base Salary will be payable in accordance
with the payroll practices of the Company in effect from time to time.

5.             Incentive
Compensation.

(a)           Bonus.  Executive may, as determined in the
discretion of the Compensation Committee of the Board (“Committee”), be
entitled to annual incentive compensation based on the achievement of certain
goals and performance criteria established pursuant to the Company’s 2006
Executive Management Incentive Plan as specified in Exhibit A hereto
(the “Bonus”).  The Committee has the complete discretion to
act reasonably to reduce the amount of the annual incentive compensation
established pursuant to Exhibit A (including to zero) (the “Actual Bonus”)
and such Actual Bonus, if any, will be due and payable in accordance with Exhibit
A.

(b)           Long-Term Incentives.  During 2007, the Committee shall grant the
Executive an option to acquire 90,000 shares of the Company’s stock under the
Company’s 2006 Stock Incentive Plan (“2006 Plan”).  The option will have an exercise price equal
to the closing stock price on the date of grant, shall have a seven-year term,
and shall vest ratably over five years from the date of grant.  The option will also be subject to the terms
and conditions set forth in the 2006 Plan and the Company’s form of option
agreement.  In addition, the Committee
shall grant the Executive 18,000 shares of the Company’s stock under the 2006
Plan, which shares shall be subject to transfer restrictions which shall lapse
in equal increments over the three-year period beginning on the first
anniversary of the date of grant.  The
restricted stock grant will also be subject to the terms and conditions set
forth in the 2006 Plan and in the Company’s form of restricted stock award
agreement.  For periods beginning after
2007, Executive may receive awards under the 2006 Plan (or any successor plan)
in such amount (if any) and form and subject to such terms and conditions as
determined in the Board’s sole and absolute discretion.  The

 2
 

 

awards granted shall also
be subject to the accelerated vesting and other provisions set forth in the
Second Amended and Restated Change in Control Agreement between Executive and
the Company, effective as of January 1, 2007 (“CIC Agreement”).

6.             Executive Benefits.  During the term of this Agreement, Executive
will be entitled to reimbursement of reasonable and customary business
expenses.  The Company will provide
Executive with such fringe benefits and other Executive benefits as are
regularly provided by the Company to its senior management (e.g., health and long-term disability insurance, paid
vacation, etc.); provided, however, that nothing herein shall preclude the
Company from amending or terminating any employee or general executive benefit
plans or programs.  In addition, the
Company shall provide the Executive with the benefits set forth on Exhibit B,
which benefits may not be terminated or reduced during the term hereof.  By signing this Agreement, Executive hereby
knowingly and voluntarily waives his right to any payment under the SERBP.

7.             Termination.

(a)           Voluntary Resignation by Executive
without Good Reason.  If Executive
voluntarily terminates his employment with the Company without Good Reason,
then (i) the Company will be obligated to pay Executive’s Base Salary
through the Date of Termination; (ii) no Bonus shall be payable for the
fiscal year in which the termination occurs; (iii) the Company will pay
Executive $5 million (the Consulting, Severance and Non-Competition Payment”),
in monthly installments of $208,333.33 in cash or by check, over the next two
years (the “Consulting Period”) (subject to Executive’s compliance with this
Agreement, including Sections 8 and 9 as provided therein); (iv) the
Company shall reimburse Executive for COBRA premiums for the period that the
Company is required to offer COBRA coverage as a matter of law; and (v) at
the Company’s option, the Executive shall render reasonable consulting services
during the Consulting Period to the Company as may be requested from time to
time by the Chairman of the Committee.

(b)           Voluntary Resignation by Executive
with Good Reason.  If Executive
voluntarily terminates his employment with the Company with Good Reason, then
(i) the Company will be obligated to pay Executive’s Base Salary through the
Date of Termination; (ii) no Bonus shall be payable for the fiscal year in
which the termination occurs; (iii) the Company shall reimburse Executive for
COBRA premiums for the period that the Company is required to offer COBRA
coverage as a matter of law; (iv) at the Company’s option, the Executive shall
render reasonable consulting services to the Company during the 24-month period
following termination of employment as may be requested from time to time by
the Chairman of the Committee; and (v) the Company will pay Executive an amount
equal to the sum of (A) two times Executive’s Base Salary on the Date of
Termination of employment, and (B) two times the average of the Actual Bonus
compensation Executive earned in the two years prior to his termination of
employment; provided, however that the total amount set forth in this Section
7(b)(v) shall not be less than $5 million and shall not exceed $10
million.  Unless otherwise provided in
this Agreement, this amount shall be paid over the two year period following
Executive’s termination of employment (“Severance Period”).  The Company intends that the benefits
provided under this Section 7(b) shall be paid in lieu of, and not in addition
to,

 3
 

 

any benefit to which the
Executive may be entitled pursuant to his termination of employment with the
Company without Good Reason, as set forth in Section 7(a).

(c)           Termination without Cause by the
Company.  If the Company terminates
Executive without Cause, then (i) the Company will be obligated to pay
Executive’s Base Salary through the Date of Termination; (ii) no Bonus shall be
payable for the fiscal year in which the termination occurs, except if the
Company terminates Executive’s employment without Cause during the last three
months of the Company’s fiscal year, Executive will be paid a pro rata bonus
based upon the Company’s performance for the fiscal year, payable at the time
set forth in Exhibit A; (iii) the Company shall reimburse Executive for
COBRA premiums for the period that the Company is required to offer COBRA
coverage as a matter of law; (iv) any options granted after the Effective Date
will become fully vested and exercisable and all restrictions on awards will
lapse; (v) at the Company’s option, the Executive shall render reasonable
consulting services to the Company during the 24-month period following
termination of employment as may be requested from time to time by the Chairman
of the Committee; and (vi) the Company will pay Executive an amount equal to the
sum of sum of (A) two times Executive’s Base Salary on the Date of Termination
of employment, and (B) two times the average of the Actual Bonus compensation
Executive earned in the two years prior to his termination of employment;
provided, however that the total amount set forth in this Section 7(c)(vi)
shall not be less than $5 million and shall not exceed $10 million.  Unless otherwise provided in this Agreement,
this amount shall be paid over the Severance Period.

(d)           Termination for Cause by the
Company.  If the Company terminates
Executive’s employment for Cause, then (i) the Company will be obligated to pay
Executive’s Base Salary through the Date of Termination, and (ii) no Bonus
shall be payable for the fiscal year in which the termination occurs.  Upon a termination for Cause by the Company,
the provisions of Section 8 (Restrictive Covenant) shall
automatically become applicable for the two-year period set forth therein,
without any further payment due Executive. 
Executive acknowledges and agrees that the compensation herein is
adequate consideration for such covenants.

(e)           Termination upon Death or
Disability.  If Executive’s
employment is terminated as a result of Executive’s death or Disability, then
the Company will be obligated to pay (i) Executive’s then current Base
Salary through the Date of Termination, (ii) a pro rated amount of Executive’s
Actual Bonus for the year, payable at the time set forth in Exhibit A,
(iii) Executive’s COBRA premiums for the period that the Company is
required to offer COBRA coverage as a matter of law; and (iv) any options
granted after the Effective Date will become fully vested and exercisable and
all restrictions on awards will lapse and, to the extent permitted under the
plan’s governing documents, Executive (or Executive’s beneficiary(ies)) shall
have a period of one year from the Date of Termination of employment to
exercise such options.  If Executive dies
or becomes Disabled during any period that the Company is obliged to make payments
under Section 7(a), (b) or (c), the Company shall make a lump sum payment to
Executive (or his estate) of any unpaid amount within thirty (30) days of such
death or Disability.

 4
 

 

(f)            Definitions.  For purposes of this Agreement:

(1)           “Cause”
and “Good Reason” shall have the
meanings ascribed to them in the CIC Agreement, provided, that Good Reason also
exists under this Agreement if (A) the Company fails to cause any successor to
immediately assume the terms of this Agreement, and (B) the Company materially
breaches its obligations under this Agreement and such breach is not cured
within a reasonable period of time not to exceed 30 days after written notice
from the Executive;

(2)           “Date
of Termination” shall mean (i) if this Agreement is terminated as a
result of Executive’s death, the date of Executive’s death, (ii) if this
Agreement is terminated by Executive, the date on which he notifies the Company
in writing (but following the Company’s opportunity to cure as provided in the
CIC Agreement), (iii) if this Agreement is terminated by the Company for
Disability, the date a notice of termination is given, (iv) if this Agreement
is terminated by the Company for Cause, the date a final determination is
provided to Executive by the Company (following the procedures set forth in the
CIC Agreement), or (v) if this Agreement is terminated by the Company without
Cause, the date notice of termination is given to Executive by the Company; and

(3)           “Disability”
shall mean if, by reason of any medically determinable physical or metal
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, Executive is receiving
income replacement benefits for a period of not less than six months under an
accident and health plan established by the Company for its employees.

(g)           Procedures for Notices of
Termination.  The procedures set
forth in Section 10 (a), (b) and (d) of the CIC Agreement shall apply under
this Agreement in connection with a notice of termination as to the kind of
termination events described in those subsections.

(h)           Compliance with Section 409A of
the Internal Revenue Code.  Any
payment under this Section 7 shall be subject to the provisions of this Section
7(h) (except for a payment pursuant to Section 7(e)).  If Executive is a “Specified Employee” of the
Company for purposes of Internal Revenue Code Section 409A (“Code Section 409A”)
at the time of a payment event set forth in Sections 7 (a), (b), (c) or (d)
then no severance or other payments pursuant to Section 7 shall be made to
Executive by the Company until the amount of time has passed that is necessary
to avoid incurring excise taxes under Code Section 409A.  Should this paragraph 7(h) result in a delay
of payments to Executive, on the first day any such payments may be made
without incurring a penalty pursuant to Section 409A (the “409A Payment Date”),
the Company shall begin to make such payments as described in this paragraph 7,
provided that any amounts that would have been payable earlier but for the
application of this paragraph 7(h), shall be paid in lump-sum on the 409A
Payment Date along with accrued interest at the rate of interest announced by
Bank of America, Arizona from time to time as its prime rate from the date that
payments to you should have been made under this Agreement.  The balance of such severance payments shall
be payable in accordance with regular payroll timing and the COBRA premiums
shall be reimbursed monthly.  For
purposes of this provision, the term Specified Employee shall have the meaning
set forth in Section 409A(2)(B)(i) of the Internal Revenue

 5
 

 

Code of 1986, as amended
or any successor provision and the treasury regulations and rulings issued
hereunder.

8.             Restrictive
Covenant.  In
consideration of Executive’s employment, but subject to Section 7, Executive
agrees to the following:

(a)           During the Restriction Period (as
defined below), Executive will not, directly or indirectly, either as an
executive, partner, owner, lender, director, adviser or consultant or in any
other capacity or through any entity:

(1)           engage in any production homebuilding
or home sales within 100 miles of any Company project, provided, that, for purposes
of this Section 8(a)(1), Executive (a) may own stock in the Company and
less than 1% of any other publicly traded homebuilder, and (b) may engage in
custom homebuilding (up to 5 homes annually for third parties and 2 for family
members), land banking or lot or land development; provided, however,
that Executive may not directly or indirectly engage in the sale of finished
lots within the restricted area described above, unless at least 10 business
days prior to any offer to a third party, the lots are offered to the Company,
and if the Company (or its nominee) determines to purchase the property, the
applicable selling party negotiates a sale in good faith.  If no such sale is then consummated, then the
applicable selling party may pursue a sale with a third party.  If the terms of such third-party sale are
materially different than the offer made to the Company, the Company (or its
nominee) will have the right of first refusal to purchase the lots within three
business days of notice of the proposed sale to such a third party.  This notice must contain the specific terms and
conditions thereof and the proposed buyer. 
If the Company (or a nominee) does not respond in writing to the right
of first offer within 10 days or the right of first refusal within three days,
the Company will be deemed to have waived the applicable right.  The Company or a nominee can substitute cash
for any non-cash consideration (at the fair market value thereof).  This right will arise again if the third
party offer is materially modified or amended.

(2)           directly or indirectly, hire or
solicit for employment for any other business entity (other than the Company)
any person who is, or within the six month period preceding the date of such
activity was, an employee of or consultant to the Company (other than as a
result of a general solicitation for employment); or

(3)           solicit any customer or supplier of
the Company (including lot developers and land bankers) for a production
homebuilding business or otherwise attempt to induce any such customer or
supplier to discontinue or materially modify its relationship with the Company.  During the Restriction Period, Executive may
utilize the services of Company suppliers for business operations permitted
under Section 8(a)(1), i.e.,
custom homebuilding, land banking and land or lot development, so long as these
activities do not disrupt or adversely affect the Company’s relationships with
such suppliers.

(b)           The provisions of this Section 8
shall begin as of the date hereof, will survive the termination of this
agreement under Section 7 and will expire two years from the

 6
 

 

Date of Termination,
provided that, to the extent required, the notices under Section 7 are
given and the payments made as provided therein (“Restriction Period”).

(c)           Executive represents to the Company
that he is willing and able to engage in businesses that are not competing
businesses hereunder and that enforcement of the restrictions set forth in this
Section 8 would not be unduly burdensome to Executive.  Executive hereby agrees that the period of
time provided for in this Section 8 and other provisions and
restrictions set forth herein are reasonable and necessary to protect the
Company and its successors and assigns in the use and employment of the
goodwill of the business conducted by Executive.  Executive agrees that, if Executive in any
material respect violates the terms of this Section 8(A) or Section 9,
the Company shall not be obliged to pay any remaining Consulting, Severance,
and Non-Competition Payments and any other payments or benefits specified in
Section 7, provided that the Company must first provide Executive with
written notice of such violation and the opportunity to provide within thirty
(30) days any information showing that he has not in any material respect
breached such Agreement.  During any
notice period or any dispute regarding the violation of the terms of this Section
8 or Section 9, the Company will place such payments in an interest
bearing escrow account at Bank of America, Phoenix, or its successor.  Executive further agrees that damages cannot
adequately compensate the Company in the event of a violation of this Section
8 and that, if such violation should occur, injunctive relief shall be
essential for the protection of the Company and its successors and
assigns.  Accordingly, Executive hereby
covenants and agrees that, in the event any of the provisions of this Section
8 shall be violated or breached, the Company shall be entitled to obtain
injunctive relief against the party or parties violating such covenants without
bond but upon due notice, in addition to such further or other relief as may be
available at equity or law.  An
injunction by the Company shall not be considered an election of remedies or a
waiver of any right to assert any other remedies which the Company has at law
or in equity.  No waiver of any breach or
violation hereof shall be implied from forbearance or failure by the Company to
take action thereof.  The prevailing
party in any litigation, arbitration or similar dispute resolution proceeding
to enforce this provision will recover any and all reasonable costs and
expenses, including attorneys’ fees.

(d)           Executive agrees that the period of
time in which this Section 8 is in effect shall be extended for a period
equal to the duration of any breach of this Section 8 by Executive.

(e)           For purposes of Sections 8 and
9, the term “Company”
includes Meritage Homes Corporation and its subsidiaries and affiliates.  For purposes hereunder, an affiliate shall be
deemed to be any corporation or other business entity in which the Company or
its subsidiaries owns a controlling interest.

9.             Non-Disclosure of
Confidential Information.

(a)           It is understood
that in the course of Executive’s employment with Company, Executive will
become acquainted with Company Confidential Information (as defined
below).  Executive recognizes that
Company Confidential Information has been developed or acquired at great
expense, is proprietary to the Company, and is and shall remain the exclusive
property of the Company.  Accordingly,
Executive agrees that he will not, disclose to others, copy, make any use of,
or remove from Company’s premises any Company Confidential Information, except
as Executive’s duties may specifically require, without the

 7
 

 

express written
consent of the Company, during Executive’s employment with the Company and
thereafter until such time as Company Confidential Information becomes
generally known, or readily ascertainable by proper means by persons unrelated
to the Company.

(b)           Upon any termination of employment,
Executive shall promptly deliver to the Company the originals and all copies of
any and all materials, documents, notes, manuals, or lists containing or
embodying Company Confidential Information, or relating directly or indirectly
to the business of the Company, in the possession or control of Executive,
unless Executive remains a member of the Board, and in such case Executive may
retain and receive all Company Confidential Information provided to other Board
members.

(c)           Executive hereby agrees that the
period of time provided for in this Section 9 and other provisions and
restrictions set forth herein are reasonable and necessary to protect the
Company and its successors and assigns in the use and employment of the
goodwill of the business conducted by Executive.  Executive further agrees that damages cannot
adequately compensate the Company in the event of a violation of this Section
9 and that, if such violation should occur, injunctive relief shall be
essential for the protection of the Company and its successors and
assigns.  Accordingly, Executive hereby
covenants and agrees that, in the event any of the provisions of this Section
9 shall be violated or breached, the Company shall be entitled to obtain
injunctive relief against the party or parties violating such covenants,
without bond but upon due notice, in addition to such further or other relief
as may be available at equity or law. 
Obtainment of such an injunction by the Company shall not be considered
an election of remedies or a waiver of any right to assert any other remedies
which the Company has at law or in equity. 
No waiver of any breach or violation hereof shall be implied from
forbearance or failure by the Company to take action thereof.  The prevailing party in any litigation,
arbitration or similar dispute resolution proceeding to enforce this provision
will recover any and all reasonable costs and expenses, including attorneys’
fees.

(d)           “Company Confidential Information” shall mean confidential,
proprietary information or trade secrets of Company and its subsidiaries and
affiliates including without limitation the following:  (1) customer lists and customer information
as compiled by Company; (2) Company’s internal practices and procedures;
(3) Company’s financial condition and financial results of operation; (4)
supply of materials information, including sources and costs, designs,
information on land and lot inventories, and current and prospective projects;
(5) strategic planning, manufacturing, engineering, purchasing, finance,
marketing, promotion, distribution, and selling activities; (6) all other information
which Executive has a reasonable basis to consider confidential or which is
treated by Company as confidential; and (7) all information having
independent economic value to Company that is not generally known to, and not
readily ascertainable by proper means by, persons who can obtain economic value
from its disclosure or use. 
Notwithstanding the foregoing provisions, the following shall not be
considered “Company Confidential Information”: (i) the general skills of the
Executive as an experienced real estate and homebuilding entrepreneur and
senior management level employee; (ii) information generally known by
senior management executives within the homebuilding and/or land development
industry; (iii) persons, entities, contacts or relationships of Executive that
are also generally known in the industry; and (iv) information which becomes
available on a non-confidential basis from a source other than Executive which
source is not prohibited from disclosing such confidential information by
legal, contractual or other obligation.

 8
 

 

10.           Cooperation; No
Disparagement.  During the
Restriction Period, Executive agrees to provide reasonable assistance to the
Company (including assistance with litigation matters), upon the Company’s
request, concerning the Executive’s previous employment responsibilities and
functions with the Company. 
Additionally, at all times after the Executive’s employment with the
Company has terminated, Company and Executive agree to refrain from making any
disparaging or derogatory remarks, statements and/or publications regarding the
other, its employees or its services.

11.           Severability.  If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under any applicable law, then such
provision will be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification will make the
provision legal, valid and enforceable, then this Agreement will be construed
as if not containing the provision held to be invalid, and the rights and
obligations of the parties will be construed and enforced accordingly.

12.           Assignment
by Company.  Nothing in
this Agreement shall preclude the Company from consolidating or merging into or
with, or transferring all or substantially all of its assets to, another
corporation or entity that assumes this Agreement and all obligations and
undertakings hereunder.  Upon such
consolidation, merger or transfer of assets and assumption, the term “Company”
as used herein shall mean such other corporation or entity, as appropriate, and
this Agreement shall continue in full force and effect.

13.           Entire
Agreement.  This
Agreement, the CIC Agreement, and any agreements concerning stock options or
other benefits, embody the complete agreement of the parties hereto with
respect to the subject matter hereof and supersede any prior written, or prior
or contemporaneous oral, understandings or agreements between the parties that
may have related in any way to the subject matter hereof.  This Agreement may be amended only in writing
executed by the Company and Executive. 
Notwithstanding the foregoing, nothing in this Agreement is intended to
affect any previous agreements pertaining to the grant of options to the
Executive prior to the Effective Date, including without limitation, provisions
in Executive’s prior Change of Control Agreement, providing for acceleration
upon a change of control.

14.           Governing
Law.  This Agreement and
all questions relating to its validity, interpretation, performance and
enforcement, shall be governed by and construed in accordance with the internal
laws, and not the law of conflicts, of the State of Arizona.

15.           Notice.  Any notice required or permitted under this
Agreement must be in writing and will be deemed to have been given when delivered
personally or by overnight courier service or three days after being sent by
mail, postage prepaid, at the address indicated below or to such changed
address as such person may subsequently give such notice of:

	
  

  	
  if to Parent or
  Company:

  	
   

  	
  Meritage Homes Corporation

  
	
   

  	
   

  	
   

  	
  17851 N. 85th
  Street, Suite 300

  
	
   

  	
   

  	
   

  	
  Scottsdale,
  Arizona 85255

  
	
   

  	
   

  	
   

  	
  Attention:
  Chairman of the Committee

  

 

 9
 

 

 

	
  

  	
  with a copy to:

  	
   

  	
  Snell & Wilmer L.L.P.

  
	
   

  	
   

  	
   

  	
  One Arizona
  Center

  
	
   

  	
   

  	
   

  	
  400 E. Van Buren
  Street

  
	
   

  	
   

  	
   

  	
  Phoenix, Arizona
  85004-2202

  
	
   

  	
   

  	
   

  	
  Phone: (602)
  382-6252

  
	
   

  	
   

  	
   

  	
  Fax: (602)
  382-6070

  
	
   

  	
   

  	
   

  	
  Attn: Steven D.
  Pidgeon, Esq.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  if to Executive:

  	
   

  	
  Steven J. Hilton

  
	
   

  	
   

  	
   

  	
  9586 E.
  Havasupai Drive

  
	
   

  	
   

  	
   

  	
  Scottsdale,
  Arizona 85255

  
	
   

  	
   

  	
   

  	
  Phone: (480)
  515-0480

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  	
  Gallagher & Kennedy

  
	
   

  	
   

  	
   

  	
  2575 E.
  Camelback Road

  
	
   

  	
   

  	
   

  	
  Phoenix, Arizona
  85016

  
	
   

  	
   

  	
   

  	
  Phone: (602)
  530-8407

  
	
   

  	
   

  	
   

  	
  Fax: (602)
  530-8500

  
	
   

  	
   

  	
   

  	
  Attn: Jay A.
  Zweig, Esq.

  

 

16.           Arbitration.  Any dispute, controversy, or claim, whether
contractual or non-contractual, between the parties hereto arising directly or
indirectly out of or connected with this Agreement, relating to the breach or
alleged breach of any representation, warranty, agreement, or covenant under
this Agreement, unless mutually settled by the parties hereto, shall be
resolved by binding arbitration in accordance with the Employment Arbitration
Rules of the American Arbitration Association (the “AAA”).  The parties
agree that before the proceeding to arbitration that they will mediate their
disputes before the AAA by a mediator approved by the AAA.  Any arbitration shall be conducted by
arbitrators approved by the AAA and mutually acceptable to Company and
Executive.  All such disputes,
controversies or claims shall be conducted by a single arbitrator, unless the
dispute involves more than $50,000 in the aggregate in which case the
arbitration shall be conducted by a panel of three arbitrators.  If the parties hereto are unable to agree on
the mediator or the arbitrator(s), then the AAA shall select the
arbitrator(s).  The resolution of the
dispute by the arbitrator(s) shall be final, binding, nonappealable, and fully
enforceable by a court of competent jurisdiction under the Federal Arbitration
Act.  The arbitrator(s) shall award
damages to the prevailing party.  The
arbitration award shall be in writing and shall include a statement of the
reasons for the award.  The arbitration
shall be held in the Phoenix/Scottsdale metropolitan area.  The Company shall pay all AAA, mediation, and
arbitrator’s fees and costs.  The
arbitrator(s) shall award reasonable attorneys’ fees and costs to the
prevailing party.

17.           Withholding;
Release; No Duplication of Benefits.  All of Executive’s compensation under this
Agreement will be subject to deduction and withholding authorized or required
by applicable law.  The Company’s
obligation to make any post-termination payments hereunder (other than salary
payments and expense reimbursements through a date of termination), shall be
subject to receipt by the Company from Executive of a mutually agreeable
release, and compliance by Executive with the covenants set forth in Sections
8 and 9 hereof.  If there is
any conflict between the provisions of the CIC Agreement and this Agreement,
such

 10
 

 

conflict shall be resolved so as to provide the
greater benefit to Executive.  However,
in order to avoid duplication of any monetary benefits, any payments or
benefits due under Executive’s CIC Agreement or under any employee severance
plan to the extent such a plan exists or is subsequently implemented by the
Company, will be reduced by any payments or benefits provided hereunder.  Any payment required under the CIC Agreement
to be paid in a lump sum, as set forth in the CIC Agreement, shall be so paid,
and the remainder, if any, due under this Agreement will be paid in equal
monthly installments over the Consulting Period or the Severance Period, as
applicable, except that in no event shall the payment of the Consulting,
Non-Competition and Severance payment be accelerated.

18.           Effect of Restatement of
Financial Results. 
Notwithstanding anything in this Agreement to the contrary, to the
extent any financial results are misstated as a result of Executive’s willful
misconduct or gross negligence, and as a result such financial results are
subsequently restated downward resulting in lower levels of bonuses pursuant to
Section 5 and the accompanying Exhibit A, offsets shall be made against future
bonuses.  If such future bonuses are
insufficient to offset the full difference between awarded bonuses and restated
bonuses and/or if such restatement occurs at the end of the Agreement Term and
subsequent Renewal Term(s), if any, bonuses previously earned and delivered
under this Agreement may be clawed-back.

19.           Successors
and Assigns.  This
Agreement is solely for the benefit of the parties and their respective
successors, assigns, heirs and legatees. 
Nothing herein shall be construed to provide any right to any other
entity or individual.

20.           Related Party Transactions.  Executive may not engage in any related party
transactions with the Company unless approved in the specific instance by the
Audit Committee of the Board.

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

	
  

  	
  MERITAGE
  HOMES CORPORATION, a

  Maryland corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ray Oppel

  
	
   

  	
  Name:

  	
  Ray Oppel

  
	
   

  	
  Title:

  	
  Exec.
  Compensation Committee Chairman

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:
  STEVEN J. HILTON

  
	
   

  	
   

  
	
   

  	
  /s/ Steven J.
  Hilton

  
					

 

 11

 

EXHIBIT
A

INCENTIVE
COMPENSATION SCHEDULE

Executive
Bonus Compensation

Part I – Bonus

	
   

  	
   

  	
   

  
	
  2007 and

  any Renewal Term

  	
   

  	
  For 2007 (and any Renewal Term), Executive may, in
  the Board’s reasonable discretion, be entitled to a maximum bonus equal to
  .825% of the EBITDA if Company’s ROA is in the top 1/2 of public homebuilders
  having revenues of $500 million or more per year, and an additional .825% of
  EBITDA if the Company’s ROE is in the top 1/2 of these public homebuilders.
  If either measurement falls within the 33% to 49% percentile, the bonus shall
  be .5363% of EBITDA for the applicable measurement. If either measurement
  falls below the 33% threshold, then there will not be any formula bonus paid
  with respect to such measurement. This bonus is established pursuant to, and
  its terms and conditions shall be subject to, the Company’s 2006 Executive
  Management Incentive Plan. For bonuses to be considered for 2008 and
  subsequent years, the Board and Executive agree to discuss the bonus formula
  on or before September 30, 2007, and in each subsequent year.

  

 

Part II – Payment

Any bonus shall be paid
in the form and time as determined by the Board in its reasonable discretion,
provided that the bonus shall be paid in cash no later than the later of (i)
March 15 of the year following the calendar year to which the payment relates,
or (ii) the date that is two and one-half months following the end of the
Company’s fiscal year to which the payment relates.

 A-1

 

EXHIBIT
B

SPECIFIED
BENEFITS

1.             Payments annually for Executive to purchase life
insurance in the amount of $5,000,000.

2.             Payments annually for Executive to purchase disability
insurance providing for monthly payments of an estimated $20,000 per month.

3.             Executive Supplemental Savings Plan enabling deferred
compensation in excess of 401(k) limitations.

4.             Use of any airplane owned or leased by the Company for
business use purposes only pursuant to the Company’s travel policy in effect
from time to time and subject to review annually.

5.             Use of Company car (same as current policy) pursuant to
the Company’s travel policy in effect from time to time and subject to review
annually.

6.             Taxes related to any payments and benefits above shall
be the sole responsibility of the Executive.

 B-1

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