Document:

exv10w1

 

Exhibit 10.1

	 	 	 
		 	
Credit Agreement

This agreement between Bank One, NA, with its main office in Chicago, IL, and
its successors and assigns, (the “Bank”), whose address is 201 N. Central Ave,
21st Floor, AZ1-1178, Phoenix, AZ 85004, and Cavco Industries, Inc. (the
“Borrower”), whose address is 1001 North Central Avenue, Suite 800, Phoenix, AZ
85004.

	1.	 	Credit Facilities.

	 	1.1	 	 Scope. This agreement governs Facility A, and, unless otherwise
agreed to in writing by the Bank and the Borrower or prohibited by
applicable law, governs the Credit Facilities.
	 
	 	1.2	 	Facility A (Line of Credit). The Bank has approved a credit
facility to the Borrower in the principal sum not to exceed
$15,000,000.00 in the aggregate at any one time outstanding
(“Facility A”). Credit under Facility A shall be repayable as set
forth in a Line of Credit Note executed concurrently with this
agreement, and any renewals, modifications or extensions thereof. The
proceeds of Facility A shall be used for the following purpose:
general business purposes, including working capital.
	 
	 	 	 	Non Usage Fee. The Borrower shall pay to the Bank a non-usage fee on
the average daily unused portion of Facility A at a rate of 0.25% per
annum, payable in arrears within fifteen (15) days of the end of each
calendar quarter for which the fee is owing.
	 
	 	1.3	 	Borrowing Base. The aggregate principal amount of advances
outstanding at any one time under Facility A shall not exceed the
lesser of the Borrowing Base or $15,000,000.00. If at any time the
aggregate principal amount of advances outstanding under Facility A
exceeds the Borrowing Base, the Borrower shall immediately pay to the
Bank an amount equal to the difference between such aggregate
principal amount of advances and the Borrowing Base. “Borrowing Base”
means the aggregate of:

	 	 	 	A. 80% of Eligible Accounts,
	 
	 	 	 	B. 50% of Eligible Inventory, not to exceed the aggregate of
$5,000,000.00.

	2.	 	Definitions. As used in this agreement, the following terms have the
following respective meanings:

	 	2.1	 	“Credit Facilities” means all extensions of credit from the
Bank to the Borrower, whether now existing or hereafter arising,
including but not limited to those described in Section 1.
	 
	 	2.2	 	“Liabilities” means all obligations, indebtedness and
liabilities of the Borrower to any one or more of the Bank, BANK ONE
CORPORATION, and any of their subsidiaries, affiliates or successors,
now existing or later arising, including, without limitation, all
loans, advances, interest, costs, overdraft indebtedness, credit card
indebtedness, lease obligations, or obligations relating to any Rate
Management Transaction, all monetary obligations incurred or accrued
during the pendency of any bankruptcy, insolvency, receivership or
other similar proceedings, regardless of whether allowed or allowable
in such proceeding, and all renewals, extensions, modifications,
consolidations or substitutions of any of the foregoing, whether the
Borrower may be liable jointly with others or individually liable as
a debtor, maker, co-maker, drawer, endorser, guarantor, surety or
otherwise, and whether voluntarily or involuntarily incurred, due or
not due, absolute or contingent, direct or indirect, liquidated or
unliquidated. The term “Rate Management Transaction” in this
agreement means any transaction (including an agreement with respect
thereto) now existing or hereafter entered into among the Borrower,
the Bank or BANK ONE CORPORATION, or any of its subsidiaries or
affiliates or their successors, which is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction,
floor transaction, collar transaction, forward transaction, currency
swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with
respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies,
commodity prices, equity prices or other financial measures.
	 
	 	2.3	 	“Notes” means the Line of Credit Note(s) described in Section
1, and all promissory notes, instruments and/or contracts evidencing
the terms and conditions of the Liabilities.

 

 

	 	2.4	 	“Account” means a trade account, account receivable, other
receivable, or other right to payment for goods sold or leased or
services rendered owing to the Borrower or to CRG Holdings, LLC, a
wholly owned subsidiary of Borrower (“CRG”) (or to a third party
grantor acceptable to the Bank).
	 
	 	2.5	 	“Account Debtor” means the person or entity obligated upon an
Account.
	 
	 	2.6	 	“Capital Expenditures” means any expenditure or the incurrence
of any obligation or liability by the Borrower for any asset which is
classified as a capital asset.
	 
	 	2.7	 	“Distributions” means all dividends and other distributions
made by the Borrower to its shareholders, partners, owners or
members, as the case may be, other than salary, bonuses, and other
compensation for services expended in the current accounting period.
	 
	 	2.8	 	“Eligible Accounts” means, at any time, all of the Borrower’s
and CRG’s Accounts. The net amount of any Eligible Account against
which the Borrower may borrow shall exclude all returns, discounts,
credits, and offsets of any nature. Unless otherwise agreed to by the
Bank in writing, Eligible Accounts do not include Accounts: (1) with
respect to which the Account Debtor is an employee or agent of the
Borrower or CRG; (2) with respect to which the Account Debtor is
affiliated with or related to the Borrower or CRG; (3) with respect
to which goods are placed on consignment, guaranteed sale, or other
terms by reason of which the payment by the Account Debtor may be
conditional; (4) with respect to which the Account Debtor is not a
resident of the United States, except to the extent such Accounts are
supported by insurance, bonds or other assurances satisfactory to the
Bank; (5) with respect to which the Borrower or CRG is or may become
liable to the Account Debtor for goods sold or services rendered by
the Account Debtor to the Borrower or CRG; (6) which are subject to
dispute, counterclaim, or setoff; (7) with respect to which the goods
have not been shipped or delivered, or the services have not been
rendered, to the Account Debtor; (8) with respect to which the Bank,
in its sole discretion, deems the creditworthiness or financial
condition of the Account Debtor to be unsatisfactory; (9) of any
Account Debtor who has filed or has had filed against it a petition
in bankruptcy or an application for relief under any provision of any
state or federal bankruptcy, insolvency, or debtor-in-relief acts; or
who has had appointed a trustee, custodian, or receiver for the
assets of such Account Debtor; or who has made an assignment for the
benefit of creditors or has become insolvent or fails generally to
pay its debts (including its payrolls) as such debts become due; (10)
with respect to which the Account Debtor is the United States
government or any department or agency of the United States; (11)
which have not been paid in full within sixty (60) days from the
invoice date; (12) which are in the nature of rebates due from
vendors and suppliers of parts and other inventory purchased by the
Borrower or CRG; and (13) which may be subject to year end
adjustments. In no event will the balance of any Account of any
single Account Debtor be eligible whenever the portion of the Account
which has not been paid within sixty (60) days from the invoice date
is in excess of 25% of the total amount outstanding on the Account.
	 
	 	2.9	 	“Eligible Inventory” means, at any time, all of the Borrower’s
and CRG’s Inventory except: (1) Inventory which is not owned by the
Borrower or CRG free and clear of all security interests, liens,
encumbrances, and claims of third parties; (2) Inventory which the
Bank, in its sole discretion, deems to be obsolete, unsalable,
damaged, defective, or unfit for further processing; (3) Work in
process, (4) Inventory consisting of used modular or manufactured
homes, and (5) Inventory consisting of furniture. For the purpose of
this Agreement and the calculation of the Borrowing Base, the value
of Borrower’s Eligible Inventory shall be reduced by the sum of (i)
any general ledger reserves for raw materials, (ii) any general
ledger reserves for finished goods, (iii) any allowance for volume
discounts or rebates for finished goods, plus (iv) any allowance for
interest reimbursement payments to retailers of Borrower’s Inventory.
	 
	 	2.10	 	“Inventory” means all of the Borrower’s and CRG’s raw
materials, work in process, finished goods, merchandise, parts and
supplies, of every kind and description, and goods held for sale or
lease or furnished under contracts of service in which the Borrower
or CRG now has or hereafter acquires any right, whether held by the
Borrower, CRG, or others, and all documents of title, warehouse
receipts, bills of lading, and all other documents of every type
covering all or any part of the foregoing. Inventory includes
inventory temporarily out of the Borrower’s or CRG’s custody or
possession and all returns on Accounts.
	 
	 	2.11	 	“Intangible Assets” means the aggregate amount of all assets
classified as intangible assets under generally accepted accounting
principles, including, without limitation, goodwill, trademarks,
patents, copyrights, organization expenses, franchises, licenses,
trade names, brand names, mailing lists, catalogs, excess of cost
over book value of assets acquired, and bond discount and
underwriting expenses.

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	 	2.12	 	“Subordinated Debt” means debt subordinated to the Bank in
manner and by agreement reasonably satisfactory to the Bank.
	 
	 	2.13	 	“Tangible Net Worth” means total assets less the sum of
Intangible Assets, and total liabilities.

	3.	 	Conditions Precedent.

	 	3.1	 	Conditions Precedent to Initial Extension of Credit. Before the
first extension of credit governed by this agreement, whether by
disbursement of a loan, issuance of a letter of credit, or otherwise,
the Borrower shall deliver to the Bank, in form and substance
satisfactory to the Bank:

	 	 	 	A. Loan Documents. The Notes, and as applicable, the letter of credit
applications, the security agreements, the pledge agreements,
financing statements, mortgages or deeds of trust, the guaranties,
the subordination agreements, and any other loan documents which the
Bank may reasonably require to give effect to the transactions
described in this agreement;
	 
	 	 	 	B. Evidence of Completed Distribution, Due Organization and Good
Standing. Evidence, satisfactory to the Bank, of (i) the approval
from the Securities and Exchange Commission (the “SEC”) and the
completion of the distribution of the shares of stock of Borrower by
Centex Corporation to the current shareholders of Centex Corporation
in accordance with the terms of that certain Form 10 Registration
Statement filed by Borrower with the SEC on April 23, 2003, and (ii)
the due organization and good standing of the Borrower and every
other business entity that is a party to this agreement or any other
loan document required by this agreement;
	 
	 	 	 	C. Evidence of Authority to Enter into Loan Documents. Evidence that
(i) each party to this agreement and any other loan document required
by this agreement is authorized to enter into the transactions
described in this agreement and the other loan documents, and (ii)
the person signing on behalf of each such party is authorized to do
so; and
	 
	 	 	 	D. Fees. Payment of the following fees, all of which the Borrower
acknowledges have been earned by the Bank: commitment fee $37,500.00.
	 
	 	 	 	E. Lien Priority. Evidence, satisfactory to the Bank, that Bank has a
first and prior lien on all collateral for the Credit Facilities,
including, without limitation, all Accounts and Inventory (as such
terms are defined under the Uniform Commercial Code of Arizona, as in
effect from time to time) of Borrower and CRG Holdings, LLC. Such
evidence to include (i) termination statements relating to financing
statements listing other creditors of Borrower or CRG Holdings, LLC
as secured parties, (ii) lien subordination agreements from other
creditors of Borrower or CRG Holdings, LLC, and (iii) landlord lien
waivers executed by all lessors of leased property where any of the
collateral may be located from time to time.
	 
	 	 	 	Notwithstanding anything contained in this Agreement to the contrary,
the failure of the Borrower to satisfy all the conditions precedent
to the initial extension of credit set forth above on or before that
date which is sixty (60) days from the date of this Agreement shall
constitute a default by Borrower under this Agreement.

	 	3.2	 	Conditions Precedent to Each Extension of Credit. Before any
extension of credit governed by this agreement, whether by
disbursement of a loan, issuance of a letter of credit or otherwise,
the following conditions must be satisfied:

	 	 	 	A. Representations. The representations of the Borrower under this
agreement and under any other document or agreement executed by
Borrower in connection with the Credit Facilities are true in all
material respects on and as of the date of the extension of credit;
	 
	 	 	 	B. No Event of Default. No event of default has occurred in any
provision of this agreement, the Notes or any agreement related to
the Credit Facilities and is continuing or would result from the
extension of credit, and no event has occurred which would constitute
the occurrence of any such event of default but for the lapse of time
until the end of any grace or cure period; and
	 
	 	 	 	C. Additional Approvals, Opinions, and Documents. The Bank has
received any other approvals, opinions and documents as it may
reasonably request.

	4.	 	Affirmative Covenants. The Borrower shall:

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	 	4.1	 	Insurance. Maintain insurance with financially sound and
reputable insurers covering its properties and business against those
casualties and contingencies and in the types and amounts as are
customary for companies of similar size and engaged in a similar line
of business.

	 	4.2	 	Existence. Maintain its existence and business operations as
presently in effect in accordance in all material respects with all
applicable laws and regulations, pay its debts and obligations when
due under normal terms, and pay on or before their due date, all
taxes, assessments, fees and other governmental monetary obligations,
except as they may be contested in good faith by proper proceedings
if they have been properly reflected on its books.

	 	4.3	 	Financial Records. Maintain proper books and records of
account, in accordance with generally accepted accounting principles,
and consistent with financial statements previously submitted to the
Bank.

	 	4.4	 	Inspection. Permit the Bank upon reasonable notice to inspect
and copy the Borrower’s business records at such times and at such
intervals as the Bank may reasonably require, and to discuss during
reasonable business hours the Borrower’s business, operations, and
financial condition with the Borrower’s officers and accountants.

	 	4.5	 	Financial Reports. Furnish to the Bank whatever information,
books and records the Bank may reasonably request, including at a
minimum:

	 	 	 	A. Within thirty (30) days after and as of the end of each calendar
month, the following lists, each certified as correct by one of its
authorized agents:

		
	 	     (1) a list of accounts receivable, aged from date of invoice, and
	 
	 	     (2) a list of accounts payable, aged from date of receipt.

	 	 	 	B. Within thirty (30) days after each monthly period, a borrowing
base certificate, in the form of Exhibit A attached hereto, along
with such supporting documentation as the Bank may request.
	 
	 	 	 	C. Via either the EDGAR System or its Home Page, within one hundred
twenty (120) days after the filing of its Annual Report on Form 10-K
for the fiscal year then ended with the Securities and Exchange
Commission, but no event later than one hundred fifty (150) days
after the end of such fiscal year, the financial statements for such
fiscal year as contained in such Annual Report on Form 10-K and, as
soon as it shall become available, the annual report to shareholders
of the Borrower for the fiscal year then ended.
	 
	 	 	 	D. For each fiscal quarter other than the last fiscal quarter of each
fiscal year, via either the EDGAR System or its Home Page, within
forty-five (45) days after the filing of its Quarterly Report on Form
10-Q for the fiscal quarter then ended with the Securities and
Exchange Commission, but no event later than ninety (90) days after
the end of such fiscal quarter, copies of the financial statements
for such fiscal quarter as contained in such Quarterly Report on Form
10-Q.
	 
	 	 	 	E. Via either the EDGAR System or its Home Page, promptly after the
same become publicly available, copies of all periodic and other
reports, proxy statements and other materials filed by the Borrower
or any subsidiary with the Securities and Exchange Commission or any
governmental authority succeeding to any or all of the functions of
said Commission.
	 
	 	 	 	If for any reason the EDGAR System and/or its Home Page are not
available to the Borrower as is required for making available the
financial statements or reports referred to above, the Borrower shall
then furnish a copy of such financial statements or reports to the
Bank.
	 
	 	 	 	For the purposes of this section, “EDGAR System” means the Electronic
Data Gathering Analysis and Retrieval System owned and operated by
the United States Securities and Exchange Commission or any
replacement system, and “Home Page” means the Borrower’s corporate
home page on the World Wide Web accessible through the Internet via
the universal resource locator (URL) identified as “www.cavco.com” or
such other universal resource locator that the Borrower shall
designate in writing to the Bank as its corporate home page on the
World Wide Web.

	 	4.6	 	Notices of Claims, Litigation, Defaults, etc. Promptly inform

the Bank in writing of (1) all existing and all threatened
litigation, claims, investigations, administrative proceedings and
similar actions affecting the Borrower which could materially and
adversely affect the financial condition of the Borrower; (2) the
occurrence of any event which gives rise to the Bank’s option to
terminate the Credit Facilities; (3) the institution of steps by the
Borrower to withdraw from, or the institution of any steps to
terminate, any employee benefit plan as to which the Borrower may
have liability; (4) any

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	 	 	 	additions to the locations or changes in the locations of the
Borrower’s businesses; and (5) any alleged breach of any provision of
this agreement or of any other agreement related to the Credit
Facilities by the Bank.
	 
	 	4.7	 	Additional Information. Furnish such additional information and
statements respecting the Borrower or CRG or their respective
businesses, as the Bank may reasonably request, from time to time.
	 
	 	4.8	 	Insurance Reports. Furnish to the Bank, upon request of the
Bank, reports on each existing insurance policy showing such
information as the Bank may reasonably request.
	 
	 	4.9	 	Other Agreements. Comply with all terms and conditions of all
other agreements, whether now or hereafter existing, between the
Borrower and any other party unless the failure to so comply would
not have a material adverse effect on the financial condition of the
Borrower or its ability to repay the Credit Facilities.
	 
	 	4.10	 	Title to Assets and Property. Maintain good and marketable
title to all of the Borrower’s assets and properties, except for
assets or properties that are obsolete or have been disposed of in
the ordinary course of business.
	 
	 	4.11	 	Additional Assurances. Make, execute and deliver to the Bank
such other agreements as the Bank may reasonably request to evidence
the Credit Facilities and to perfect any security interests required
thereunder.
	 
	 	4.12	 	Employee Benefit Plans. Maintain each employee benefit plan as
to which the Borrower may have any liability, in compliance in all
material respects with all applicable requirements of law and
regulations.
	 
	 	4.13	 	Compliance Certificates. Provide the Bank, within forty-five
(45) days after the end of each fiscal quarter, with a certificate
executed by the Borrower’s chief financial officer, or other officer
or a person acceptable to the Bank, certifying that, as of the date
of the certificate, no event of default exists under any provision of
this agreement.

	5.	 	Negative Covenants.

	 	5.1	 	Unless otherwise noted, the financial requirements set forth in
this section will be computed in accordance with generally accepted
accounting principles applied on a basis consistent with financial
statements previously submitted by the Borrower to the Bank.
	 
	 	5.2	 	Without the written consent of the Bank, the Borrower will not:

	 	 	 	A. Dividends. Acquire or retire any of its shares of capital stock,
or declare or pay dividends or make any other distributions upon any
of its shares of capital stock, except in the absence of the
occurrence of any default, dividends in its capital stock.
	 
	 	 	 	B. Debt. Incur, or permit to remain outstanding, debt for borrowed
money or installment obligations, except debt reflected in the latest
financial statement of the Borrower furnished to the Bank prior to
execution of this agreement and not to be paid with proceeds of
borrowings under the Credit Facilities, purchase money loans from
others for the acquisition of equipment up to $1,200,000.00 in the
aggregate during any fiscal year. For purposes of this covenant, the
sale of any account receivable is the incurring of debt for borrowed
money.
	 
	 	 	 	C. Guaranties. Guarantee or otherwise become or remain secondarily
liable on the undertaking of another, except for endorsement of
drafts for deposit and collection in the ordinary course of business
and guaranties executed in connection with repurchase agreements for
inventory entered into in the normal course of business.
	 
	 	 	 	D. Liens. Create or permit to exist any lien on any of its property,
real or personal, except: existing liens described in Schedule I;
liens to the Bank; and the liens described on Schedule II.
	 
	 	 	 	E. Use of Proceeds. Use, or permit any proceeds of the Credit
Facilities to be used, directly or indirectly, for the purpose of
“purchasing or carrying any margin stock” within the meaning of
Federal Reserve Board Regulation U. At the Bank’s request, the
Borrower will furnish a completed Federal Reserve Board Form U-1.
	 
	 	 	 	F. Continuity of Operations. (1) Engage in any business activities
substantially different from those in which the Borrower is presently
engaged; (2) cease operations, liquidate, merge, acquire or
consolidate with any other entity, change its name, dissolve, or sell
any assets out of the ordinary course of business; or (3) enter into
any arrangement with any person providing for the leasing by the
Borrower or any subsidiary of real or personal property which has
been sold or transferred by the Borrower or subsidiary to such
person.

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	 	 	 	G. Limitation on Negative Pledge Clauses. Enter into any agreement
with any person other than the Bank which prohibits or limits the
ability of the Borrower or any of its subsidiaries to create or
permit to exist any lien on any of its property, assets or revenues,
whether now owned or hereafter acquired, except for liens permitted
by Section 5.2D.
	 
	 	 	 	H. Conflicting Agreements. Enter into any agreement containing any
provision which would be violated or breached by the performance of
the Borrower’s obligations under this agreement.
	 
	 	 	 	I. Investments. Invest in, or purchase, create, form or acquire any
interest in, any other enterprise or entity.
	 
	 	 	 	J. Leverage Ratio. Permit at any time, its ratio of total liabilities
less deferred taxes to Tangible Net Worth to be greater than 2.00 to
1.00.
	 
	 	 	 	K. Capital Expenditures. Acquire, whether by purchase or capital
lease, fixed assets if the aggregate purchase price of such assets to
the Borrower, and all subsidiaries if any, shall exceed $1,500,000.00
in the aggregate in any one fiscal year.
	 
	 	 	 	L. Debt Service Coverage Ratio. Permit at any time, its ratio of net
income before taxes, plus interest expense, plus depreciation
expense, plus amortization expense, minus Capital Expenditures, minus
actual taxes paid, for the twelve month period then ending to current
portion of long term debt and capitalized lease payments made, plus
interest expense, to be less than 1.50 to 1.00.

	6.	 	Representations.

	 	6.1	 	Representations by the Borrower. The Borrower represents that:
(a) the execution and delivery of this agreement and the Notes, and
the performance of the obligations they impose, do not violate any
law, conflict with any agreement by which it is bound, or require the
consent or approval of any governmental authority or other third
party, (b) this agreement and the Notes are valid and binding
agreements, enforceable according to their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar
laws or general principles of equity (c) all balance sheets, profit
and loss statements, and other financial statements and other
information furnished by Borrower to the Bank in connection with the
Liabilities are accurate in all material respects and fairly reflect
the financial condition of the organizations and persons to which
they apply on their effective dates, including contingent liabilities
of every type, in accordance with generally accepted accounting
principles, which financial condition has not changed materially and
adversely since those dates, (d) no litigation, claim, investigation,
administrative proceeding or similar action (including those for
unpaid taxes) against the Borrower is pending or threatened, and no
other event has occurred, which may in any one case or in the
aggregate materially adversely affect the Borrower’s financial
condition and properties, other than litigation, claims, or other
events, if any, that have been disclosed to and acknowledged by the
Bank in writing, (e) all of the Borrower’s tax returns and reports
that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in
full, except those presently being contested by the Borrower in good
faith and for which adequate reserves have been provided, or those
the failure to file or pay could not reasonably be expected to have a
material adverse effect on the financial condition of the Borrower or
its ability to repay the Credit Facilities (f) the Borrower is not a
“holding company” or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940,
as amended, (g) the Borrower is not a “holding company”, or a
“subsidiary company” of a “holding company” or an “affiliate” of a
“holding company” or of a “subsidiary company” of a “holding company”
within the meaning of the Public Utility Holding Company Act of 1935,
as amended, (h) there are no defenses or counterclaims, offsets or
adverse claims, demands or actions of any kind, personal or
otherwise, that the Borrower could assert with respect to this
agreement or the Credit Facilities, (i) the Borrower owns, or is
licensed to use, all trademarks, trade names, copyrights, technology,
know-how and processes necessary for the conduct of its business as
currently conducted other than those the failure to own or be
licensed to use could not reasonably be expected to have a material
adverse effect on the financial condition of the Borrower or its
ability to repay the Credit Facilities, and (j) no part of the
proceeds of the Credit Facilities will be used for “purchasing” or
“carrying” any “margin stock” within the respective meanings of each
of the quoted terms under Regulation U of the Board of Governors of
the Federal Reserve System of the United States (the “Board”) as now
and from time to time hereafter in effect or for any purpose which
violates the provisions of any regulations of the Board. Borrower
further represents that: (a) it is duly organized, existing and in
good standing pursuant to the laws under which it is organized, and
(b) the execution and delivery of this agreement and the Notes and
the performance of the obligations they impose (i) are within its
powers, (ii) have been duly authorized by all necessary action of its
governing body, and (iii) do not contravene the terms of its articles
of incorporation or organization, its by-laws, or any partnership,
operating or other agreement governing its affairs.
	 
	 	6.2	 	Representations Regarding Assets. With respect to any asset of
the Borrower utilized in the calculation of the Borrowing Base set
forth in this agreement, the Borrower represents and warrants to the
Bank: (1) each asset represented by the Borrower to be eligible for
Borrowing Base purposes of this agreement conforms to the eligibility

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	 	 	 	definitions set forth in this agreement; (2) all asset values
delivered to the Bank will be true and correct, subject to immaterial
variance; and be determined on a consistent accounting basis; (3)
except as agreed to the contrary by the Bank in writing, each asset
is now and at all times hereafter while utilized in the calculation
of Borrowing Base will be in the Borrower’s physical possession and
shall not be held by others on consignment, sale or approval, or sale
or return; (4) except as reflected in schedules delivered to the
Bank, each asset is now and at all times hereafter while utilized in
the calculation of Borrowing Base will be of good and merchantable
quality, free from defects; (5) each asset is not now and will not at
any time hereafter while utilized in the calculation of Borrowing
Base be stored with a bailee, warehouseman, or similar party without
the Bank’s prior written consent, and in such event, the Borrower
will concurrently at the time of bailment cause any such bailee,
warehouseman, or similar party to issue and deliver to the Bank,
warehouseman receipts in the Bank’s name evidencing the storage of
the assets; and (6) the Bank, its assigns, or agents shall have the
right at any time and at the Borrower’s expense to inspect, examine
and audit the Borrower’s records, and if Accounts are included in the
calculation of Borrowing Base, confirm with Account Debtors the
accuracy of such Accounts, and inspect and examine the assets and to
check and test the same as to quality, quantity, value, and
condition.

	7.	 	Default/Remedies. If any of the Credit Facilities are not paid at
maturity, whether by acceleration or otherwise, or if an event of default
by Borrower or any Guarantor occurs under the terms of this agreement, the
Notes or any agreement related to the Credit Facilities, then the Bank
shall have all of the rights and remedies provided by any law or
agreement.
	 
	8.	 	Miscellaneous.

	 	8.1	 	Notice. Any notices and demands under or related to this
document shall be in writing and delivered to the intended party at
its address stated herein, and if to the Bank, at its main office if
no other address of the Bank is specified herein, by one of the
following means: (a) by hand, (b) by a nationally recognized
overnight courier service, or (c) by certified mail, postage prepaid,
with return receipt requested. Notice shall be deemed given: (a) upon
receipt if delivered by hand, (b) on the Delivery Day after the day
of deposit with a nationally recognized courier service, or (c) on
the third Delivery Day after the notice is deposited in the mail.
“Delivery Day” means a day other than a Saturday, a Sunday or any
other day on which national banking associations are authorized to be
closed. Any party may change its address for purposes of the receipt
of notices and demands by giving notice of such change in the manner
provided in this provision.
	 
	 	8.2	 	No Waiver. No delay on the part of the Bank in the exercise of
any right or remedy waives that right or remedy. No single or partial
exercise by the Bank of any right or remedy precludes any other
future exercise of it or the exercise of any other right or remedy.
No waiver or indulgence by the Bank of any default is effective
unless it is in writing and signed by the Bank, nor shall a waiver on
one occasion bar or waive that right on any future occasion.
	 
	 	8.3	 	Integration. This agreement, the Notes, and any agreement
related to the Credit Facilities embody the entire agreement and
understanding between the Borrower and the Bank and supersede all
prior agreements and understandings relating to their subject matter.
If any one or more of the obligations of the Borrower under this
agreement or the Notes is invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the
remaining obligations of the Borrower shall not in any way be
affected or impaired, and the invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity,
legality or enforceability of the obligations of the Borrower under
this agreement or the Notes in any other jurisdiction.
	 
	 	8.4	 	Governing Law and Venue. This agreement is delivered in the
State of Arizona and governed by Arizona law (without giving effect
to its laws of conflicts). The Borrower agrees that any legal action
or proceeding with respect to any of its obligations under this
agreement may be brought by the Bank in any state or federal court
located in the State of Arizona, as the Bank in its sole discretion
may elect. By the execution and delivery of this agreement, the
Borrower submits to and accepts, for itself and in respect of its
property, generally and unconditionally, the non-exclusive
jurisdiction of those courts. The Borrower waives any claim that the
State of Arizona is not a convenient forum or the proper venue for
any such suit, action or proceeding.
	 
	 	8.5	 	Captions. Section headings are for convenience of reference
only and do not affect the interpretation of this agreement.
	 
	 	8.6	 	Survival of Representations and Warranties. The Borrower
understands and agrees that in extending the Credit Facilities, the
Bank is relying on all representations, warranties, and covenants
made by the Borrower in this agreement or in any certificate or other
instrument delivered by the Borrower to the Bank under this
agreement. The Borrower further agrees that regardless of any
investigation made by the Bank, all such representations, warranties
and covenants will survive the making of the Credit Facilities and
delivery to the Bank of this agreement, shall be continuing in
nature, and shall remain in full force and effect until such time as
the Borrower’s indebtedness to the Bank shall be paid in full.

7

 

	 	8.7	 	Non-Liability of the Bank. The relationship between the
Borrower and the Bank created by this agreement is strictly a debtor
and creditor relationship and not fiduciary in nature, nor is the
relationship to be construed as creating any partnership or joint
venture between the Bank and the Borrower. The Borrower is exercising
the Borrower’s own judgement with respect to the Borrower’s business.
All information supplied to the Bank is for the Bank’s protection
only and no other party is entitled to rely on such information.
There is no duty for Bank to review, inspect, supervise or inform the
Borrower of any matter with respect to the Borrower’s business. The
Bank and the Borrower intend that the Bank may reasonably rely on all
information supplied by the Borrower to the Bank, together with all
representations and warranties given by the Borrower to the Bank,
without investigation or confirmation by the Bank and that any
investigation or failure to investigate will not diminish the Bank’s
right to so rely.
	 
	 	8.8	 	Indemnification of the Bank. The Borrower agrees to indemnify,
defend and hold the Bank and BANK ONE CORPORATION, or any of its
subsidiaries or affiliates or their successors, and each of their
respective shareholders, directors, officers, employees and agents
(collectively, the “Indemnified Persons”) harmless from any and all
obligations, claims, liabilities, losses, damages, penalties, fines,
forfeitures, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature (including, without limitation,
any Indemnified Person’s reasonable attorneys’ fees) (collectively,
the “Claims”) which may be imposed upon, incurred by or assessed
against any Indemnified Person (whether or not caused by any
Indemnified Person’s sole, concurrent, or contributory negligence)
arising out of or relating to this agreement; the exercise of the
rights and remedies granted under this agreement (including, without
limitation, the enforcement of this agreement and the defense of any
Indemnified Person’s action or inaction in connection with this
agreement); and in connection with the Borrower’s failure to perform
all of the Borrower’s obligations under this agreement, except to the
limited extent that the Claims against any such Indemnified Person
are caused by such Indemnified Person’s willful misconduct, bad faith
or gross negligence. The indemnification provided for in this section
shall survive the termination of this agreement and shall extend to
and continue to benefit each individual or entity who is or has at
any time been an Indemnified Person.
	 
	 	 	 	The Borrower’s indemnity obligations under this section shall not in
any way be affected by the presence or absence of covering insurance,
or by the amount of such insurance or by the failure or refusal of
any insurance carrier to perform any obligation on its part under any
insurance policy or policies affecting the Borrower’s assets or the
Borrower’s business activities. Should any Claim be made or brought
against any Indemnified Person by reason of any event as to which the
Borrower’s indemnification obligations apply, then, upon any
Indemnified Person’s demand, the Borrower, at its sole cost and
expense, shall defend such Claim in the Borrower’s name, if
necessary, by the attorneys for the Borrower’s insurance carrier (if
such Claim is covered by insurance), or otherwise by such attorneys
as Borrower shall select, subject to the approval of any Indemnified
Person, which approval shall not be unreasonably withheld. Any
Indemnified Person may also engage its own attorneys at its
reasonable discretion to defend the Borrower and to assist in its
defense and the Borrower agrees to pay the fees and disbursements of
such attorneys.
	 
	 	 	 	Notwithstanding the foregoing or anything else in this agreement or
any other loan document to the contrary, in no event shall Borrower
be liable under this indemnity provision for any lost profits or for
any special, indirect, consequential or punitive damages.
	 
	 	8.9	 	Counterparts. This agreement may be executed in multiple
counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts, taken together, shall constitute
one and the same agreement.
	 
	 	8.10	 	Sole Discretion of the Bank. Whenever the Bank’s consent or
approval is required under this agreement, the decision as to whether
or not to consent or approve shall be in the sole and exclusive
discretion of the Bank and the Bank’s decision shall be final and
conclusive.
	 
	 	8.11	 	Advice of Counsel. The Borrower acknowledges that it has been
advised by counsel, or had the opportunity to be advised by counsel,
in the negotiation, execution and delivery of this agreement and any
documents executed and delivered in connection with the Credit
Facilities.
	 
	 	8.12	 	Recovery of Additional Costs. If the imposition of or any
change in any law, rule, regulation, or guideline, or the
interpretation or application of any thereof by any court or
administrative or governmental authority (including any request or
policy not having the force of law) shall impose, modify, or make
applicable any taxes (except federal, state, or local income or
franchise taxes imposed on the Bank), reserve requirements, capital
adequacy requirements, or other obligations which would (A) increase
the cost to the Bank for extending or maintaining the Credit
Facilities, (B) reduce the amounts payable to the Bank under the
Credit Facilities, or (C) reduce the rate of return on the Bank’s
capital as a consequence of the Bank’s obligations with respect to
the Credit Facilities, then the Borrower agrees to pay the Bank such
additional amounts as will compensate the Bank therefor, within five
(5) days after the Bank’s written demand for

8

 

	 	 	 	such payment. The Bank’s demand shall be accompanied by an
explanation of such imposition or charge and a calculation in
reasonable detail of the additional amounts payable by the Borrower,
which explanation and calculations shall be conclusive in the absence
of manifest error.
	 
	 	8.13	 	Conflicting Terms. If this agreement is inconsistent with any
provision in any agreement related to the Credit Facilities, the Bank
shall determine, in the Bank’s sole and absolute discretion, which of
the provisions shall control any such inconsistency.
	 
	 	8.14	 	Expenses. The Borrower agrees to pay or reimburse the Bank for
all its out-of-pocket costs and expenses and reasonable attorneys’
fees (including the fees of in-house counsel) incurred in connection
with the development, preparation and execution of, and in connection
with the enforcement or preservation of any rights under, this
agreement, any amendment, supplement, or modification thereto, and
any other documents prepared in connection herewith or therewith.
These costs and expenses include without limitation any costs or
expenses incurred by the Bank in any bankruptcy, reorganization,
insolvency or other similar proceeding.

	9.	 	WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER
FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES.
	 
	10.	 	JURY WAIVER. THE BORROWER AND THE BANK HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE
IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE)
BETWEEN THE BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO
THIS DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO
PROVIDE THE FINANCING DESCRIBED HEREIN.

Dated: September 17, 2003

	 	 	 	 	 	 	 	 	 
	Address(es) for Notices:	 	Borrower:	 	 
	 	 	 	 	 	 	 	 	 
	1001 North Central Avenue, Suite 800	 	Cavco Industries, Inc.	 	 
	Phoenix, AZ 85004	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Attn:	 	
Sean K. Nolen
	 	By:
	 	/s/ Sean K. Nolen	 	 
	 	 	 	 	 	 	

	 	 	 	 	 	 	Sean K. Nolen
	 	V.P., C.F.O., Treasurer
	 	 	 	 	 	 	

	 	 	 	 	 	 	Printed Name
	 	Title
	 	 	 	 	 	 	 	 	 
	 	 	 	 	Date:
	 	September 17, 2003	 	 
	 	 	 	 	 	 	 
	Address for Notices:	 	Bank:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	201 N. Central Ave, 21st Floor, AZ1-1178	 	Bank One, NA, with its main office in Chicago, IL
	Phoenix, AZ 85004	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Attn:	 	
Sanat B. Patel
	 	By:
	 	/s/ Sanat B. Patel	 	 
	 	 	 	 	 	 	

	 	 	 	 	 	 	Sanat B. Patel
	 	Vice President
	 	 	 	 	 	 	

	 	 	 	 	 	 	Printed Name
	 	Title
	 	 	 	 	 	 	 	 	 
	 	 	 	 	Date:
	 	September 30, 2003	 	 
	 	 	 	 	 	 	 

9

 

SCHEDULE I

LIENS

[TO BE PROVIDED BY BORROWER]

10

 

SCHEDULE II

LIENS

     (i)  pledges or deposits made to secure payment of worker’s
compensation, or to participate in any fund in connection with worker’s
compensation, unemployment insurance, pensions, or other social security
programs;

     (ii)  good faith pledges or deposits made to secure performance of
bids, tenders, insurance or other contracts (other than for the repayment
of borrowed money), or leases, or to secure statutory obligations, surety
or appeal bonds, or indemnity, performance, or other similar bonds, as all
such liens arise in the ordinary course of business of the Borrower;

     (iii)  encumbrances consisting of zoning restrictions, easements, or
other restrictions on the use of real property, none of which impair in
any material respect the use of such property by the Borrower in the
operation of its business, and none of which is violated by existing or
proposed structures or land use;

     (iv)  liens of landlords or of mortgagees of landlords, arising solely
by operation of law, on fixtures and movable property located on premises
leased in the ordinary course of business;

     (v)  the following, so long as the applicability, amount, or validity
of which is being contested in good faith by appropriate proceedings
diligently conducted, and against which reserves or other provisions
required by generally accepted accounting principles have been made, levy
and execution thereon have been stayed and continue to be stayed, and they
do not in the aggregate materially detract from the value of the property
of Borrower in question, or materially impair the use thereof in the
operation of its business: (A) claims and liens for taxes; (B) claims and
liens upon, and defects of title to, real or personal property, including
any attachment of personal or real property or other legal process prior
to adjudication of a dispute of the merits; and (C) claims and liens of
mechanics, materialmen, warehousemen, carriers, landlords, or other like
liens;

     (vi)  liens in assets or properties acquired with purchase money debt
permitted under 5.2B above and securing only such purchase money debt;

     (vii)  liens on any property or asset of any corporation or other
entity existing at the time such corporation or other entity becomes a
subsidiary or is merged or consolidated with or into Borrower or a
subsidiary or at the time such property or asset is acquired from such
corporation or other entity, other than any lien placed on any property or
asset of such corporation or other entity in contemplation of such
acquisition, merger, or consolidation;

     (viii)  liens for current taxes not yet due; and

     (ix)  any renewals, extensions, or refinancings (but not increase in
the principal amount thereof) of any of the foregoing liens.

11GSI TECHNOLOGIES USA INC.

                                                                   April 9, 2003

                                    AGREEMENT
                                    ---------

GSI  makes  the  following offer to MCSi regarding MCSi's proposals for building
digital  signage  networks  for  strategic  customers.

1.-  LICENSE  FEE:
     GSI  commits  to  supplying  licenses  for  the  use  of  its Digital Media
     Logistics  Suite  3.0  software  at  the  price  of US$200 per license (one
                                                                             ---
     license  per  player  and  one  screen  per  player)  +  18%  annually  for
     ---------------------------------------------------
     maintenance  and  support  fees  (regular  industry  standard).

     The  above  mentioned  price is applicable to 12,500 licenses for strategic
     customers  (at  MCSi's  discretion)  over  the  next  24  months.

2.-  TOOLS

     The  Digital  Media  Administrator tool (DMA) and Digital Media Server tool
     (DMS),  as  specified  in the document of GSI Digital Media Logistics Suite
     3.0,  are  included  at  no  extra  charge.

3.-  CONDITIONS  OF  PAYMENT

          -    33.3%  of  contract  value  upon  MCSi  signing a contract with a
               customer.
          -    Remaining  payments  based  on  schedule  deployment,  invoiced
               quarterly.

4.-  TRAINING  AND  SERVICE

     Included in the above mentioned price and fees:

          -    Training  on  the  use of Digital Media Logistics Suite 3.0 for a
               team  of  MCSi  staff  at  the  company's  headquaters.
          -    Standard  Level  3  support.

5.-  ADDITIONAL  WORK  NOT  ITEMIZED  IN  THE  AGREEMENT

     This  agreement  is for delivery of GSI's Digital Media Logistics Suite 3.0
     to  MCSi.
     Any  additional  work  will  be  billed  at  US$1,000  per  day,  e.g.:

          -    Customization  of  the  license  and  development  of  a specific
               solution  for  any  customer.
          -    Or  any  additional  work  directly  with  the  end-users, at the
               request  of  MCSi.

                                        1

                            GSI TECHNOLOGIES USA INC.
    400 ST-JACQUES WEST, SUITE 500, MONTREAL, QUEBEC, CANADA, H2Y 1S1 TEL (514)
                           282-9292 FAX (514) 282-0711
                               WWW.GSITECHUSA.COM

<PAGE>
6.-  COMMITMENT

     GSI guarantees the above-mentioned price based on MCSi's guidance for up to
     12,500 units for any customer. If the total quantity of licenses were to be
     above  12,500,  the  price per license would then be subject to negotiation
     based  on  the  regular  market  price  charged  by  GSI  (or another price
     negotiated  and  agreed  upon  by  GSI  and  MCSi).

7.-  VALIDITY  OF  AGREEMENT

     This  offer  is valid for a total of 12,500 licences for MCSi customers, at
     MCSi's  discretion,  for  the next 24 months, starting April 15, 2003 until
     April  14,  2005.

------------------------------------             -------------------------------
J.-Michel de Montigny                            Gary C. Quasebarth
Product, sales and marketing Manager             Vice President of Technology
GSI Technologies USA inc.                        Digital Signage Group
                                                 MCSi

N.B. THIS  VERSION REPLACES THE ONE REVISED, AGREED UPON AND INITIALIZED BY
     BOTH  PARTIES  AT  NAB  2003  IN  LAS  VEGAS.

                                        2

                            GSI TECHNOLOGIES USA INC.
    400 ST-JACQUES WEST, SUITE 500, MONTREAL, QUEBEC, CANADA, H2Y 1S1 TEL (514)
                           282-9292 FAX (514) 282-0711
                               WWW.GSITECHUSA.COM

<PAGE>

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