Document:

EXHIBIT 4.1

                    VANDERBILT MORTGAGE AND FINANCE, INC.,
                            AS SELLER AND SERVICER,

                             CLAYTON HOMES, INC.,
                     AS PROVIDER OF THE LIMITED GUARANTEE

                                      and

                        JPMORGAN CHASE BANK, AS TRUSTEE

                        POOLING AND SERVICING AGREEMENT
                           Dated as of July 25, 2002

                         Manufactured Housing Contract
                 Senior/Subordinate Pass-Through Certificates
                                 Series 2002-B

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                                   Table of Contents

                                                                                           Page

                                       Article I

                                      DEFINITIONS

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Section 1.01.  Definitions...................................................................1
Section 1.02.  Determination of Scheduled Payments..........................................31

                                      Article II

   CONVEYANCE OF CONTRACTS; TRUST FUND; PERFECTION OF SECURITY INTEREST; CUSTODY OF CONTRACTS

Section 2.01.  Conveyance of Contracts and Other Rights.....................................32
Section 2.02.  Filing; Name Change or Relocation............................................33
Section 2.03.  Acceptance by Trustee........................................................34
Section 2.04.  Delivery of Land-and-Home Contract Files and Mortgage Loan Files and
               Recordation..................................................................35
Section 2.05.  REMIC Election; Designation of Regular and Residual Interests; Tax Year......36
Section 2.06.  Designation of Startup Day...................................................36
Section 2.07.  REMIC Certificate Maturity Date..............................................36

                                      Article III

                             REPRESENTATIONS AND WARRANTIES

Section 3.01.  Representations and Warranties Regarding Vanderbilt..........................37
Section 3.02.  Representations and Warranties Regarding Each Contract.......................37
Section 3.03.  Representations and Warranties Regarding the Contracts in the Aggregate......40
Section 3.04.  Representations and Warranties Regarding the Contract Files, the
               Land-and-Home Contract Files and the Mortgage Loan Files.....................41
Section 3.05.  Repurchases of Contracts or Substitution of Contracts for Breach of
               Representations and Warranties...............................................42

                                      Article IV

                                   THE CERTIFICATES

Section 4.01.  The Certificates.............................................................46
Section 4.02.  Registration of Transfer and Exchange of Certificates........................47
Section 4.03.  Mutilated, Destroyed, Lost or Stolen Certificate.............................50
Section 4.04.  Persons Deemed Owners........................................................50
Section 4.05.  Appointment of Paying Agent..................................................50
Section 4.06.  Access to List of Certificateholders' Names and Addresses....................51

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Section 4.07.  Authenticating Agents........................................................51
Section 4.08.  Class R Certificate..........................................................51

                                       Article V

                         ADMINISTRATION AND SERVICING OF CONTRACTS

Section 5.01.  Responsibility for Contract Administration and Servicing.....................56
Section 5.02.  Standard of Care.............................................................56
Section 5.03.  Records......................................................................56
Section 5.04.  Inspection...................................................................56
Section 5.05.  Establishment of and Deposits in the Certificate Account.....................57
Section 5.06.  Payment of Taxes.............................................................58
Section 5.07.  Enforcement..................................................................58
Section 5.08.  Transfer of the Certificate Account..........................................59
Section 5.09.  Maintenance of Hazard Insurance Policies.....................................59
Section 5.10.  Fidelity Bond and Errors and Omissions Insurance.............................60
Section 5.11.  Collections under Hazard Insurance Policies; Consent to Transfers of
               Manufactured Homes; Assumption Agreements....................................60
Section 5.12.  Realization upon Defaulted Contracts.........................................61
Section 5.13.  Costs and Expenses...........................................................62
Section 5.14.  Trustee to Cooperate.........................................................62
Section 5.15.  Servicing and Other Compensation.............................................63
Section 5.16.  Custody of Contracts.........................................................63
Section 5.17.  REMIC Compliance.............................................................64
Section 5.18.  Establishment of and Deposits in the Distribution Account....................66
Section 5.19.  Pre-Funding Account..........................................................67
Section 5.20.  Conveyance of the Subsequent Contracts.......................................68

                                        Article VI

            PAYMENTS TO THE CERTIFICATEHOLDERS; WITHDRAWALS FROM CERTIFICATE ACCOUNT

Section 6.01.  Monthly Payments.............................................................72
Section 6.02.  Permitted Withdrawals from the Certificate Account...........................77
Section 6.03.  [Reserved]...................................................................78
Section 6.04.  Monthly Advances by the Servicer.............................................78
Section 6.05.  Limited Guarantee............................................................78
Section 6.06.  Alternate Credit Enhancement.................................................79
Section 6.07.  Calculation of the Remittance Rates with respect to the Floating Rate
               Certificates.................................................................79

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                                        Article VII

                                          REPORTS

Section 7.01.  Monthly Reports..............................................................80
Section 7.02.  Certificate of Servicing Officer.............................................82
Section 7.03.  Other Data and Direction of the Trustee......................................82
Section 7.04.  Annual Statement as to Compliance............................................82
Section 7.05.  Annual Independent Public Accountants' Servicing Report......................82
Section 7.06.  Statements to Certificateholders.............................................83

                                        Article VIII

                           INDEMNITIES; VANDERBILT AND THE SERVICER

Section 8.01.  Liabilities to Obligors......................................................86
Section 8.02.  Tax Indemnification..........................................................86
Section 8.03.  Servicer's Indemnities.......................................................86
Section 8.04.  Operation of Indemnities.....................................................86
Section 8.05.  Merger or Consolidation of Vanderbilt or the Servicer........................87
Section 8.06.  Limitation on Liability of the Servicer and Others...........................87
Section 8.07.  Assignment by Servicer.......................................................87
Section 8.08.  Successor to the Servicer....................................................88

                                         Article IX

                                           DEFAULT

Section 9.01.  Events of Default............................................................90
Section 9.02.  Waiver of Defaults...........................................................91
Section 9.03.  Trustee to Act; Appointment of Successor.....................................91
Section 9.04.  Notification to Certificateholders...........................................91
Section 9.05.  Effect of Transfer...........................................................91
Section 9.06.  Transfer of the Accounts.....................................................92

                                          Article X

                                    CONCERNING THE TRUSTEE

Section 10.01.  Duties of Trustee...........................................................93
Section 10.02.  Certain Matters Affecting the Trustee.......................................94
Section 10.03.  Trustee Not Liable for Certificates or Contracts............................95
Section 10.04.  Trustee May Own Certificates................................................96
Section 10.05.  Servicer to Pay Fees and Expenses of Trustee................................96
Section 10.06.  Eligibility Requirements for Trustee........................................96
Section 10.07.  Resignation and Removal of the Trustee......................................97
Section 10.08.  Successor Trustee...........................................................98

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Section 10.09.  Merger or Consolidation of Trustee..........................................98
Section 10.10.  Appointment of Co-Trustee or Separate Trustee...............................98
Section 10.11.  Appointment of Office or Agency.............................................99
Section 10.12.  Trustee May Enforce Claims Without Possession of Certificates...............99
Section 10.13.  Suits for Enforcement......................................................100
Section 10.14.  Rights of Paying Agent and Certificate Register............................100

                                          Article XI

                                         TERMINATION

Section 11.01.  Termination................................................................101

                                         Article XII

                                   MISCELLANEOUS PROVISIONS

Section 12.01.  Severability of Provisions.................................................104
Section 12.02.  Limitation on Rights of Certificateholders.................................104
Section 12.03.  Acts of Certificateholders.................................................104
Section 12.04.  [Reserved].................................................................105
Section 12.05.  Amendment..................................................................105
Section 12.06.  Recordation of Agreement...................................................107
Section 12.07.  Contribution of Assets.....................................................107
Section 12.08.  Duration of Agreement......................................................107
Section 12.09.  Governing Law..............................................................107
Section 12.10.  Notices....................................................................107
Section 12.11.  Merger and Integration of Documents........................................107
Section 12.12.  Headings...................................................................108
Section 12.13.  Counterparts...............................................................108

TESTIMONIUM

EXHIBIT A-1     -     Contract Schedule
EXHIBIT A-2     -     Form of Custodial Agreement
EXHIBIT B-1     -     Form of Face of Class A Certificate
EXHIBIT B-2     -     Form of Face of Class M-1 Certificate
EXHIBIT C       -     Form of Face of Class B Certificate
EXHIBIT D       -     Form of Face of Class R Certificate
EXHIBIT E       -     Form of Reverse of Certificates
EXHIBIT F       -     Form of Certificate Regarding Substitution of Eligible Substitute
                      Contracts
EXHIBIT G       -     Form of Certificate of Servicing Officer Regarding Monthly Report
EXHIBIT H       -     Form of Transfer Affidavit
EXHIBIT I       -     Form of Investment Letter
EXHIBIT J       -     List of Sellers and Originators of Acquired Contracts

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EXHIBIT K       -     Form of Power of Attorney
EXHIBIT L       -     Form of Limited Power of Attorney
EXHIBIT M       -     Form of Subsequent Transfer Agreement

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                                      v
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     AGREEMENT, dated as of July 25, 2002, among Vanderbilt Mortgage and
Finance, Inc., a corporation organized and existing under the laws of the
State of Tennessee, as Seller and Servicer ("Vanderbilt"), Clayton Homes,
Inc., a corporation organized and existing under the laws of the State of
Delaware, as provider of the Limited Guarantee ("Clayton"), and JPMorgan Chase
Bank, a New York banking corporation, not in its individual capacity but
solely as Trustee (the "Trustee").

     WHEREAS, in the regular course of its business, Vanderbilt originates,
purchases and services manufactured housing installment sales contracts,
installment loan agreements and mortgage loans, which provide for installment
payments by or on behalf of the owner of the manufactured home and grant a
security interest in the related manufactured home (and in addition, in
certain cases, mortgages or deeds of trust on the real estate on which such
manufactured home is located);

     WHEREAS, Vanderbilt and the Trustee wish to set forth the terms and
conditions pursuant to which the "Trust Fund," as hereinafter defined, will
acquire the "Contracts" as hereinafter defined, and Vanderbilt will manage and
service the Contracts;

     NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, Vanderbilt, Clayton and the Trustee agree as
provided herein:

                                   Article I

                                  DEFINITIONS

     Section 1.01. Definitions. Whenever used herein, unless the context
otherwise requires, the following words and phrases shall have the following
meanings:

     ACQUIRED CONTRACTS: 5,233 Initial Contracts having an aggregate principal
balance as of the Cut-off Date of approximately $203,678,095.42, which
Vanderbilt purchased from the sellers listed on Exhibit J, all of which
Initial Contracts were originated by the Originators listed in Exhibit J
hereto.

     ACTUARIAL CONTRACT: Any Contract pursuant to which the portion of any
scheduled payment allocable to interest is calculated on the basis that each
monthly payment is applied on its Due Date, regardless of when it is actually
made.

     ADJUSTABLE RATE CONTRACT: Each Contract sold to the Trust which bears
interest at a variable rate.

     AFFILIATE: As to any specified Person, any other Person controlling or
controlled by or under common control with such specified Person. For the
purposes of this definition, "controls," when used with respect to any
specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" or
"controlled" have meanings correlative to the foregoing.

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     AGGREGATE INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Remittance
Date, an amount equal to the sum of the Class A-1 Interest Formula
Distribution Amount, Class A-2 Interest Formula Distribution Amount, Class A-3
Interest Formula Distribution Amount, Class A-4 Interest Formula Distribution
Amount, Class A-5 Interest Formula Distribution Amount, Class M-1 Interest
Formula Distribution Amount, Class B-1 Interest Formula Distribution Amount
and Class B-2 Interest Formula Distribution Amount.

     AGGREGATE NET LIQUIDATION LOSSES: With respect to the time of reference
thereto, the aggregate of the amounts by which (i) the outstanding principal
balance of each Contract that, during such time of reference, had become a
Liquidated Contract, plus accrued and unpaid interest thereon to the Due Date
for such Contract in the Due Period in which such Contract became a Liquidated
Contract, exceeds (ii) the Net Liquidation Proceeds for such Contract.

     AGREEMENT: This Pooling and Servicing Agreement and all amendments hereof
and supplements hereto.

     AMORTIZATION SCHEDULE: With respect to any Contract, the amortization
schedule for such Contract at the time of reference thereto after adjustments
for previous Partial Prepayments but without giving effect to any adjustments
by reason of the bankruptcy of the Obligor or any similar proceeding or
moratorium or any waiver, extension or grace period.

     ANNUAL PERCENTAGE RATE OR APR: As to any Contract and any time, the per
annum rate of interest then being borne by such Contract, as set forth on the
face thereof.

     APPLICANTS: As defined in Section 4.06.

     APPRAISED VALUE: With respect to any Manufactured Home, the value of such
Manufactured Home as determined by a professional appraiser or an employee of
the Servicer who, as part of such employment, regularly appraises manufactured
housing units.

     AUTHENTICATING AGENT: An authenticating agent appointed pursuant to
Section 4.07.

     AVAILABLE DISTRIBUTION AMOUNT: As to any Remittance Date, (a) the sum of
(i) the amount on deposit in the Certificate Account as of the end of the Due
Period ending immediately prior to such Remittance Date, (ii) any deposit to
the Certificate Account for such Remittance Date from the Pre-Funding Account
and (iii) the Monthly Advance with respect to the Contracts made in respect of
such Remittance Date, reduced by (b) the sum of (i) scheduled payments
deposited therein of principal and interest for Contracts due after such Due
Period and (ii) amounts permitted to be withdrawn by the Servicer from the
Certificate Account pursuant to clauses (i) through (v), inclusive, and (vii)
of Section 6.02 and (iii) all Interest Deficiency Withdrawals, if any, made by
the Servicer with respect to the preceding Remittance Date pursuant to Section
6.02(ix).

     AVAILABLE FUNDS SHORTFALL: As to any Remittance Date, the amount, if any,
by which the Available Distribution Amount is less than the amount required to
be distributed on

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the Certificates on such Remittance Date pursuant to clauses A(i) through (x)
or clauses B(i) through (x), as applicable, of Section 6.01(a).

     AVERAGE SIXTY-DAY DELINQUENCY RATIO: As to any Remittance Date, the
arithmetic average of the Sixty-Day Delinquency Ratios for such Remittance
Date and the two preceding Remittance Dates. The "Sixty-Day Delinquency Ratio"
for a Remittance Date is the percentage derived from the fraction, the
numerator of which is the aggregate of the outstanding principal balances (as
of the end of the preceding Due Period) of all Contracts (including Contracts
in respect of which the related Manufactured Home has been repossessed but not
yet disposed of) as to which a scheduled monthly payment thereon (without
giving effect to any adjustments thereto by reason of a bankruptcy or similar
proceeding of the Obligor or any extension or modification granted to such
Obligor) is delinquent 60 days or more as of the end of the related Due Period
and the denominator of which is the Pool Scheduled Principal Balance for such
Remittance Date.

     BI-WEEKLY CONTRACT: Any Contract pursuant to which the scheduled level
payment of interest and principal is due every 14 days.

     BOOK-ENTRY CERTIFICATE: Any Certificate registered in the name of the
Depository or its nominee ownership of which is reflected on the books of the
Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the
rules of such Depository).

     BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or (ii) a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.

     BUY-DOWN LOAN: A Contract on which the obligor has paid a fee at the time
of origination to reduce the periodic interest rate.

     CERTIFICATE: A Certificate for Manufactured Housing Contract
Senior/Subordinate Pass-Through Certificates, Series 2002-B, executed,
countersigned and delivered by the Trustee substantially in the form of
Exhibits B-1, B-2, C or D and E.

     CERTIFICATES: The Class A-1F Certificates, Class A-1V Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class M-1 Certificates, Class B-1 Certificates and Class B-2
Certificates.

     CERTIFICATE ACCOUNT: The custodial account or accounts created and
maintained pursuant to Section 5.05.

     CERTIFICATEHOLDER or HOLDER: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purposes
of giving any consent, waiver, request or demand pursuant to this Agreement,
any Certificate registered in the name of Vanderbilt, the Servicer or any
Person actually known to a Responsible Officer of the Trustee to be an
Affiliate of the Servicer and any Certificate to the extent that, to the
actual knowledge of a Responsible Officer of the Trustee, the Servicer or any
Affiliate of the Servicer is the Certificate Owner shall be deemed not to be
outstanding and the Percentage Interest or Fractional Interest,

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as the case may be, evidenced thereby shall not be taken into account in
determining whether the requisite amount of Percentage Interests or Fractional
Interests necessary to effect any such consent, waiver, request or demand has
been obtained, unless, in the case of the Senior Certificates, all such
Certificates are held by such Persons or, in the case of the Subordinate
Certificates, all such Certificates and all Senior Certificates are held by
such Persons, or such Certificates have been fully paid.

     CERTIFICATE OWNER: With respect to a Certificate, the Person who is the
beneficial owner of a Book-Entry Certificate.

     CERTIFICATE REGISTER: The register maintained pursuant to Section 4.02.

     CERTIFICATE REGISTRAR: The Trustee, or the agent appointed pursuant to
Section 4.02(a).

     CLASS: Pertaining to Class A-1F Certificates, Class A-1V Certificates,
Class A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class
A-5 Certificates, Class M-1 Certificates, Class B-1 Certificates or Class B-2
Certificates, as the case may be.

     CLASS A CERTIFICATE: Any one of the Class A-1F Certificates, Class A-1V
Certificates, Class A-2 Certificates, Class A-3 Certificates, Class A-4
Certificates and Class A-5 Certificates.

     CLASS A DISTRIBUTION AMOUNT: As to any Remittance Date, the sum of the
Class A-1F Distribution Amount, the Class A-1V Distribution Amount, the Class
A-2 Distribution Amount, the Class A-3 Distribution Amount, the Class A-4
Distribution Amount and the Class A-5 Distribution Amount.

     CLASS A PERCENTAGE: As to any Remittance Date, the percentage derived
from the fraction (which shall not be greater than 1) whose numerator is the
Class A Principal Balance immediately prior to such Remittance Date and whose
denominator is the Pool Scheduled Principal Balance immediately prior to such
Remittance Date.

     CLASS A PRINCIPAL BALANCE: As to any Remittance Date, the sum of the
Class A-1F Principal Balance, Class A-1V Principal Balance, Class A-2
Principal Balance, Class A-3 Principal Balance, Class A-4 Principal Balance
and Class A-5 Principal Balance (before giving effect to distributions on the
Certificates on such Remittance Date).

     CLASS A-1 CERTIFICATES: The Class A-1F Certificates and the Class A-1V
Certificates.

     CLASS A-1 INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Remittance
Date, an amount equal to the sum of (a) interest accrued during the related
Interest Period at the Class A-1F Remittance Rate on the Class A-1F Principal
Balance as of such Remittance Date (before giving effect to the distribution
on such Remittance Date), (b) interest accrued during the related Interest
Period at the Class A-1V Remittance Rate on the Class A-1V Principal Balance
as of such Remittance Date (before giving effect to the distribution on such

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Remittance Date), (c) any Class A-1F Unpaid Interest Shortfall and (d) any
Class A-1V Unpaid Interest Shortfall.

     CLASS A-1 PRINCIPAL BALANCE: At any time, the sum of the Class A-1F
Principal Balance and the Class A-1V Principal Balance.

     CLASS A-1F CERTIFICATE: Any one of the Certificates designated Class
A-1F, executed and countersigned as provided herein, substantially in the form
set forth in Exhibits B-1 and E hereto.

     CLASS A-1F DISTRIBUTION AMOUNT: As to any Remittance Date, the aggregate
amount distributed on the Class A-1F Certificates on such Remittance Date
pursuant to Section 6.01.

     CLASS A-1F INTEREST SHORTFALL: As to any Remittance Date, any amount by
which the amount distributed in respect of interest on the Class A-1F
Certificates on such Remittance Date is less than the amount computed pursuant
to clause (a) of the definition of "Class A-1 Interest Formula Distribution
Amount."

     CLASS A-1F PRINCIPAL BALANCE: At any time, the Original Class A-1F
Principal Balance minus the sum of all amounts previously distributed on the
Class A-1F Certificates since the Closing Date pursuant to clauses A(ii) and
B(ii) of Section 6.01(a).

     CLASS A-1F REMITTANCE RATE: As to any Remittance Date, the lesser of (i)
2.53% per annum and (ii) the Weighted Average Net Contract Rate for such
Remittance Date.

     CLASS A-1F UNPAID INTEREST SHORTFALL: As to any Remittance Date, the
amount, if any, by which the aggregate of the Class A-1F Interest Shortfalls
for prior Remittance Dates exceeds the aggregate of the amounts distributed on
the Class A-1F Certificates on prior Remittance Dates in respect of such
Interest Shortfalls, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class A-1F Remittance Rate on the amount thereof
from such prior Remittance Date to such current Remittance Date. For purposes
of determining whether amounts distributable pursuant to clause (c) of the
definition of "Class A-1 Interest Formula Distribution Amount" were actually
distributed on the Class A-1F Certificates on any particular Remittance Date,
the distribution of interest on the Class A-1F Certificates on such Remittance
Date shall be allocated first to the monthly interest requirement calculated
pursuant to clause (a) of such definition and then to any Class A-1F Unpaid
Interest Shortfall pursuant to clause (c) of such definition.

     CLASS A-1V CERTIFICATE: Any one of the Certificates designated Class
A-1V, executed and countersigned as provided herein, substantially in the form
set forth in Exhibits B-1 and E hereto.

     CLASS A-1V DISTRIBUTION AMOUNT: As to any Remittance Date, the aggregate
amount distributed on the Class A-1V Certificates on such Remittance Date
pursuant to Section 6.01.

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     CLASS A-1V INTEREST SHORTFALL: As to any Remittance Date, any amount by
which the amount distributed in respect of interest on the Class A-1V
Certificates on such Remittance Date is less than the amount computed pursuant
to clause (b) of the definition of "Class A-1 Interest Formula Distribution
Amount."

     CLASS A-1V REMITTANCE RATE: As to any Remittance Date, the lesser of (i)
the sum of (a) LIBOR as of the second LIBOR Business Day prior to the first
day of the related Interest Period (or as of the second LIBOR Business Day
prior to the Closing Date in the case of the first Interest Period) per annum
and (b) 0.25% (twenty-five basis points) per annum and (ii) the Weighted
Average Net Contract Rate for such Remittance Date.

     CLASS A-1V PRINCIPAL BALANCE: At any time, the Original Class A-1V
Principal Balance minus the sum of all amounts previously distributed on the
Class A-1V Certificates since the Closing Date pursuant to clauses A(ii) and
B(ii) of Section 6.01(a).

     CLASS A-1V UNPAID INTEREST SHORTFALL: As to any Remittance Date, the
amount, if any, by which the aggregate of the Class A-1V Interest Shortfalls
for prior Remittance Dates exceeds the aggregate of the amounts distributed on
the Class A-1V Certificates on prior Remittance Dates in respect of such
Interest Shortfalls, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class A-1V Remittance Rate on the amount thereof
from such prior Remittance Date to such current Remittance Date. For purposes
of determining whether amounts distributable pursuant to clause (c) of the
definition of "Class A-1 Interest Formula Distribution Amount" were actually
distributed on the Class A-1V Certificates on any particular Remittance Date,
the distribution of interest on the Class A-1V Certificates on such Remittance
Date shall be allocated first to the monthly interest requirement calculated
pursuant to clause (b) of such definition and then to any Class A-1V Unpaid
Interest Shortfall pursuant to clause (d) of such definition.

     CLASS A-2 CERTIFICATE: Any one of the Certificates designated Class A-2,
executed and countersigned as provided herein, substantially in the form set
forth in Exhibits B-1 and E hereto.

     CLASS A-2 DISTRIBUTION AMOUNT: As to any Remittance Date, the aggregate
amount distributed on the Class A-2 Certificates on such Remittance Date
pursuant to Section 6.01.

     CLASS A-2 INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Remittance
Date, an amount equal to the sum of (a) interest accrued during the related
Interest Period at the Class A-2 Remittance Rate on the Class A-2 Principal
Balance as of such Remittance Date (before giving effect to the distribution
on such Remittance Date) and (b) any Class A-2 Unpaid Interest Shortfall.

     CLASS A-2 INTEREST SHORTFALL: As to any Remittance Date, any amount by
which the amount distributed in respect of interest on the Class A-2
Certificates on such Remittance Date is less than the amount computed pursuant
to clause (a) of the definition of "Class A-2 Interest Formula Distribution
Amount."

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     CLASS A-2 PRINCIPAL BALANCE: At any time, the Original Class A-2
Principal Balance minus the sum of all amounts previously distributed on the
Class A-2 Certificates since the Closing Date pursuant to clauses A(ii) and
B(ii) of Section 6.01(a).

     CLASS A-2 REMITTANCE RATE: As to any Remittance Date, the lesser of (i)
3.88% per annum and (ii) the Weighted Average Net Contract Rate for such
Remittance Date.

     CLASS A-2 UNPAID INTEREST SHORTFALL: As to any Remittance Date, the
amount, if any, by which the aggregate of the Class A-2 Interest Shortfalls
for prior Remittance Dates exceeds the aggregate of the amounts distributed on
the Class A-2 Certificates on prior Remittance Dates in respect of such
Interest Shortfalls, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class A-2 Remittance Rate on the amount thereof
from such prior Remittance Date to such current Remittance Date. For purposes
of determining whether amounts distributable pursuant to clause (b) of the
definition of "Class A-2 Interest Formula Distribution Amount" were actually
distributed on the Class A-2 Certificates on any particular Remittance Date,
the distribution of interest on the Class A-2 Certificates on such Remittance
Date shall be allocated first to the monthly interest requirement calculated
pursuant to clause (a) of such definition and then to any Class A-2 Unpaid
Interest Shortfall pursuant to clause (b) of such definition.

     CLASS A-3 CERTIFICATE: Any one of the Certificates designated Class A-3,
executed and countersigned as provided herein, substantially in the form set
forth in Exhibits B-1 and E hereto.

     CLASS A-3 DISTRIBUTION AMOUNT: As to any Remittance Date, the aggregate
amount distributed on the Class A-3 Certificates on such Remittance Date
pursuant to Section 6.01.

     CLASS A-3 INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Remittance
Date, an amount equal to the sum of (a) interest accrued during the related
Interest Period at the Class A-3 Remittance Rate on the Class A-3 Principal
Balance as of such Remittance Date (before giving effect to the distribution
on such Remittance Date) and (b) any Class A-3 Unpaid Interest Shortfall.

     CLASS A-3 INTEREST SHORTFALL: As to any Remittance Date, any amount by
which the amount distributed in respect of interest on the Class A-3
Certificates on such Remittance Date is less than the amount computed pursuant
to clause (a) of the definition of "Class A-3 Interest Formula Distribution
Amount."

     CLASS A-3 PRINCIPAL BALANCE: At any time, the Original Class A-3
Principal Balance minus the sum of all amounts previously distributed on the
Class A-3 Certificates since the Closing Date pursuant to clauses A(ii) and
B(ii) of Section 6.01(a).

     CLASS A-3 REMITTANCE RATE: As to any Remittance Date, the lesser of (i)
4.70% per annum and (ii) the Weighted Average Net Contract Rate for such
Remittance Date.

     CLASS A-3 UNPAID INTEREST SHORTFALL: As to any Remittance Date, the
amount, if any, by which the aggregate of the Class A-3 Interest Shortfalls
for prior Remittance

                                      7
<PAGE>

Dates exceeds the aggregate of the amounts distributed on the Class A-3
Certificates on prior Remittance Dates in respect of such Interest Shortfalls,
plus accrued interest (to the extent payment thereof is legally permissible)
at the Class A-3 Remittance Rate on the amount thereof from such prior
Remittance Date to such current Remittance Date. For purposes of determining
whether amounts distributable pursuant to clause (b) of the definition of
"Class A-3 Interest Formula Distribution Amount" were actually distributed on
the Class A-3 Certificates on any particular Remittance Date, the distribution
of interest on the Class A-3 Certificates on such Remittance Date shall be
allocated first to the monthly interest requirement calculated pursuant to
clause (a) of such definition and then to any Class A-3 Unpaid Interest
Shortfall pursuant to clause (b) of such definition.

     CLASS A-4 CERTIFICATE: Any one of the Certificates designated Class A-4,
executed and countersigned as provided herein, substantially in the form set
forth in Exhibits B-1 and E hereto.

     CLASS A-4 DISTRIBUTION AMOUNT: As to any Remittance Date, the aggregate
amount distributed on the Class A-4 Certificates on such Remittance Date
pursuant to Section 6.01.

     CLASS A-4 INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Remittance
Date, an amount equal to the sum of (a) interest accrued during the related
Interest Period at the Class A-4 Remittance Rate on the Class A-4 Principal
Balance as of such Remittance Date (before giving effect to the distribution
on such Remittance Date) and (b) any Class A-4 Unpaid Interest Shortfall.

     CLASS A-4 INTEREST SHORTFALL: As to any Remittance Date, any amount by
which the amount distributed in respect of interest on the Class A-4
Certificates on such Remittance Date is less than the amount computed pursuant
to clause (a) of the definition of "Class A-4 Interest Formula Distribution
Amount."

     CLASS A-4 PRINCIPAL BALANCE: At any time, the Original Class A-4
Principal Balance minus the sum of all amounts previously distributed on the
Class A-4 Certificates since the Closing Date pursuant to clauses A(ii) and
B(ii) of Section 6.01(a).

     CLASS A-4 REMITTANCE RATE: As to any Remittance Date, the lesser of (i)
5.84% per annum and (ii) the Weighted Average Net Contract Rate for such
Remittance Date.

     CLASS A-4 UNPAID INTEREST SHORTFALL: As to any Remittance Date, the
amount, if any, by which the aggregate of the Class A-4 Interest Shortfalls
for prior Remittance Dates exceeds the aggregate of the amounts distributed on
the Class A-4 Certificates on prior Remittance Dates in respect of such
Interest Shortfalls, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class A-4 Remittance Rate on the amount thereof
from such prior Remittance Date to such current Remittance Date. For purposes
of determining whether amounts distributable pursuant to clause (b) of the
definition of "Class A-4 Interest Formula Distribution Amount" were actually
distributed on the Class A-4 Certificates on any particular Remittance Date,
the distribution of interest on the Class A-4 Certificates on such Remittance
Date shall be allocated first to the monthly interest requirement calculated
pursuant

                                      8
<PAGE>

to clause (a) of such definition and then to any Class A-4 Unpaid Interest
Shortfall pursuant to clause (b) of such definition.

     CLASS A-5 CERTIFICATE: Any one of the Certificates designated Class A-5,
executed and countersigned as provided herein, substantially in the form set
forth in Exhibits B-1 and E hereto.

     CLASS A-5 DISTRIBUTION AMOUNT: As to any Remittance Date, the aggregate
amount distributed on the Class A-5 Certificates on such Remittance Date
pursuant to Section 6.01.

     CLASS A-5 INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Remittance
Date, an amount equal to the sum of (a) interest accrued during the related
Interest Period at the Class A-5 Remittance Rate on the Class A-5 Principal
Balance as of such Remittance Date (before giving effect to the distribution
on such Remittance Date) and (b) any Class A-5 Unpaid Interest Shortfall.

     CLASS A-5 INTEREST SHORTFALL: As to any Remittance Date, any amount by
which the amount distributed in respect of interest on the Class A-5
Certificates on such Remittance Date is less than the amount computed pursuant
to clause (a) of the definition of "Class A-5 Interest Formula Distribution
Amount."

     CLASS A-5 PRINCIPAL BALANCE: At any time, the Original Class A-5
Principal Balance minus the sum of all amounts previously distributed on the
Class A-5 Certificates since the Closing Date pursuant to clauses A(iv) and
B(iv) of Section 6.01(a).

     CLASS A-5 REMITTANCE RATE: As to any Remittance Date, the lesser of (i)
6.34% per annum and (ii) the Weighted Average Net Contract Rate for such
Remittance Date.

     CLASS A-5 UNPAID INTEREST SHORTFALL: As to any Remittance Date, the
amount, if any, by which the aggregate of the Class A-5 Interest Shortfalls
for prior Remittance Dates exceeds the aggregate of the amounts distributed on
the Class A-5 Certificates on prior Remittance Dates in respect of such
Interest Shortfalls, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class A-5 Remittance Rate on the amount thereof
from such prior Remittance Date to such current Remittance Date. For purposes
of determining whether amounts distributable pursuant to clause (b) of the
definition of "Class A-5 Interest Formula Distribution Amount" were actually
distributed on the Class A-5 Certificates on any particular Remittance Date,
the distribution of interest on the Class A-5 Certificates on such Remittance
Date shall be allocated first to the monthly interest requirement calculated
pursuant to clause (a) of such definition and then to any Class A-5 Unpaid
Interest Shortfall pursuant to clause (b) of such definition.

     CLASS B CERTIFICATE: Any one of the Class B-1 Certificates or Class B-2
Certificates, as the case may be.

     CLASS B PERCENTAGE: As to any Remittance Date, 100% minus the sum of the
Class A Percentage and Class M-1 Percentage for such Remittance Date.

                                      9
<PAGE>

     CLASS B PRINCIPAL BALANCE: As to any Remittance Date, the sum of the
Class B-1 Principal Balance and the Class B-2 Principal Balance (before giving
effect to distributions on the Certificates on such Remittance Date).

     CLASS B-1 CERTIFICATE: Any one of the Certificates designated Class B-1,
executed and countersigned as provided herein, substantially in the form set
forth in Exhibits C and E hereto.

     CLASS B-1 DISTRIBUTION AMOUNT: As to any Remittance Date, the aggregate
amount distributed on the Class B-1 Certificates on such Remittance Date
pursuant to Section 6.01.

     CLASS B-1 INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Remittance
Date, an amount equal to the sum of (a) interest accrued during the related
Interest Period at the Class B-1 Remittance Rate on the Class B-1 Principal
Balance as of such Remittance Date (before giving effect to the distribution
on such Remittance Date) and (b) any Class B-1 Unpaid Interest Shortfall.

     CLASS B-1 INTEREST SHORTFALL: As to any Remittance Date, any amount by
which the amount distributed in respect of interest on the Class B-1
Certificates on such Remittance Date is less than the amount computed pursuant
to clause (a) of the definition of "Class B-1 Interest Formula Distribution
Amount."

     CLASS B-1 PRINCIPAL BALANCE: At any time, the Original Class B-1
Principal Balance minus the sum of (i) all amounts previously distributed on
the Class B-1 Certificates pursuant to clauses A(viii) and B(viii) of Section
6.01(a).

     CLASS B-1 REMITTANCE RATE: As to any Remittance Date, the lesser of (i)
5.85% per annum and (ii) the Weighted Average Net Contract Rate for such
Remittance Date.

     CLASS B-1 UNPAID INTEREST SHORTFALL: As to any Remittance Date, the
amount, if any, by which the aggregate of the Class B-1 Interest Shortfalls
for prior Remittance Dates exceeds the aggregate of the amounts distributed on
the Class B-1 Certificates on prior Remittance Dates in respect of such
Interest Shortfalls, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class B-1 Remittance Rate on the amount thereof
from such prior Remittance Date to such current Remittance Date. For purposes
of determining whether amounts distributable pursuant to clause (b) of the
definition of "Class B-1 Interest Formula Distribution Amount" were actually
distributed on the Class B-1 Certificates on any particular Remittance Date,
the distribution of interest on the Class B-1 Certificates on such Remittance
Date shall be allocated first to the monthly interest requirement calculated
pursuant to clause (a) of such definition and then to any Class B-1 Unpaid
Interest Shortfall pursuant to clause (b) of such definition.

     CLASS B-2 CERTIFICATE: Any one of the Certificates designated Class B-2,
executed and countersigned as provided herein, substantially in the form set
forth in Exhibits C-1 and E hereto.

                                      10
<PAGE>

     CLASS B-2 DISTRIBUTION AMOUNT: As to any Remittance Date, the aggregate
amount distributed on the Class B-2 Certificates on such Remittance Date
pursuant to Section 6.01 (excluding the amount of the Guarantee Payment, if
any, with respect to such Remittance Date).

     CLASS B-2 FLOOR AMOUNT: As to any Remittance Date, $10,000,000.

     CLASS B-2 FORMULA DISTRIBUTION AMOUNT: As to any Remittance Date, an
amount equal to the sum of (a) the Class B-2 Interest Formula Distribution
Amount for such Remittance Date and (b) the greater of (x) the Class B-2
Principal Liquidation Loss Amount for such Remittance Date and (y) an amount
equal to the amount, if any, of principal that would be distributable on the
Class B-2 Certificates on such Remittance Date pursuant to clauses (A)(x) or
(B)(x), as the case may be, of Section 6.01(a) hereof, assuming that the
Available Distribution Amount for such Remittance Date remaining after
distribution of the amounts specified in (x) clauses A(i), A(iii), A(v),
A(vii) and A(ix) in the aggregate or (y) clauses B(i), B(iii), B(v), B(vii)
and B(ix) in the aggregate, as the case may be, of Section 6.01(a) hereof is
at least equal to the Formula Principal Distribution Amount for such
Remittance Date.

     CLASS B-2 INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Remittance
Date, an amount equal to the sum of (a) interest accrued during the related
Interest Period at the Class B-2 Remittance Rate on the Class B-2 Principal
Balance as of such Remittance Date (before giving effect to the distribution
on such Remittance Date) and (b) any Class B-2 Unpaid Interest Shortfall.

     CLASS B-2 INTEREST SHORTFALL: As to any Remittance Date, any amount by
which the amount distributed in respect of interest on the Class B-2
Certificates on such Remittance Date is less than the amount computed pursuant
to clause (a) of the definition of "Class B-2 Interest Formula Distribution
Amount."

     CLASS B-2 PRINCIPAL BALANCE: At any time, the Original Class B-2
Principal Balance minus the sum of (i) all amounts previously distributed on
the Class B-2 Certificates pursuant to clauses A(x) and B(x) of Section
6.01(a).

     CLASS B-2 PRINCIPAL LIQUIDATION LOSS AMOUNT: As to any Remittance Date,
the amount, if any, by which the sum of the Class A Principal Balance, the
Class M-1 Principal Balance and the Class B Principal Balance for such
Remittance Date exceeds the Pool Scheduled Principal Balance for such
Remittance Date, in each case, after giving effect to all distributions on the
Certificates on account of principal on such Remittance Date (exclusive of the
Guarantee Payment, if any).

     CLASS B-2 REMITTANCE RATE: As to any Remittance Date, the lesser of (i)
7.84% per annum and (ii) the Weighted Average Net Contract Rate for such
Remittance Date.

     CLASS B-2 UNPAID INTEREST SHORTFALL: As to any Remittance Date, the
amount, if any, by which the aggregate of the Class B-2 Interest Shortfalls
for prior Remittance Dates exceeds the aggregate of the amounts distributed on
the Class B-2 Certificates on prior Remittance Dates in respect of such
Interest Shortfalls, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class B-2 Remittance Rate on the amount thereof

                                      11
<PAGE>

from such prior Remittance Date to such current Remittance Date. For purposes
of determining whether amounts distributable pursuant to clause (b) of the
definition of "Class B-2 Interest Formula Distribution Amount" were actually
distributed on the Class B-2 Certificates on any particular Remittance Date,
the distribution of interest on the Class B-2 Certificates on such Remittance
Date shall be allocated first to the monthly interest requirement calculated
pursuant to clause (a) of such definition and then to any Class B-2 Unpaid
Interest Shortfall pursuant to clause (b) of such definition.

     CLASS M-1 AND CLASS B PRINCIPAL DISTRIBUTION TEST: The Class M-1 and
Class B Principal Distribution Test is met in respect of a Remittance Date if
the following conditions are satisfied:

          (i) such Remittance Date is on or after the September 2007
     Remittance Date;

          (ii) the Class M-1 Percentage plus the Class B Percentage for such
     Remittance Date is equal to at least 22.75%;

          (iii) the Average Sixty-Day Delinquency Ratio for the Contracts as
     of such Remittance Date does not exceed 5.00%;

          (iv) the Cumulative Realized Losses for the Contracts do not exceed
     (x) 7% of the Pool Original Principal Balance, as of the September 2007
     Remittance Date, (y) 8% of the Pool Original Principal Balance as of the
     September 2008 Remittance Date, and (z) 9% of the Pool Original Principal
     Balance as of the September 2009 Remittance Date and thereafter;

          (v) the Current Realized Loss Ratio for the Contracts as of such
     Remittance Date does not exceed 2.75%; and

          (vi) the Class B-2 Principal Balance is not less than the Class B-2
     Floor Amount.

     CLASS M-1 CERTIFICATE: Any one of the Certificates designated Class M-1,
executed and countersigned as provided herein, substantially in the form set
forth in Exhibits B-2 and E hereto.

     CLASS M-1 DISTRIBUTION AMOUNT: As to any Remittance Date, the aggregate
amount distributed on the Class M-1 Certificates on such Remittance Date
pursuant to Section 6.01.

     CLASS M-1 INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Remittance
Date, an amount equal to the sum of (a) interest accrued during the related
Interest Period at the Class M-1 Remittance Rate on the Class M-1 Principal
Balance as of such Remittance Date (before giving effect to the distribution
on such Remittance Date) and (b) any Class M-1 Unpaid Interest Shortfall.

     CLASS M-1 INTEREST SHORTFALL: As to any Remittance Date, any amount by
which the amount distributed on the Class M-1 Certificates on such Remittance
Date is less than

                                      12
<PAGE>

the amount computed pursuant to clause (a) of the definition of "Class M-1
Interest Formula Distribution Amount."

     CLASS M-1 PERCENTAGE: As to any Remittance Date, the percentage derived
from the fraction (which shall not be greater than 1) whose numerator is the
Class M-1 Principal Balance immediately prior to such Remittance Date and
whose denominator is the Pool Scheduled Principal Balance immediately prior to
such Remittance Date.

     CLASS M-1 PRINCIPAL BALANCE: At any time, the Original Class M-1
Principal Balance minus the sum of all amounts previously distributed on the
Class M-1 Certificates since the Closing Date pursuant to clauses A(vi) and
B(vi) of Section 6.01(a).

     CLASS M-1 REMITTANCE RATE: As to any Remittance Date, the lesser of (i)
6.41% per annum and (ii) the Weighted Average Net Contract Rate for such
Remittance Date.

     CLASS M-1 UNPAID INTEREST SHORTFALL: As to any Remittance Date, the
amount, if any, by which the aggregate of the Class M-1 Interest Shortfalls
for prior Remittance Dates exceeds the aggregate of the amounts distributed on
the Class M-1 Certificates on prior Remittance Dates in respect of such
Interest Shortfalls, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class M-1 Remittance Rate on the amount thereof
from such prior Remittance Date to such current Remittance Date. For purposes
of determining whether amounts distributable pursuant to clause (b) of the
definition of "Class M-1 Interest Formula Distribution Amount" were actually
distributed on the Class M-1 Certificates on any particular Remittance Date,
the distribution of interest on the Class M-1 Certificates on such Remittance
Date shall be allocated first to the monthly interest requirement calculated
pursuant to clause (a) of such definition and then to any Class M-1 Unpaid
Interest Shortfall pursuant to clause (b) of such definition.

     CLASS R CERTIFICATE: The Certificate executed and countersigned as
provided herein, substantially in the form set forth in Exhibits D and E
hereto.

     CLASS R DISTRIBUTION AMOUNT: As to any Remittance Date, the aggregate
amount distributed on the Class R Certificate pursuant to Section 6.01.

     CLOSING DATE: August 23, 2002.

     CODE: The Internal Revenue Code of 1986, as amended.

     COMPUTER TAPE: The computer tape generated by Vanderbilt which provides
information relating to the Contracts, and includes the master file and the
history file.

     CONTRACT FILE: As to each Contract, other than a Land-and-Home Contract
or a Mortgage Loan, (a) the original of the Contract (except for fewer than 15
Contracts, in which case the related Contract File shall contain a photocopy
of the original Contract together with a certificate from the Obligor under
such Contract certifying that such photocopy is a true copy of the original
Contract), and, in the case of each Bi-weekly Contract, the original of the
bi-weekly rider for such Contract, and, in the case of each Equity Builder
Contract, the original of the graduated payment rider for such Contract; (b)
the original title document for the related

                                      13
<PAGE>

Manufactured Home of the type issued to lienholders, unless the laws of the
jurisdiction in which the related Manufactured Home is located do not provide
for the issuance of such title documents for such Manufactured Home; (c)
evidence of one or more of the following types of perfection of the security
interest in the related Manufactured Home granted by such Contract, as
appropriate: (1) notation of such security interest on the title document, (2)
a financing statement meeting the requirements of the UCC, with evidence of
recording in the appropriate offices indicated thereon, or (3) such other
evidence of perfection of a security interest in a manufactured housing unit
as is customary in such jurisdiction; (d) the assignment of the Contract
(which may be in a blanket form that also covers other Contracts or contracts)
from the Originator to Vanderbilt; and (e) any extension, modification or
waiver agreement(s). In addition, as to each Land Secured Contract, the
related Mortgage with evidence of recording thereon.

     CONTRACT POOL: The pool of Contracts held in the Trust Fund.

     CONTRACT RATE ADJUSTMENT DATE: As to each Adjustable Rate Contract, a
date on which the related APR may adjust, as provided in such Contract.

     CONTRACT SCHEDULE: The list (as such list may be amended from time to
time) identifying (A) each Initial Contract constituting part of the corpus of
the Trust Fund as of the Cut-off Date, and (B) each Subsequent Contract
transferred to the Trustee or a separate trustee as of the related Subsequent
Transfer Date and which (a) identifies each Contract as either a Fixed Rate
Contract or Adjustable Rate Contract and by contract number and name and
address of the Obligor and (b) sets forth as to each Contract (i) the unpaid
principal balance as of the related Transfer Date determined by giving effect
to payments received prior to the related Transfer Date, (ii) the amount of
each scheduled payment due from the Obligor, and (iii) the APR.

     CONTRACTS: The manufactured housing installment sale contracts and
installment loan agreements, including any Land-and-Home Contracts and any
Mortgage Loans, described in the Contract Schedule and constituting part of
the corpus of the Trust Fund, which Contracts are to be sold and assigned by
Vanderbilt to the Trustee and which are the subject of this Agreement. The
Contracts include, without limitation, all related security interests and any
and all rights to receive payments which are due pursuant thereto from and
after the Cut-off Date, but exclude any rights to receive payments which are
due pursuant thereto prior to the Cut-off Date.

     CORPORATE TRUST OFFICE: The principal office of the Trustee at which at
any particular time its corporate business in connection with this Agreement
shall be administered, which office at the date of execution of this Agreement
is located at 450 West 33rd Street, 14th Floor, New York, NY 10001.

     CUMULATIVE REALIZED LOSSES: As to any Remittance Date, the Aggregate Net
Liquidation Losses for the period from the Cut-off Date through the end of the
related Due Period.

     CURRENT REALIZED LOSS RATIO: As to any Remittance Date, the annualized
percentage derived from the fraction, the numerator of which is the sum of the
Aggregate Net Liquidation Losses for the three preceding Due Periods and the
denominator of which is the

                                      14
<PAGE>

arithmetic average of the Pool Scheduled Principal Balances for such
Remittance Date and the preceding two Remittance Dates.

     CUSTODIAL AGREEMENT: As defined in Section 2.04(a).

     CUT-OFF DATE: July 25, 2002 for the Initial Contracts.

     DEFICIENCY EVENT: The Remittance Date, if any, on which the Pool
Scheduled Principal Balance becomes equal to or less than the Class A
Principal Balance.

     DEFINITIVE CERTIFICATES: Any Certificate evidenced by a physical
certificate and any Certificate issued in lieu of a Book-Entry Certificate
pursuant to Section 4.02(g).

     DEPOSITORY: The initial Depository shall be The Depository Trust Company,
the nominee of which is Cede & Co., as the registered Holder of (i) one Class
A-1F Certificate evidencing $30,000,000 in initial aggregate principal balance
of the Class A-1F Certificates, (ii) one Class A-1V Certificate evidencing
$101,726,000 in initial aggregate principal balance of the Class A-1V
Certificates, (iii) one Class A-2 Certificate evidencing $120,364,000 in
initial aggregate principal balance of the Class A-2 Certificates, (iv) one
Class A-3 Certificate evidencing $64,300,000 in initial aggregate principal
balance of the Class A-3 Certificates, (v) one Class A-4 Certificate
evidencing $96,110,000 in initial aggregate principal balance of the Class A-4
Certificates, (vi) one Class A-5 Certificate evidencing $22,500,000 in initial
aggregate principal balance of the Class A-5 Certificates, (vii) one Class M-1
Certificate evidencing $20,000,000 in initial aggregate principal balance of
the Class M-1 Certificates, (viii) one Class B-1 Certificate evidencing
$18,750,000 in initial aggregate principal balance of the Class B-1
Certificates and (ix) one Class B-2 Certificate evidencing $26,250,000 in
initial aggregate principal balance of the Class B-2 Certificates. The
Depository shall at all times be a "clearing corporation" as defined in
Section 8-102(3) of the Uniform Commercial Code of the State of New York.

     DEPOSITORY PARTICIPANT: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.

     DETERMINATION DATE: The fifth Business Day prior to each Remittance Date.

     DISTRIBUTION ACCOUNT: The custodial account or accounts created and
maintained pursuant to Section 5.18.

     DUE DATE: The day of the month (or in the case of a Bi-weekly Contract or
Semi-Monthly Contract, each day in the month) on which each scheduled payment
of principal and interest is due on a Contract, exclusive of any days of
grace.

     DUE PERIOD: With respect to any Remittance Date, the period commencing on
the 26th day of the second month preceding the month of such Remittance Date
and ending on the 25th day of the month preceding the month of such Remittance
Date.

                                      15
<PAGE>

     ELECTRONIC LEDGER: The electronic master record of Vanderbilt's
manufactured housing installment sales contracts and installment loan
agreements clearly identifying each Contract that is part of the corpus of the
Trust Fund.

     ELIGIBLE ACCOUNT: An account that is either (i) maintained with a
depository institution the commercial paper or short-term unsecured debt
obligations of which is rated "P-1" by Moody's and "A-1+" by S&P, (ii) a trust
account maintained with the Trustee in its corporate trust department or (iii)
otherwise acceptable to the Rating Agencies, as evidenced by a letter from the
Rating Agencies, without a reduction or withdrawal of the rating of the
Certificates.

     ELIGIBLE INVESTMENTS: One or more of the following:

          (a) direct obligations of, or guaranteed as to the full and timely
     payment of principal and interest by, the United States or any agency or
     instrumentality thereof when such obligations are backed by the full
     faith and credit of the United States;

          (b) repurchase agreements on obligations specified in clause (a)
     maturing not more than one month from the date of acquisition thereof,
     provided that the long-term unsecured obligations of the party agreeing
     to repurchase such obligations are at the time rated by each Rating
     Agency in the two highest rating category available from such Rating
     Agency; and provided further that the short-term debt obligations of the
     party agreeing to repurchase shall be at the time rated "P-1" by Moody's
     and "A-1+" by S&P;

          (c) federal funds, certificates of deposit, time deposits, demand
     deposits and bankers' acceptances, each of which shall not have an
     original maturity of more than 90 days, of any depository institution or
     trust company incorporated under the laws of the United States or any
     state; provided that the short-term obligations of such depository
     institution or trust company shall be at the time rated "P-1" by Moody's
     and "A-1+" by S&P;

          (d) commercial paper (having original maturities of not more than
     270 days) of any corporation incorporated under the laws of the United
     States or any state thereof; provided that such commercial paper shall be
     at the time rated "P-1" by Moody's and "A-1+" by S&P;

          (e) any money market fund rated "P-1" by Moody's and "A-1+" by S&P;
     and

          (f) other obligations or securities that are acceptable to the
     Rating Agencies as an Eligible Investment hereunder and will not result
     in a reduction in or withdrawal of the then current rating or ratings of
     the Certificates, as evidenced by a letter to such effect from the Rating
     Agencies;

provided, however, that no instrument shall be an Eligible Investment if such
instrument evidences a right to receive only interest payments with respect to
the obligations underlying such instrument.

     ELIGIBLE SUBSTITUTE CONTRACT: As to any Replaced Contract for which such
Eligible Substitute Contract is being substituted pursuant to Section 3.05(b),
a Contract that (a)

                                      16
<PAGE>

as of the date of its substitution, satisfies all of the representations and
warranties (which, except when expressly stated to be as of origination, shall
be deemed to be determined as of the date of its substitution rather than as
of the Cut-off Date or the Closing Date) in Section 3.02 and does not cause
any of the representations and warranties in Section 3.03, after giving effect
to such substitution, to be incorrect, (b) after giving effect to the
scheduled payment or payments due in the month of such substitution, has a
Scheduled Principal Balance that is not greater than the Scheduled Principal
Balance of such Replaced Contract, (c) has an APR that is at least equal to
the APR of such Replaced Contract, (d) has a remaining term to scheduled
maturity that is not greater than the remaining term to scheduled maturity of
the Replaced Contract, (e) has not been delinquent for more than 31 days as to
any scheduled payment due within twelve months of the date of its
substitution, (f) if the Replaced Contract is secured by a Manufactured Home
which was new at the time of origination, it shall be replaced by a new
Eligible Substitute Contract and (g) if the Replaced Contract is secured by a
Manufactured Home which is a double-wide, the Eligible Substitute Contract
shall be a double-wide. Notwithstanding the foregoing, in the event that on
any date more than one Eligible Substitute Contract is substituted for one or
more Replaced Contracts, the requirement set forth in clause (b) above with
respect to Scheduled Principal Balance may be satisfied if the aggregate of
the Scheduled Principal Balances of such Eligible Substitute Contracts is not
greater than the aggregate of the Scheduled Principal Balances of such
Replaced Contracts; the requirement set forth in clause (c) above with respect
to APR may be satisfied if the weighted average APR of such Eligible
Substitute Contracts is at least equal to the weighted average APR of such
Replaced Contracts (provided that the APR of each Eligible Substitute Contract
to be substituted for a Fixed Rate Contract shall be equal to or greater than
the Weighted Average Net Contract Rate); the requirement set forth in clause
(d) above with respect to remaining term to scheduled maturity may be
satisfied if the weighted average remaining term to scheduled maturity of such
Eligible Substitute Contracts is not greater than the weighted average
remaining term to scheduled maturity of such Replaced Contracts; provided that
no Eligible Substitute Contract shall have a scheduled maturity date later
than December 15, 2032.

     EQUITY BUILDER CONTRACT: Contracts which provide for interest-only
payments during the first year, and after the first year, the payment amount
increases annually such that the Contract is fully amortized for the remainder
of the term of the Contract. The payment increase is based upon a percentage
of the required interest payment during the first year.

     ERISA: The Employee Retirement Income Security Act of 1974, as amended.

     ERISA RESTRICTED CERTIFICATE: The Class R Certificate and any other
certificate that does not satisfy the applicable rating requirement under the
Underwriter's Exemption.

     EVENT OF DEFAULT: Any one of the events described in Section 9.01 hereof.

     EXTENSION FEE: Any extension fee paid by the Obligor on a Contract.

     FIDELITY BOND: A fidelity bond to be maintained by the Servicer pursuant
to Section 5.10.

     FILE: A Contract File, Land-and-Home Contract File or a Mortgage Loan
File.

                                      17
<PAGE>

     FIRST REMITTANCE DATE: September 9, 2002.

     FIXED RATE CERTIFICATES: The Class A-1F, Class A-2, Class A-3, Class A-4,
Class A-5, Class M-1, Class B-1 and Class B-2 Certificates.

     FIXED RATE CONTRACT: Each Contract sold to the Trust Fund which bears
interest at a fixed rate.

     FLOATING RATE CERTIFICATES: The Class A-1V Certificates.

     FORMULA PRINCIPAL DISTRIBUTION AMOUNT: As to any Remittance Date, an
amount equal to the sum of (a) all scheduled payments of principal due on each
Outstanding Contract during the Due Period immediately preceding such
Remittance Date, (b) the Scheduled Principal Balance of each Contract which,
during the Due Period preceding the month of such Remittance Date, was
purchased by Vanderbilt pursuant to Section 3.05 of this Agreement, (c) all
Partial Prepayments received with respect to Contracts during such preceding
Due Period, (d) the Scheduled Principal Balance of each Contract for which a
Principal Prepayment in Full was received during such preceding Due Period,
(e) the Scheduled Principal Balance of each Contract that became a Liquidated
Contract during such Due Period and (f) any previously undistributed
shortfalls in the distribution of the amounts in clauses (a) through (e) in
respect of prior Remittance Dates (other than any such shortfall with respect
to which a Guarantee Payment has been made to the Class B-2
Certificateholders). The Formula Principal Distribution Amount for the
Remittance Date immediately following the end of the Funding Period will also
include an amount equal to the Pre-Funded Amount remaining at the end of the
Funding Period.

     FRACTIONAL INTEREST: As to any Certificate of any Class, the product of
(a) the Percentage Interest evidenced by such Certificate multiplied by (b)
the amount derived from dividing the Principal Balance of such Class by the
sum of the Class A Principal Balance, Class M-1 Principal Balance and Class B
Principal Balance.

     FUNDING PERIOD: The period commencing on the Closing Date and ending on
the earliest to occur of (a) the Determination Date on which the Pre-Funded
Amount (exclusive of any Pre-Funding Account Earnings) is equal to or less
than $100,000, (b) the occurrence of an Event of Default or (c) November 21,
2002.

     GROSS MARGIN: With respect to each Adjustable Rate Contract, the
percentage set forth in the related Contract to be added to the related index
for use in determining such Contract's APR on each date of adjustment thereof.

     GUARANTEE PAYMENT: As to any Remittance Date, the amount, if any, by
which (a) the Class B-2 Formula Distribution Amount for such Remittance Date
exceeds (b) the Remaining Amount Available.

     GUARANTEE REIMBURSEMENT AMOUNT: As to any Remittance Date, an amount
equal to the lesser of (a) the Available Distribution Amount for such
Remittance Date less the portion thereof that represents the sum of the
amounts (i) distributed on the Certificates (other than the Class R
Certificate) on such Remittance Date and (ii) paid to the Servicer in respect
of the Monthly Servicing Fee pursuant to clause A(xiii) or B(xiii) of Section
6.01(a) on such

                                      18
<PAGE>

Remittance Date and (b) the aggregate amount of outstanding Guarantee Payments
that remain unreimbursed as of such Remittance Date.

     HAZARD INSURANCE POLICY: With respect to each Contract, the policy of
fire and extended coverage insurance (and federal flood insurance, if
applicable) required to be maintained for the related Manufactured Home, as
provided in Section 5.09, and which, as provided in Section 5.09, may be a
blanket insurance policy maintained by the Servicer in accordance with the
terms and conditions of Section 5.09.

     INDEX: As to any Adjustable Rate Contract, the published rate upon which
the related Remittance Rate is calculated.

     INITIAL CONTRACTS: The Contracts listed on Schedule A-1 conveyed to the
Trustee or a separate trustee by Vanderbilt on the Closing Date.

     INITIAL PRINCIPAL AMOUNT: With respect to the Initial Contracts,
$375,000,015.86.

     INTEREST DEFICIENCY AMOUNT: With respect to the Class A-5 Certificates,
the Class M-1 Certificates and the Class B-1 Certificates and any Remittance
Date, the Interest Formula Distribution Amount with respect to each such Class
remaining unpaid after application of the Available Distribution Amount in
accordance with Section 6.01(a).

     INTEREST DEFICIENCY WITHDRAWAL: With respect to any Remittance Date and:

     (i)  the Class A-5 Certificates, the lesser of:

          (a) if such Remittance Date occurs between September 1, 2002 and
     August 31, 2003 and the Cumulative Realized Losses as of such Remittance
     Date are greater than 7.50% of the Initial Principal Amount of the
     Contracts, zero;

          (b) if such Remittance Date occurs between September 1, 2003 and
     August 31, 2004 and the Cumulative Realized Losses as of such Remittance
     Date are greater than 12.75% of the Initial Principal Amount of the
     Contracts, zero;

          (c) if such Remittance Date occurs between September 1, 2004 and
     August 31, 2005 and the Cumulative Realized Losses as of such Remittance
     Date are greater than 18.00% of the Initial Principal Amount of the
     Contracts, zero;

          (d) if such Remittance Date occurs after September 1, 2005 and the
     Cumulative Realized Losses as of such Remittance Date are greater than
     21.50% of the Initial Principal Amount of the Contracts, zero;

          (e) the applicable Interest Deficiency Amount; and

          (f) the amount remaining on deposit in the Certificate Account after
     withdrawal of the Available Distribution Amount;

                                      19
<PAGE>

     (ii) the Class M-1 Certificates, the lesser of:

          (a) if such Remittance Date occurs between September 1, 2002 and
     August 31, 2003 and the Cumulative Realized Losses as of such Remittance
     Date are greater than 6.00% of the Initial Principal Amount of the
     Contracts, zero;

          (b) if such Remittance Date occurs between September 1, 2003 and
     August 31, 2004 and the Cumulative Realized Losses as of such Remittance
     Date are greater than 10.25% of the Initial Principal Amount of the
     Contracts, zero;

          (c) if such Remittance Date occurs between September 1, 2004 and
     August 31, 2005 and the Cumulative Realized Losses as of such Remittance
     Date are greater than 14.50% of the Initial Principal Amount of the
     Contracts, zero;

          (d) if such Remittance Date occurs after September 1, 2005 and the
     Cumulative Realized Losses as of such Remittance Date are greater than
     17.00% of the Initial Principal Amount of the Contracts, zero;

          (e) the applicable Interest Deficiency Amount; and

          (f) the amount remaining on deposit in the Certificate Account after
     making the Class A-5 Interest Deficiency Withdrawal; and

     (iii) the Class B-1 Certificates, the lesser of:

          (a) if such Remittance Date occurs between September 1, 2002 and
     August 31, 2003 and the Cumulative Realized Losses as of such Remittance
     Date are greater than 5.25% of the Initial Principal Amount of the
     Contracts, zero;

          (b) if such Remittance Date occurs between September 1, 2003 and
     August 31, 2004 and the Cumulative Realized Losses as of such Remittance
     Date are greater than 9.00% of the Initial Principal Amount of the
     Contracts, zero;

          (c) if such Remittance Date occurs between September 1, 2004 and
     August 31, 2005 and the Cumulative Realized Losses as of such Remittance
     Date are greater than 12.75% of the Initial Principal Amount of the
     Contracts, zero;

          (d) if such Remittance Date occurs after September 1, 2005 and the
     Cumulative Realized Losses as of such Remittance Date are greater than
     5.00% of the Initial Principal Amount of the Contracts, zero;

          (e) the applicable Interest Deficiency Amount; and

          (f) the amount remaining on deposit in the Certificate Account after
     making the Class M-1 Interest Deficiency Withdrawal.

     INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Remittance Date, the
Class A-1 Interest Formula Distribution Amount, the Class A-2 Interest Formula
Distribution

                                      20
<PAGE>

Amount, the Class A-3 Interest Formula Distribution Amount, the Class A-4
Interest Formula Distribution Amount, the Class A-5 Interest Formula
Distribution Amount, the Class M-1 Interest Formula Distribution Amount, the
Class B-1 Interest Formula Distribution Amount or the Class B-2 Interest
Formula Distribution Amount, as applicable.

     INTEREST PERIOD: With respect to the Floating Rate Certificates and any
Remittance Date, the period commencing on the preceding Remittance Date (or in
the case of the first Remittance Date, the Closing Date) through the day
preceding such Remittance Date. With respect to the Fixed Rate Certificates
and any Remittance Date, the period from the first day of the calendar month
preceding the month of such Remittance Date through the last day of such
calendar month.

     LAND-AND-HOME CONTRACT: A Contract that is secured by a Mortgage on real
estate on which the related Manufactured Home is situated, and which
Manufactured Home is considered or classified as part of the real estate under
the laws of the jurisdiction in which it is located.

     LAND-AND-HOME CONTRACT FILE: With respect to each Land-and-Home Contract,

          (a) sthe original of the Land-and-Home Contract, and, in the case of
     each Bi-weekly Contract, the original of the bi-weekly rider for such
     Contract, and, in the case of each Equity Builder Contract, the original
     of the graduated payment rider for such Contract;

          (b) the original related Mortgage with evidence of recording thereon
     and any title document for the related Manufactured Home;

          (c) with respect to any Land-and-Home Contract not originated by
     Vanderbilt, the assignment of the Land-and-Home Contract from the
     originator to Vanderbilt with evidence of recording thereon;

          (d) with respect to any Land-and-Home Contract originated by
     Vanderbilt, an endorsement of such Land-and-Home Contract by Vanderbilt
     without recourse;

          (e) with respect to the Land-and-Home Contracts located in the ten
     states with the highest concentration of Land-and-Home Contracts, an
     Opinion of Counsel to the effect that Vanderbilt need not cause to be
     recorded any assignment which relates to Land-and-Home Contracts in such
     states to protect the Trustee's and the Certificateholders' interest in
     such Land-and-Home Contracts; provided, however, if Vanderbilt fails to
     deliver such an Opinion of Counsel for any such states, with respect to
     the Land-and-Home Contracts located in those states, Vanderbilt shall
     provide an original executed assignment of the Mortgage, with evidence of
     recording thereon, showing the assignment from Vanderbilt to the Trustee
     or the separate trustee, as applicable; and

          (f) any extension, waiver or modification agreement(s) for each
     Land-and-Home Contract on the Schedule.

                                      21
<PAGE>

     LAND SECURED CONTRACT: A Contract that is secured by (i) a security
interest in a Manufactured Home and (ii) a Mortgage on real estate on which
the related Manufactured Home is situated, but such Manufactured Home is not
considered or classified as part of the real estate under the laws of the
jurisdiction in which it is located.

     LATE PAYMENT FEES: Any late payment fees paid by Obligors on Contracts
after all sums received have been allocated first to regular installments due
or overdue and all such installments are then paid in full.

     LIBOR: As to any date, the rate for United States dollar deposits for one
month which appear on the Telerate Screen LIBOR Page 3750 as of 11:00 A.M.,
London time. If such rate does not appear on such page (or such other page as
may replace that page on that service, or if such service is no longer
offered, such other service for displaying LIBOR or comparable rates as may be
reasonably selected by the Seller after consultation with the Trustee), the
rate will be the Reference Bank Rate. If no such quotations can be obtained
and no Reference Bank Rate is available, LIBOR will be LIBOR applicable to the
preceding Remittance Date.

     LIBOR BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or (ii)
a day on which banking institutions in the State of New York or in the city of
London, England are required or authorized by law to be closed.

     LIFETIME CAP: With respect to an Adjustable Rate Contract, the maximum
APR, if any, that may be borne by such Contract over its term, as set forth as
such therein.

     LIMITED GUARANTEE: The obligation of Clayton to make Guarantee Payments
as set forth in Section 6.05.

     LIQUIDATED CONTRACT: Any defaulted Contract as to which the Servicer has
determined that all amounts which it expects to recover from or on account of
such Contract have been recovered; provided that any defaulted Contract in
respect of which the related Manufactured Home and, in the case of
Land-and-Home Contracts, Mortgaged Property have been realized upon and
disposed of and the proceeds of such disposition have been received shall be
deemed to be a Liquidated Contract.

     LIQUIDATION EXPENSES: All reasonable out-of-pocket expenses (exclusive of
overhead expenses) which are incurred by the Servicer in connection with the
liquidation of any defaulted Contract, on or prior to the date on which the
related Manufactured Home and, in the case of Land-and-Home Contracts,
Mortgaged Property are disposed of, including, without limitation, legal fees
and expenses, any unreimbursed amount expended by the Servicer pursuant to
Section 5.06 or 5.09 (to the extent such amount is reimbursable under the
terms of Section 5.06 or 5.09, as the case may be) respecting such Contract
and any unreimbursed expenditures for property taxes or for property
restoration or preservation that are related to such liquidation.

     LIQUIDATION PROCEEDS: Cash (including insurance proceeds other than those
applied to the restoration of the related Manufactured Home or released to the
related Obligor in accordance with the normal servicing procedures of the
Servicer) received in connection with the liquidation of defaulted Contracts,
whether through repossession or otherwise.

                                      22
<PAGE>

     LOAN-TO-VALUE RATIO: The fraction, expressed as a percentage, the
numerator of which is the original principal balance of the related Contract
and the denominator of which is the Original Value of the related Manufactured
Home (including for this purpose the Original Value of any Mortgaged Property
not constituting a part of the Manufactured Home).

     MANUFACTURED HOME: A unit of manufactured housing which meets the
requirements of Section 25(e)(10) of the Code, including all accessions
thereto, securing the indebtedness of the Obligor under the related Contract.

     MINIMUM APR: With respect to an Adjustable Rate Contract, the minimum
APR, if any, that may be borne by such Contract over its term, as set forth as
such therein.

     MONTHLY ADVANCE: As to any Remittance Date, the aggregate of all
scheduled payments of principal and interest which were due during the related
Due Period on any Contracts that remained Outstanding at the end of such Due
Period and were not collected during such Due Period, exclusive of any such
scheduled payment which the Servicer has determined would be a Nonrecoverable
Advance if an advance in respect of such scheduled payment were made.

     MONTHLY ADVANCE REIMBURSEMENT AMOUNT: Any amount received or deemed to be
received by the Servicer pursuant to Section 6.04(c) in reimbursement of a
Monthly Advance made out of its own funds.

     MONTHLY REPORT: The monthly report described in Section 7.01.

     MONTHLY SERVICING FEE: With respect to any Remittance Date, an amount
equal to one-twelfth of 1.25% of the Pool Scheduled Principal Balance for the
immediately preceding Remittance Date.

     MOODY'S: Moody's Investors Service, Inc. or its successor in interest.

     MORTGAGE: The mortgage or deed of trust creating a lien on an estate in
fee simple interest in the real property securing a Contract.

     MORTGAGE LOANS: The mortgage loans or deeds of trust secured by a
mortgage or deed of trust of one- to four-family residential properties,
described in the Contract Schedule and constituting part of the corpus of the
Trust, which are to be sold and assigned by Vanderbilt to the Trustee and
which are the subject of this Agreement. The Mortgage Loans include, without
limitation, all related security interests and any and all rights to receive
payments which are due pursuant thereto from and after the Cut-off Date, but
exclude any rights to receive payments which are due pursuant thereto prior to
the Cut-off Date.

     MORTGAGE LOAN FILE: With respect to each Mortgage Loan,

          (a) the original related Mortgage, with evidence of recording
     indicated thereon, and the original related mortgage note, if any;

                                      23
<PAGE>

          (b) the original assignment and any intervening assignments of the
     Mortgage, with evidence of recording thereon, showing a complete chain of
     assignment of the Mortgage Loan from origination of the Mortgage Loan to
     Vanderbilt;

          (c) the original assignment, with evidence of recording thereon,
     showing the assignment from Vanderbilt to the Trustee or the separate
     trustee, as applicable; and

          (d) any extension, modification or waiver agreement(s) for each
     Mortgage Loan on the Schedule.

     MORTGAGED PROPERTY: The property subject to a Mortgage.

     NET LIQUIDATION PROCEEDS: As to any Liquidated Contract, Liquidation
Proceeds net of the sum of (i) Liquidation Expenses and (ii) any amount
required to be paid to the Obligor or any other Person with an interest in the
Manufactured Home or any related Mortgaged Property that is senior to the
interest of the Trust Fund.

     NON RECORDATION OPINION: As defined in Section 2.04(d).

     NONRECOVERABLE ADVANCE: Any advance made or proposed to be made pursuant
to Section 6.04, which the Servicer believes, in its good faith judgment, is
not, or if made would not be, ultimately recoverable from Liquidation Proceeds
or otherwise. In determining whether an advance is or will be nonrecoverable,
the Servicer need not take into account that it might receive any amounts in a
deficiency judgment. The determination by the Servicer that any advance is, or
if made would constitute, a Nonrecoverable Advance, shall be evidenced by an
Officer's Certificate of the Servicer delivered to the Trustee and stating the
reasons for such determination.

     OBLIGOR: Each Person who is indebted under a Contract or who has acquired
a Manufactured Home subject to a Contract.

     OFFICER'S CERTIFICATE: A certificate signed by the President, a Vice
President, the Treasurer, the Secretary or one of the Assistant Treasurers or
Assistant Secretaries or any other duly authorized officer of Vanderbilt or
the Servicer, as appropriate, and delivered to the Trustee as required by this
Agreement.

     OPINION OF COUNSEL: A written opinion of counsel, who may be the counsel
for Vanderbilt or the Servicer and who shall be acceptable to the Trustee.

     ORIGINAL CLASS A-1F PRINCIPAL BALANCE: $30,000,000.

     ORIGINAL CLASS A-1V PRINCIPAL BALANCE: $101,726,000.

     ORIGINAL CLASS A-2 PRINCIPAL BALANCE: $120,364,000.

     ORIGINAL CLASS A-3 PRINCIPAL BALANCE: $64,300,000.

     ORIGINAL CLASS A-4 PRINCIPAL BALANCE: $96,110,000.

                                      24
<PAGE>

     ORIGINAL CLASS A-5 PRINCIPAL BALANCE: $22,500,000.

     ORIGINAL CLASS M-1 PRINCIPAL BALANCE: $20,000,000.

     ORIGINAL CLASS B-1 PRINCIPAL BALANCE: $18,750,000.

     ORIGINAL CLASS B-2 PRINCIPAL BALANCE: $26,250,000.

     ORIGINAL PRE-FUNDED AMOUNT: The amount deposited in the Pre-Funding
Account on the Closing Date from the proceeds of the sale of the Certificates,
which amount is $125,000,000.

     ORIGINAL VALUE: With respect to any Manufactured Home that was new at the
time the related Contract was originated, the sum of the down payment
(including the value allocated to any trade-in unit or land pledged as
additional security or in lieu of the down payment), the original amount
financed on the related Contract, which may include sales and other taxes and
premiums for related insurance, and, in the case of a Land-and-Home Contract,
the value of the land securing the Contract as estimated by the dealer. With
respect to any Manufactured Home that was used at the time the related
Contract was originated, the total delivered sales price of such Manufactured
Home (including, for this purpose, any Mortgaged Property not constituting a
part of the Manufactured Home), plus sales and other taxes and, to the extent
financed under such Contract, premiums for related insurance.

     ORIGINATOR: Any of the originators of Acquired Contracts listed in
Exhibit J hereto.

     OUTSTANDING: With respect to any Contract as to the time of reference
thereto, a Contract that has not been fully prepaid, has not become a
Liquidated Contract, and has not been purchased pursuant to Section 3.05 prior
to such time of reference.

     OUTSTANDING AMOUNT ADVANCED: As to any Remittance Date, the aggregate of
all Monthly Advances remitted by the Servicer out of its own funds pursuant to
Section 6.04, less the aggregate of all related Monthly Advance Reimbursement
Amounts actually received prior to such Remittance Date.

     OWNERSHIP INTEREST: As defined in Section 4.08(b).

     PARTIAL PREPAYMENT: Any Principal Prepayment other than a Principal
Prepayment in Full.

     PAYING AGENT: Any paying agent appointed pursuant to Section 4.05.

     PERCENTAGE INTEREST: As to any Certificate of any Class, the percentage
interest evidenced thereby in distributions required to be made on the
Certificates of such Class, such percentage interest being equal to the
percentage obtained by dividing the denomination of such Certificate by the
aggregate of the denominations of all of the outstanding Certificates of such
Class (or, in the case of the Class R Certificate, being equal to the
percentage specified on the face of such Class R Certificate).

                                      25
<PAGE>

     PERIODIC CAP: With respect to an Adjustable Rate Contract, the provision
in each Adjustable Rate Contract that limits permissible increases and
decreases in such Contract's APR on any date on which such APR adjusts
pursuant to the terms of such Contract.

     PERMITTED TRANSFEREE: As defined in Section 4.08(b).

     PERSON: Any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.

     PLAN ASSETS: As defined in Section 4.02(b).

     POOL FACTOR: As of any Remittance Date and as to any Class of
Certificates, the percentage obtained by dividing the Class A-1F Principal
Balance, the Class A-1V Principal Balance, the Class A-2 Principal Balance,
the Class A-3 Principal Balance, the Class A-4 Principal Balance, the Class
A-5 Principal Balance, the Class M-1 Principal Balance, the Class B-1
Principal Balance or the Class B-2 Principal Balance, as the case may be
(after giving effect to the distribution on such Remittance Date), by the
Original Class A-1F Principal Balance, the Original Class A-1V Principal
Balance, the Original Class A-2 Principal Balance, the Original Class A-3
Principal Balance, the Original Class A-4 Principal Balance, the Original
Class A-5 Principal Balance, the Original Class M-1 Principal Balance, the
Original Class B-1 Principal Balance or the Original Class B-2 Principal
Balance, respectively, carried out to seven decimal places.

     POOL ORIGINAL PRINCIPAL BALANCE: As of any Remittance Date, the sum of
(i) the aggregate principal balance of the Initial Contracts as of the Cut-off
Date and (ii) the aggregate principal balance of all Subsequent Contracts
(determined as of the applicable Subsequent Cut-off Date) having a Subsequent
Transfer Date on or prior to the related Determination Date.

     POOL SCHEDULED PRINCIPAL BALANCE: As to any Remittance Date, the sum of
(i) the Pool Original Principal Balance and (ii) the Pre-Funded Amount, if
any, remaining in the Pre-Funding Account as of the related Determination Date
(exclusive of any Pre-Funding Account Earnings) less (iii) the aggregate of
the Formula Principal Distribution Amounts (exclusive of the amounts in clause
(f) of the definition of "Formula Principal Distribution Amount") for all
prior Remittance Dates.

     PRE-FUNDED AMOUNT: With respect to any Determination Date, the amount
remaining on deposit in the Pre-Funding Account, exclusive of any Pre-Funding
Account Earnings.

     PRE-FUNDING ACCOUNT: The Pre-Funding Account established in accordance
with Section 5.19 hereof and maintained by the Trustee.

     PRE-FUNDING ACCOUNT EARNINGS: With respect to the September 2002
Remittance Date, the actual investment earnings earned during the period from
the Closing Date through September 6 (inclusive) on the Pre-Funding Account
during such period as calculated by the Servicer pursuant to Section 5.20(d)
hereof; with respect to the October 2002 Remittance

                                      26
<PAGE>

Date, the actual investment earnings earned during the period from September
7, 2002 through October 6, 2002 (inclusive) on the Pre-Funding Account during
such period as calculated by the Servicer pursuant to Section 5.20(d) hereof;
with respect to the November 2002 Remittance Date, the actual investment
earnings earned during the period from October 7, 2002 through November 6,
2002 (inclusive) on the Pre-Funding Account during such period as calculated
by the Servicer pursuant to Section 5.20(d) hereof; with respect to the
December 2002 Remittance Date, the actual investment earnings earned during
the period from November 7, 2001 through December 6, 2001 (inclusive) on the
Pre-Funding Account during such period as calculated by the Servicer pursuant
to Section 5.20(d) hereof.

     PRINCIPAL BALANCE: The Class A-1F Principal Balance, the Class A-1V
Principal Balance, the Class A-2 Principal Balance, the Class A-3 Principal
Balance, the Class A-4 Principal Balance, the Class A-5 Principal Balance, the
Class M-1 Principal Balance, the Class B-1 Principal Balance or the Class B-2
Principal Balance, as applicable.

     PRINCIPAL PREPAYMENT: (i) Subject to clause (ii) of this definition, with
respect to any Due Date for a Contract, any payment or any portion thereof or
other recovery on such Contract (other than a Liquidated Contract or a
Contract repurchased pursuant to Section 3.05) received on or prior to such
Due Date (but after the immediately preceding Due Date) that exceeds the
amount necessary to bring such Contract current as of such Due Date and that
the Obligor has notified or confirmed with the Servicer are to be treated as a
prepayment of principal; (ii) notwithstanding the provisions of the preceding
clause (i), if any payment or any portion thereof or other recovery on a
Contract (other than a Liquidated Contract or a Contract repurchased pursuant
to Section 3.05) is sufficient to pay the outstanding principal balance of
such Contract, all accrued and unpaid interest at the APR to the payment date
and, at the option of the Servicer, all other outstanding amounts owing on
such Contract, the portion of the payments or recoveries on such Contract
during such Due Period that is equal to the Scheduled Principal Balance of
such Contract after giving effect to the scheduled payment on such Contract
due in such Due Period; and (iii) any cash deposit made with respect to a
Contract pursuant to Section 3.05.

     PRINCIPAL PREPAYMENT IN FULL: Any Principal Prepayment specified in
clause (ii) of the definition of the term "Principal Prepayment."

     PRIVATE CERTIFICATES: The Class R Certificates; provided however, any
Class of Certificates offered pursuant to an effective registration statement
shall no longer be a Private Certificate.

     RATING AGENCIES: Moody's and S&P.

     RECORD DATE: With respect to the initial Remittance Date, the Closing
Date. With respect to any Remittance Date thereafter, the close of business of
the last Business Day of the month preceding the month of the related
Remittance Date, except that, with respect to the Class A-1 Certificates,
after the initial Remittance Date, the Record Date will be the Business Day
preceding the related Remittance Date. In the event that a Definitive
Certificate is issued with respect to a Class of Certificates, the Record Date
with respect to such Class will be the close of

                                      27
<PAGE>

business of the last Business Day of the month preceding the month of the
related Remittance Date.

     RECORDED DOCUMENTS: As defined in Section 2.04(b).

     REMAINING AMOUNT AVAILABLE: As to any Remittance Date, the Available
Distribution Amount less the sum of the Class A Distribution Amount, the Class
M-1 Distribution Amount and the Class B-1 Distribution Amount.

     REMIC: A real estate mortgage investment conduit within the meaning of
Section 860D(a) of the Code.

     REMIC CERTIFICATE MATURITY DATE: The "latest possible maturity date" of
the Regular Certificates as that term is defined in Section 2.07.

     REMIC PROVISIONS: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations promulgated thereunder, as the foregoing may be in effect from
time to time.

     REMITTANCE DATE: The 7th day of any month, or if such 7th day is not a
Business Day, the first Business Day immediately following the 7th day of the
month, commencing with September 9, 2002.

     REMITTANCE RATE: As to each Class of Certificates, the Class A-1F
Remittance Rate, the Class A-1V Remittance Rate, the Class A-2 Remittance
Rate, the Class A-3 Remittance Rate, the Class A-4 Remittance Rate, the Class
A-5 Remittance Rate, the Class M-1 Remittance Rate, the Class B-1 Remittance
Rate or the Class B-2 Remittance Rate, as applicable.

     REO ACCOUNT: As defined in Section 5.17.

     REPLACED CONTRACT: As defined in Section 3.05(b).

     REPOSSESSION PROFITS: As to any Remittance Date, the excess, if any, of
Net Liquidation Proceeds in respect of each Contract that became a Liquidated
Contract during the related Due Period over the sum of the unpaid principal
balance of such Contract plus accrued and unpaid interest at the related APR
on the unpaid principal balance thereof from the Due Date to which interest
was last paid by the Obligor to the Due Date for such Contract in the month in
which such Contract became a Liquidated Contract.

     REPURCHASE OBLIGATION: The obligation of Vanderbilt, set forth in Section
3.05, to repurchase the related Contracts as to which there exists an uncured
breach of a representation or warranty contained in Section 3.02 or 3.03.

     REPURCHASE PRICE: With respect to any Contract required to be repurchased
hereunder, an amount equal to the remaining principal amount outstanding on
such Contract as of the beginning of the Due Period in which such repurchase
occurs plus accrued interest from the Due Date with respect to which the
Obligor last made the entire payment then due to the Due

                                      28
<PAGE>

Date (or the latest-occurring Due Date, in the case of a Bi-weekly Contract or
a Semi-Monthly Contract) in the Due Period in which such Contract is
repurchased.

     RESPONSIBLE OFFICER: When used with respect to the Trustee, any officer
including any vice president, assistant vice president, secretary or assistant
secretary with direct responsibility for the administration of this Agreement
and any other officer of the Trustee customarily performing functions similar
to those performed by any of the above designated officers and also to whom,
with respect to a particular matter, such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.

     SCHEDULED PRINCIPAL BALANCE: As to any Contract and any Remittance Date
or the Cut-off Date, the principal balance of such Contract as of the Due Date
(or, in the case of a Bi-weekly Contract or a Semi-Monthly Contract, the
latest occurring Due Date) in the Due Period next preceding such Remittance
Date or the Cut-off Date as specified in the Amortization Schedule at the time
relating thereto after giving effect to the payment of principal due on such
Due Date and irrespective of any delinquency in payment by, or extension
granted to, the related Obligor.

     SEMI-MONTHLY CONTRACT: Any Contract pursuant to which the scheduled level
payment of interest and principal is due twice each month.

     SENIOR CERTIFICATE: Any one of the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates or Class A-4 Certificates.

     SERVICER: Vanderbilt or its successor in interest or any successor under
this Agreement as provided by Section 8.08.

     SERVICING FILE: All documents, records, and other items maintained by the
Servicer with respect to a Contract and not included in the corresponding
Contract File, Land-and-Home Contract File or Mortgage Loan File, as
applicable, including the credit application, credit reports and
verifications, appraisals, tax and insurance records, payment records,
insurance claim records, correspondence, and all historical computerized data
files.

     SERVICING OFFICER: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Contracts whose name
appears on a list of servicing officers furnished on the Closing Date to the
Trustee by the Servicer, as such list may from time to time be amended.

     S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. or its successor in interest.

     STEP-UP RATE CONTRACT: Any Contract bearing interest during an initial
period or periods at a fixed rate or fixed rates that are lower than the fixed
rate borne thereafter.

     SUBORDINATE CERTIFICATE: Any one of the Class A-5 Certificates, Class M-1
Certificates, Class B-1 Certificates or Class B-2 Certificates.

                                      29
<PAGE>

     SUBSEQUENT CONTRACTS: The Contracts sold to the Trustee or a separate
trustee pursuant to Section 5.20 hereof, which shall be listed on the Contract
Schedule attached to a Subsequent Transfer Agreement.

     SUBSEQUENT CUT-OFF DATE: The beginning of business on the date specified
in a Subsequent Transfer Agreement (which shall be August 25, September 25 or
October 25, 2002) with respect to those Subsequent Contracts which are
transferred and assigned to the Trustee or a separate trustee pursuant to the
related Subsequent Transfer Agreement.

     SUBSEQUENT TRANSFER AGREEMENT: Each Subsequent Transfer Agreement dated
as of a Subsequent Transfer Date executed by the Trustee and Vanderbilt
substantially in the form of Exhibit M hereto, by which Subsequent Contracts
are sold and assigned to the Trustee or a separate trustee.

     SUBSEQUENT TRANSFER DATE: With respect to any Subsequent Transfer, the
date specified as such in the related Subsequent Transfer Agreement.

     TRANSFER: As defined in Section 4.08(b).

     TRANSFER AFFIDAVIT: As defined in Section 4.08(b).

     TRANSFER DATE: With respect to each Initial Contract, the Closing Date;
with respect to each Subsequent Contract, its related Subsequent Transfer
Date.

     TRANSFEREE: As defined in Section 4.08(b).

     TRUST FUND: The corpus of the trust created by this Agreement, to the
extent described herein, consisting of the Contracts (including, without
limitation, the security interest created thereby), including all rights to
receive payments on the Contracts that have not been received prior to the
Cut-off Date (including any such payments that were due prior to the Cut-off
Date but were not received by Vanderbilt prior to the Cut-off Date); such
assets as shall from time to time be identified as deposited in the
Certificate Account and the Pre-Funding Account; all Manufactured Homes and
any related Mortgaged Properties that secured Contracts not purchased pursuant
to Section 3.05 and that have been acquired in realizing upon such Contracts;
the Mortgages; the Repurchase Obligation; the proceeds of the Hazard Insurance
Policies; and the Limited Guarantee for the benefit of the Class B-2
Certificateholders.

     TRUSTEE: JPMorgan Chase Bank, or its successors or assigns or any
successor under this Agreement.

     TRUSTEE'S FEES: The fees, expenses and disbursements of the Trustee set
forth in Section 10.05.

     UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction or, in the case of Louisiana, the comparable provisions of
Louisiana law.

     UNDERWRITERS: Credit Suisse First Boston Corporation, Bear, Stearns & Co.
Inc. and BB&T Capital Markets, a division of Scott & Stringfellow, Inc.

                                      30
<PAGE>

     VANDERBILT: Vanderbilt Mortgage and Finance, Inc., a Tennessee
corporation, or its successor in interest or any successor under this
Agreement appointed as herein provided.

     WEIGHTED AVERAGE NET CONTRACT RATE: As to any Remittance Date, the per
annum rate equal to (i) the weighted average of the Annual Percentage Rates
borne by the Contracts that were Outstanding Contracts on the first day of the
related Interest Period (weighted on the basis of the respective Scheduled
Principal Balances of the Contracts on the first day of such Interest Period)
less (ii) (x) if Vanderbilt is the Servicer, 0.00% or (y) if Vanderbilt is no
longer the Servicer, 1.25%. For purposes of this calculation, the Contract
Rates in respect of the bi-weekly contracts shall be calculated by reference
to the interest collections in respect of scheduled payments for the Due
Period preceding the remittance date and adjusted to be calculated on the
basis of the actual number of days elapsed and a 360 day year in the case of
the Class A-1V Certificates, and on the basis of an assumed 360 day year
consisting of 12 30-day months in the case of all other Classes of
Certificates.

     Section 1.02. Determination of Scheduled Payments. Scheduled payments due
on any Contract shall be determined without giving effect to any adjustments
required by reason of the bankruptcy of the related Obligor or any similar
proceeding or moratorium or any waiver, extension or grace period.

                              [End of Article I]

                                      31
<PAGE>

                                  Article II

                     CONVEYANCE OF CONTRACTS; TRUST FUND;
                       PERFECTION OF SECURITY INTEREST;
                             CUSTODY OF CONTRACTS

     Section 2.01. Conveyance of Contracts and Other Rights.

     (a) Vanderbilt, concurrently with the execution and delivery hereof, does
hereby transfer, sell, assign, set over and otherwise convey to the Trustee,
as trustee, or in the case of any Initial Contracts from Alaska, California,
Delaware, District of Columbia, Florida, Georgia, Maine, Maryland, Minnesota,
Missouri, Montana, Nevada, Texas, Utah or Washington, a separate trustee,
without recourse (i) all of the right, title and interest of Vanderbilt in and
to the Initial Contracts (including, without limitation, the security
interests created thereby) and any related Mortgages, including all interest
and principal payments that have not been received prior to the Cut-off Date
(including any such payments that were due prior to the Cut-off Date but were
not received by Vanderbilt prior to the Cut-off Date), (ii) all of the rights
under any Hazard Insurance Policy relating to a Manufactured Home securing an
Initial Contract for the benefit of the creditor of such Contract, (iii) all
documents contained in the Contract Files, Land-and-Home Contract Files and
Mortgage Loan Files, if any, (iv) the Certificate Account, the Pre-Funding
Account and all funds and other assets deposited therein and all instruments,
securities (including without limitation, Eligible Investments) or other
property in which the Certificate Account or, the Pre-Funding Account may be
invested in whole or in part from time to time and (v) all proceeds derived
from any of the foregoing.

     As of the related Transfer Date, the ownership of each Contract and the
contents of the related Contract File, Land-and-Home Contract File or Mortgage
Loan File, as applicable, and Servicing File are vested in the Trustee, as
trustee, or separate trustee, as the case may be. The contents of each File
and Servicing File are and shall be held in trust by the Servicer for the
benefit of the Trustee or such separate trustee, as the case may be, as the
owner thereof and the Servicer's possession of the contents of each Servicing
File so retained is for the sole purpose of servicing the related Contract,
and such retention and possession by the Servicer is in a custodial capacity
only. The contents of the Land-and-Home Contract Files and the Mortgage Loan
Files, if any, shall be delivered to the Trustee, or a custodian on behalf of
the Trustee, in accordance with Section 2.04 hereof. Neither Vanderbilt nor
the Servicer shall take any action inconsistent with the Trustee's or such
separate trustee's, as the case may be, ownership of the Contracts, and
Vanderbilt and the Servicer shall promptly indicate to all inquiring parties
that the Contracts have been sold, transferred, assigned, set over and
conveyed to the Trustee or such separate trustee, as the case may be, and
shall not claim any ownership interest in the Contracts.

     (b) Although the parties intend that the conveyance of Vanderbilt's
right, title and interest in and to the items of property listed in Section
2.01(a) pursuant to this Agreement shall constitute a purchase and sale and
not a loan, if such conveyance is deemed to be a loan, the parties intend that
the rights and obligations of the parties to such loan shall be established
pursuant to the terms of this Agreement. The parties also intend and agree
that Vanderbilt shall be deemed to have granted to the Trustee (including any
separate trustee or co-trustee appointed pursuant to the terms of this
Agreement), and Vanderbilt does hereby grant to the Trustee

                                      32
<PAGE>

(including any separate trustee or co-trustee appointed pursuant to the terms
of this Agreement), a perfected first priority security interest in all of the
right, title and interest in, to and under the items of property listed in
Section 2.01(a), including all Contracts, and that this Agreement shall
constitute a security agreement under applicable law. If the trust created by
this Agreement terminates prior to the satisfaction of the claims of any
Person in any Certificates, the security interest created hereby shall
continue in full force and effect and the Trustee shall be deemed to be the
collateral agent for the benefit of such Person. Vanderbilt acknowledges and
agrees that the provisions of this paragraph shall be applicable to all
Subsequent Contracts to the same extent as to the Initial Contracts from and
after the applicable Subsequent Transfer Date.

     Vanderbilt acknowledges and agrees that the conveyance of the Contracts
for the consideration stated in this Agreement is a transfer for sufficient
value and consideration and that the transfer is not an avoidable conveyance
under any applicable state or federal fraudulent conveyance laws.

     Section 2.02. Filing; Name Change or Relocation.

     (a) On or prior to each respective Transfer Date, the Servicer shall
cause to be filed in the office of the Secretary of State of Tennessee, UCC-1
financing statements describing the Contracts being transferred on such
Transfer Date and naming Vanderbilt as "Seller" and the Trustee (or a separate
trustee) as "Purchaser." Each financing statement shall bear a statement on
the face thereof indicating that the parties intend the financing statement to
evidence a true sale of the Contracts, but that if the transaction is
recharacterized as a loan from the described Purchaser to the described
Seller, the financing statement is to perfect the described Purchaser's
security interest in the Contracts. The Servicer shall cause to be filed all
necessary continuation statements for each of the foregoing UCC-1 financing
statements. From time to time, the Servicer shall take and cause to be taken
such actions and execute such documents as are necessary to perfect and
protect the Certificateholders' interests in the Contracts and their proceeds
and the Manufactured Homes and any related Mortgaged Property against all
other Persons, including, without limitation, the filing of financing
statements, amendments thereto and continuation statements, the execution of
transfer instruments and the making of notations on or taking possession of
all records or documents of title; provided, however, that Vanderbilt, so long
as it is the Servicer, shall not be required to cause notations to be made on
any document of title relating to any Manufactured Home or to execute any
transfer instrument (including, without limitation, any UCC-3 assignments)
relating to any Manufactured Home (other than a notation or a transfer
instrument necessary to show Vanderbilt as the lienholder or legal title
holder) or to file documents in real property records with respect to a
Manufactured Home or related Contract or any related Mortgaged Property,
absent notice from the Servicer or actual knowledge that such Manufactured
Home (other than a Manufactured Home securing a Land-and-Home Contract) has
become real property under applicable state law; provided that the preceding
proviso shall not have any effect on the representation and warranty in
Section 3.02(k) and Vanderbilt's obligations in respect thereof in Section
3.05; provided, further, that the Servicer (if Vanderbilt is not the Servicer)
shall not be required to protect the Trustee from any liens, claims, charges
or other encumbrances on the Contracts, their proceeds or the Manufactured
Homes created by Vanderbilt or conveyances of the Contracts or their proceeds
by Vanderbilt. Nothing in the preceding sentence shall be construed to limit
the indemnification obligations of the Servicer set forth in Section 10.05
hereof. Vanderbilt agrees to take whatever action is necessary

                                      33
<PAGE>

to enable the Servicer to file financing statements and otherwise act to
perfect and protect the Certificateholders' interests in the Contracts, the
Manufactured Homes and any related Mortgage or Mortgaged Property. In
particular, Vanderbilt shall deliver to the Trustee on or before the Closing
Date a power of attorney substantially in the form as Exhibit K hereto,
authorizing the Trustee to, among other things, record assignments of
Mortgages securing Land Secured Contracts. Assuming that Vanderbilt and the
Trustee perform such actions as are required at the direction of the Servicer,
the Servicer will maintain a perfected first priority security interest in
each Manufactured Home and any related Mortgaged Property so long as the
related Contract is the property of the Trust Fund; provided, however, that
Vanderbilt, so long as it is the Servicer, shall not be required to cause
notations to be made on any document of title relating to any Manufactured
Home, to execute any transfer instrument (including, without limitation, any
UCC-3 assignments) relating to any Manufactured Home (other than a notation or
a transfer instrument necessary to show Vanderbilt as lienholder or legal
title holder) or to file documents in real property records with respect to a
Manufactured Home or related Contract or any related Mortgaged Property,
absent notice from the Servicer or actual knowledge that such Manufactured
Home (other than a Manufactured Home securing a Land-and-Home Contract) has
become real property under applicable state law.

     (b) During the term of this Agreement, Vanderbilt shall not change its
name, identity, structure or state of incorporation without first giving
notice to the Trustee. If any change in Vanderbilt's name, identity, structure
or state of incorporation would make any financing or continuation statement
or notice of lien filed under this Agreement seriously misleading within the
meaning of applicable provisions of the UCC or any title statute, Vanderbilt,
no later than five days after the effective date of such change, shall file
such amendments as may be required to preserve and protect the
Certificateholders' interests in the Contracts and proceeds thereof and in the
Manufactured Homes.

     (c) Vanderbilt hereby represents and warrants that it is incorporated in
the State of Tennessee.

     (d) The Servicer agrees to pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against
all third parties, of the Certificateholders' right, title and interest in and
to the Contracts (including, without limitation, the security interest in the
Manufactured Homes granted thereby) and any related Mortgages.

     Section 2.03. Acceptance by Trustee. The Trustee hereby acknowledges
conveyance of the Initial Contracts and any related Mortgages to the Trustee,
or a separate trustee, as the case may be, and declares that the Trustee,
directly or through a custodian (which, except with respect to the
Land-and-Home Contracts and the Mortgage Loan Files, shall be the Servicer
pursuant to Section 5.16), holds and will hold such Files in trust for the use
and benefit of all present and future Certificateholders. The Trustee hereby
certifies that although it has not undertaken any independent investigation or
review of any Initial Contract, any Contract File, any Land-and-Home Contract
File, any Mortgage Loan File or any Servicing File, no Responsible Officer of
the Trustee has received written notice or has actual knowledge of (a) any
adverse claim, lien or encumbrance with respect to any Initial Contract, (b)
any Initial Contract being overdue or dishonored, (c) any evidence on the face
of any Initial Contract of any security interest therein

                                      34
<PAGE>

adverse to the Trustee's interest, or (d) any defense against or claim against
any Initial Contract by the Obligor or by any other party.

     Section 2.04. Delivery of Land-and-Home Contract Files and Mortgage Loan
Files and Recordation.

     (a) In connection with the conveyance pursuant to Section 2.01 and the
conveyances contemplated by Section 5.20, with respect to each Land-and-Home
Contract and each Mortgage Loan, if any, Vanderbilt shall (i) enter into a
custodial agreement (the "Custodial Agreement") on the Closing Date
substantially in the form attached hereto as Exhibit A-2 and (ii) deliver or
cause to be delivered the related Land-and-Home Contract Files and Mortgage
Loan Files, as applicable, to the custodian under the Custodial Agreement on
behalf of the Trustee, within 30 days of the applicable Transfer Date in
accordance with such Custodial Agreement. Such delivery of the Files shall be
accompanied by a certificate of delivery signed by Vanderbilt substantially in
the form set forth as Exhibit A to the Custodial Agreement.

     (b) In lieu of the items to be recorded and delivered pursuant to
Sections (b), (c) and (e) of the definition of Land-and-Home Contract File and
Sections (a), (b) and (c) of the definition of Mortgage Loan File (the
"Recorded Documents"), if the original Mortgage or assignment has not been
returned by the applicable recording office or is not otherwise available,
Vanderbilt shall provide the custodian with a copy thereof together with an
Officer's Certificate (which may be a blanket Officer's Certificate of
Vanderbilt covering all such Mortgages and assignments) certifying that the
copy is a true and correct copy of the original Mortgage or original
assignment, as applicable, submitted for recording, which will be (1) replaced
by the original Mortgage or original assignment when it is so returned or (2)
if the recording office in the applicable jurisdiction retains the original
Mortgage or original assignment or the original Mortgage or original
assignment has been lost, a copy of such item certified by the applicable
recording office.

     (c) Vanderbilt shall deliver each Recorded Document (or if the recording
office in the applicable jurisdiction retains the original Mortgage or
original assignment or the original Mortgage or original assignment has been
lost, a copy of such item certified by the applicable recording office) to the
custodian no later than the earlier of (i) five Business Days after receipt
thereof and (ii) within 180 days of the applicable Transfer Date. In addition,
within that same time period, Vanderbilt shall deliver to the custodian any
other original documents constituting a part of the Files.

     (d) Within 30 days of the end of the Funding Period Date and with respect
to the ten states which have the highest concentration of Land-and-Home
Contracts, by Cut-off Date principal balance of the Contract Pool, Vanderbilt
shall deliver an Opinion of Counsel to the Trustee and the Rating Agencies to
the effect that Vanderbilt need not cause to be recorded any assignment which
relates to Land-and-Home Contracts in such states to protect the Trustee's and
the Certificateholders' interest in such Land-and-Home Contracts (a "Non
Recordation Opinion"). Such Opinions of Counsel shall be addressed to the
Trustee and the Rating Agencies. In the event that any Opinion of Counsel
referred to in the preceding sentence is not obtainable with respect to a
state after reasonable effort, then Vanderbilt shall either record the
assignments of mortgage for each Land-and-Home Contract located in such state
or substitute an Eligible

                                      35
<PAGE>

Substitute Contract (which would not be a Land-and-Home Contract in such
state) for each Land-and-Home Contract in such state, in each case, within 90
days of the applicable Transfer Date. At the conclusion of the 90 day period,
the aggregate principal balance of Land-and-Home Contracts for which a Non
Recordation Opinion has not been delivered and for which the related
assignments of mortgage have not been recorded shall not exceed 10% of the
total principal balance of the Contract Pool.

     Section 2.05. REMIC Election; Designation of Regular and Residual
Interests; Tax Year. Vanderbilt will cause the Trust Fund (other than the
Pre-Funding Account) to elect to be treated as a REMIC. The Class A
Certificates, Class M-1 Certificates and Class B Certificates will constitute
"regular interests" in the REMIC. The Class R Certificate will constitute the
sole class of "residual interest" in the REMIC. The Holder of the Class R
Certificate hereby agrees to pay any taxes assessed against it as holder of
the "residual interest" in the REMIC. The tax year of the Trust Fund shall be
the calendar year, and the Trust Fund shall use the accrual method of
accounting.

     Section 2.06. Designation of Startup Day. The Closing Date is hereby
designated as the "startup day" of the REMIC within the meaning of Section
860G(a)(9) of the Code.

     Section 2.07. REMIC Certificate Maturity Date. Each of the Class A
Certificates, Class M-1 Certificates and Class B Certificates will be retired
on or before the Remittance Date in October 2035. The foregoing date
represents the date by which the Certificates would be reduced to zero on the
date on which the Initial Contract with the latest maturity date in the
Contract Pool matures plus 37 months.

                              [End of Article II]

                                      36
<PAGE>

                                 Article III

                        REPRESENTATIONS AND WARRANTIES

     Section 3.01. Representations and Warranties Regarding Vanderbilt.
Vanderbilt makes the following representations and warranties to the Trustee
and the Certificateholders:

     (a) Organization and Good Standing; Licensing. Vanderbilt is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Tennessee and has the corporate power to own its assets
and to transact the business in which it is currently engaged. Vanderbilt is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the character of the business transacted by it
or properties owned or leased by it requires such qualification and in which
the failure so to qualify would have a material adverse effect on the
business, properties, assets, or condition (financial or other) of Vanderbilt.
Vanderbilt was properly licensed in each jurisdiction at the time of its
purchase or origination, as applicable, of each Contract in such jurisdiction
to the extent required by the laws of such jurisdiction as applied to the
purchase or origination, as applicable, and servicing of such Contract.

     (b) Authorization; Binding Obligations. Vanderbilt has the power and
authority to make, execute, deliver and perform this Agreement and perform all
of the transactions contemplated to be performed by it under the Agreement,
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement. When executed and delivered, this
Agreement will constitute the legal, valid and binding obligation of
Vanderbilt enforceable in accordance with its terms, except as enforcement of
such terms may be limited by bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally and by the availability of
equitable remedies.

     (c) No Consent Required. Vanderbilt is not required to obtain the consent
of any other party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement, except such as have been obtained.

     (d) No Violations. The execution, delivery and performance of this
Agreement by Vanderbilt will not violate any provision of any existing law or
regulation or any order or decree of any court applicable to Vanderbilt or the
charter or bylaws of Vanderbilt, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which Vanderbilt is a
party or by which Vanderbilt may be bound.

     (e) Litigation. No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to the
knowledge of Vanderbilt, threatened, against Vanderbilt or any of its
properties or with respect to this Agreement or the Certificates which, if
adversely determined, would in the opinion of Vanderbilt have a material
adverse effect on the transactions contemplated by this Agreement.

     Section 3.02. Representations and Warranties Regarding Each Contract.
Vanderbilt represents and warrants to the Trustee and the Certificateholders
as to each Initial Contract as of the Closing Date and as to each Subsequent
Contract as of

                                      37
<PAGE>

the Subsequent Transfer Date (except as otherwise expressly stated):

     (a) Contract Schedule. The information set forth in the Contract Schedule
is true and correct.

     (b) Payments. As of the Cut-off Date, no scheduled payment of principal
or interest on any Contract was more than 59 days past due and was not made
directly or indirectly by Vanderbilt on behalf of the Obligor. As of the
Closing Date, Vanderbilt has not taken any material steps toward foreclosure
in respect of any Contract.

     (c) No Waivers. The terms of the Contract and any related Mortgage have
not been waived, altered or modified in any respect, except by instruments or
documents identified in the Contract File, the Land-and-Home Contract File or
the Mortgage Loan File, as applicable.

     (d) Binding Obligation. The Contract and any related Mortgage is the
legal, valid and binding obligation of the Obligor thereunder and is
enforceable in accordance with its terms, except as such enforceability may be
limited by laws affecting the enforcement of creditors' rights generally and
by general principles of equity.

     (e) No Defenses. The Contract and any related Mortgage is not subject to
any right of rescission, setoff, counterclaim or defense, including the
defense of usury, and the operation of any of the terms of the Contract or the
exercise of any right thereunder will not render the Contract unenforceable in
whole or in part or subject to any right of rescission, setoff, counterclaim
or defense, including the defense of usury, and no such right of rescission,
setoff, counterclaim or defense has been asserted with respect thereto.

     (f) Insurance. The Manufactured Home securing the Contract is covered by
a Hazard Insurance Policy in the amount required by Section 5.09. All premiums
due as of the Closing Date on such insurance have been paid in full.

     (g) Origination. The Contract was either (i) originated by a manufactured
housing dealer acting, to the best of Vanderbilt's knowledge, in the regular
course of its business and was purchased by Vanderbilt or an Originator in the
regular course of its business, or (ii) originated by Vanderbilt or an
Originator in the regular course of its business.

     (h) Lawful Assignment. The Contract and any related Mortgage was not
originated in and is not subject to the laws of any jurisdiction whose laws
would make the transfer or ownership of the Contract under this Agreement or
pursuant to transfers of Certificates unlawful or render the Contract
unenforceable.

     (i) Compliance with Law. All requirements of any federal, state or local
law, including, without limitation, usury, truth-in-lending and equal credit
opportunity laws and lender licensing laws, applicable to the Contract and any
related Mortgage have been complied with, and the Servicer shall, for at least
the period of this Agreement, maintain in its possession, available for the
Trustee's inspection, and shall deliver to the Trustee upon demand, evidence
of compliance with all such requirements.

                                      38
<PAGE>

     (j) Contract in Force. The Contract and any related Mortgage has not been
satisfied or subordinated in whole or in part or rescinded, and the
Manufactured Home securing the Contract has not been released from the lien of
the Contract and any related Mortgage in whole or in part.

     (k) Valid Security Interest. The Contract, together with any related
Mortgage or certificate of title, creates a valid, subsisting and enforceable
first priority security interest in favor of Vanderbilt in the Manufactured
Home covered thereby and, in the case of a Land-and-Home Contract or a
Mortgage Loan, a first mortgage lien on the related Mortgaged Property; and
the Trustee has a valid and perfected first priority security interest in such
Manufactured Home and, in the case of a Land-and-Home Contract or a Mortgage
Loan, a first mortgage lien on the related Mortgaged Property.

     (l) Capacity of Parties. All parties to the Contract and any related
Mortgage had capacity to execute the Contract.

     (m) Good Title. Vanderbilt originated or purchased the Contract and any
related Mortgage for value and took possession thereof in the ordinary course
of its business, without knowledge that the Contract was subject to any
security interest. Immediately prior to the transfer of the Contract and any
related Mortgage by Vanderbilt, Vanderbilt had good and marketable title
thereto free and clear of any encumbrance, equity, loan, pledge, charge, claim
or security interest and was the sole owner thereof with full right to
transfer the Contract and any related Mortgage to the Trustee.

     (n) No Defaults. As of the Closing Date, there was no default, breach,
violation or event permitting acceleration existing under the Contract and any
related Mortgage and no event which, with notice and the expiration of any
grace or cure period, would constitute such a default, breach, violation or
event permitting acceleration under such Contract (except payment
delinquencies permitted by clause (b) above). Vanderbilt has not waived any
such default, breach, violation or event permitting acceleration.

     (o) No Liens. As of the Closing Date, there are, to the best of
Vanderbilt's knowledge, no liens or claims which have been filed for work,
labor or materials affecting the Manufactured Home or related Mortgaged
Property securing the Contract or the Mortgage Loan, as applicable, which are
or may be liens prior to, or equal or coordinate with, the lien of the
Contract.

     (p) Equal Installments. Except for Equity Builder Contracts, each Fixed
Rate Contract has a fixed APR and provides for level monthly, bi-weekly or
semi-monthly payments of principal and interest which fully amortize the loan
over its term. If the Contract is an Adjustable Rate Contract, it has a
variable APR based on the Index. The Contract is an Actuarial Contract.

     (q) Enforceability. Each Contract and any related Mortgage contains
customary and enforceable provisions such as to render the rights and remedies
of the holder thereof adequate for the realization against the collateral of
the benefits of the security.

     (r) One Original. There is only one original executed Contract, and each
original Contract is in the custody of Vanderbilt or otherwise held on behalf
of the Trustee on the Closing Date.

                                      39
<PAGE>

     (s) Loan-to-Value Ratio. At the time of its origination each Contract had
a Loan-to-Value Ratio not greater than 100%.

     (t) Primary Residence. To the best of Vanderbilt's knowledge, at the time
of origination of the Contracts, at least 92% of the Manufactured Homes
securing the Contracts were the related Obligors' primary residences.

     (u) Not Real Estate. Except with respect to Land-and-Home Contracts and
Mortgage Loans, the related Manufactured Home is personal property, was
personal property at the time of the execution and delivery of the related
Contract by the parties thereto, and is not and was not, at such time,
considered or classified as part of the real estate on which it is located
under the laws of the jurisdiction in which it is located. The related
Manufactured Home is, to the best of Vanderbilt's knowledge, free of damage
and in good repair.

     (v) Notation of Security Interest. If the related Manufactured Home is
located in a state in which notation of a security interest on the title
document is required or permitted to perfect such security interest, the title
document shows, or if a new or replacement title document with respect to such
Manufactured Home is being applied for such title document will be issued
within 180 days and will show, Vanderbilt or the related Originator as the
holder of a first priority security interest in such Manufactured Home. If the
related Manufactured Home is located in a state in which the filing of a
financing statement or the making of a fixture filing under the UCC is
required to perfect a security interest in manufactured housing, such filings
or recordings have been duly made and show Vanderbilt as secured party. If the
related Manufactured Home secures a Land-and-Home Contract, the related land
securing such Land-and-Home Contract is subject to a Mortgage properly filed
in the appropriate public recording office and naming Vanderbilt as mortgagee.
In each such case, the Trustee has the same rights as the secured party of
record would have (if such secured party were still the owner of the Contract)
against all Persons claiming an interest in such Manufactured Home.

     (w) Qualified Mortgage for REMIC. Each Contract is secured by a "single
family residence" within the meaning of Section 25(e)(10) of the Code and is a
"qualified mortgage" under Section 860G(a)(3) of the Code.

     (x) Stamping of Contracts. Within seven days after the Closing Date, each
Initial Contract will have been stamped with the following legend: "This
Contract has been assigned to JPMorgan Chase Bank, as Trustee, or a separate
trustee, under the Pooling and Servicing Agreement dated as of July 25, 2002
or to any successor Trustee thereunder." Within seven days after the related
Subsequent Transfer Date, each Subsequent Contract will have been stamped with
the following legend: "This Contract has been assigned to JPMorgan Chase Bank,
as Trustee, or a separate trustee, under the Pooling and Servicing Agreement
dated as of July 25, 2002 or to any successor Trustee thereunder."

     (y) [Reserved]

     Section 3.03. Representations and Warranties Regarding the Contracts in
the Aggregate. Vanderbilt represents and warrants that:

                                      40
<PAGE>

     (a) Amounts. The aggregate principal amount payable by Obligors under the
Contracts as of the Cut-off Date (including scheduled principal payments due
before the Cut-off Date but received by Vanderbilt on or after the Cut-off
Date and excluding scheduled principal payments due on or after the Cut-off
Date but received by Vanderbilt prior to the Cut-off Date) equal or exceed the
Initial Principal Amount and each Contract has an APR equal to or greater than
2.750%.

     (b) Characteristics. The Initial Contracts have the following
characteristics as of the Cut-off Date: (i) except for Initial Contracts
secured by Manufactured Homes and real estate located in Texas, Tennessee and
North Carolina, not more than 4.91% of the Initial Contracts, by remaining
principal balance, are secured by Manufactured Homes or Mortgaged Properties
and located in any one state; (ii) no Initial Contract has a remaining
maturity of less than 8 months or more than 360 months; (iii) the final
scheduled payment date on the Initial Contract with the latest maturity is
September 1, 2032; (iv) no less than approximately 63.54% of the Initial
Principal Amount is attributable to loans for purchases of Manufactured Homes
or Mortgaged Properties that were new at the time the related Initial
Contracts were originated, no more than approximately 21.76% of the Initial
Principal Amount is attributable to loans for purchases of Manufactured Homes
or Mortgaged Properties that were used at the time the related Initial
Contracts were originated, and no more than approximately 14.71% of the
Initial Principal Amount is attributable to loans for purchases of
Manufactured Homes or Mortgaged Properties that were previously repossessed
and then financed with a new borrower at the time the related Initial
Contracts were originated; (v) no Initial Contract was originated before May
21, 1985; (vi) no more than 6.92% of the Initial Contracts by Cut-Off Date
principal balance are Initial Contracts for which the related land was pledged
in lieu of a down payment or a trade-in; (vii) approximately 10.95% of the
Initial Contracts by Cut-Off Date principal balance are Land-and-Home
Contracts (excluding Mortgage Loans) and no more than 4.24% of the Initial
Contracts by Cut-Off Date principal balance are Mortgage Loans; and (viii)
6.19% of the Initial Contracts by Cut-off Date principal balance is an Equity
Builder Contract.

     (c) Computer Tape. The Computer Tape made available by the Servicer as of
the close of business on July 25, 2002 was accurate as of its date and
includes a description of the same Contracts that are described in the
Contract Schedule.

     (d) Marking Records. On or before the Closing Date, Vanderbilt will have
caused the portions of the Electronic Ledger relating to the Contracts
constituting part of the Trust Fund to be clearly and unambiguously marked to
indicate that such Contracts constitute part of the Trust Fund and are owned
by the Trust Fund in accordance with the terms of the trust created hereunder.

     (e) No Adverse Selection. Except for the effect of the representations
and warranties made in Section 3.02 and 3.03 and the effect of the
geographical distribution of the Manufactured Homes, no adverse selection
procedures have been employed in selecting the Contracts.

     Section 3.04. Representations and Warranties Regarding the Contract
Files, the Land-and-Home Contract Files and the Mortgage Loan Files.
Vanderbilt represents and warrants that:

                                      41
<PAGE>

     (a) Possession. Immediately prior to the Closing Date, the Servicer will
have possession of each original Initial Contract and the remainder of the
related Contract File. In addition, the Servicer will have possession of the
Servicing Files with respect to each Initial Contract, including each
Land-and-Home Contract and each Mortgage Loan. There are and there will be no
custodial agreements in effect materially and adversely affecting the right of
Vanderbilt to make, or to cause to be made, any delivery required hereunder.

     (b) Bulk Transfer Laws. The transfer, assignment and conveyance of the
Contracts, the Contract Files, the Land-and-Home Contract Files and the
Mortgage Loan Files by Vanderbilt pursuant to this Agreement are not subject
to the bulk transfer or any similar statutory provisions in effect in any
applicable jurisdiction.

     Section 3.05. Repurchases of Contracts or Substitution of Contracts for
Breach of Representations and Warranties.

     (a) Vanderbilt shall either (i) repurchase a Contract at its Repurchase
Price, or (ii) if Vanderbilt is able to satisfy the conditions of Section
3.05(b), remove a Contract from the Trust Fund and substitute therefor an
Eligible Substitute Contract in accordance with and subject to the limitations
of Section 3.05(b), in each case not later than one Business Day after the
first Determination Date which is more than 90 days after Vanderbilt becomes
aware, or receives written notice from the Servicer or the Trustee, of a
breach of a representation or warranty of Vanderbilt set forth in Sections
3.02 or 3.03 of this Agreement that materially adversely affects the Trust
Fund's interest in such Contract, unless such breach has been cured; provided,
however, that with respect to any Contract incorrectly described on the
Contract Schedule with respect to unpaid principal balance, which Vanderbilt
would otherwise be required to repurchase pursuant to this Section, Vanderbilt
may, in lieu of repurchasing such Contract, deposit in the Certificate Account
not later than one Business Day after such Determination Date cash in an
amount sufficient to cure such deficiency or discrepancy; and provided,
further, that with respect to a breach of a representation or warranty
relating to the Contracts in the aggregate and not to each particular
Contract, Vanderbilt may select Contracts to repurchase or substitute for such
that, had such Contracts not been included as part of the Contract Pool and
after giving effect to such substitution, if any, there would have been no
breach of such representation or warranty. It is understood and agreed that
the obligation of Vanderbilt to repurchase or substitute for any Contract as
to which a breach of a representation or warranty set forth in Section 3.02 or
3.03 of this Agreement has occurred and is continuing shall constitute the
sole remedy respecting such breach available to the Certificateholders or the
Trustee; provided, however, that Vanderbilt shall defend and indemnify the
Trustee, the Trust Fund and Certificateholders against all costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or suffered by any of them
as a result of third-party claims arising out of any breach of a
representation or warranty set forth in Section 3.02 or 3.03. Nothing in the
preceding sentence shall be construed to limit the indemnification obligations
of the Servicer set forth in Section 10.05 hereof. Notwithstanding any other
provision of this Agreement, the obligation of Vanderbilt under this Section
shall not terminate upon an Event of Default and the indemnification
obligation of the Servicer in this Section shall survive the resignation or
removal of the Trustee and the termination of this Agreement.

                                      42
<PAGE>

     Notwithstanding any other provision of this Agreement to the contrary,
any amount received on or recovered with respect to repurchased Contracts or
Replaced Contracts during or after the Due Period in which such repurchase
occurs shall be the property of Vanderbilt and need not be deposited in the
Certificate Account.

     Notwithstanding the foregoing, Vanderbilt shall not deposit cash into the
Certificate Account pursuant to this Section 3.05 after the end of the three
month period beginning on the Closing Date unless it shall first have obtained
an Opinion of Counsel to the effect that such deposit will not give rise to
any tax under Section 860F(a)(1) of the Code or Section 860G(d) of the Code.
Any such deposit shall not be invested. If Vanderbilt is required to purchase
such Contract (or deposit cash in the Certificate Account), Vanderbilt shall
guarantee the payment of any tax under Section 860F(a)(1) of the Code or under
Section 860G(d) of the Code by paying to the Trustee the amount of such tax
not later than five Business Days before such tax shall be due and payable to
the extent that amounts previously paid over to and then held by the Trustee
pursuant to Section 5.17 hereof are insufficient to pay such tax and all other
taxes chargeable under Section 5.17. If a payment of tax by Vanderbilt is
required in connection with a repurchase, Vanderbilt shall give the Trustee
notice of such tax and the amount of such tax and the date by which Vanderbilt
shall provide funds to the Trustee to cover such tax. The Trustee shall hold
any amount paid to it pursuant to the preceding sentence in an account that is
not part of the Trust Fund. The Servicer shall give notice to the Trustee at
the time of such repurchase of the amounts due from Vanderbilt pursuant to the
guarantee of Vanderbilt and notice as to who should receive such payment.

     The Trustee shall have no obligation to pay any such amounts pursuant to
this Section other than from moneys provided to it by Vanderbilt or from
moneys held in the funds and accounts created under this Agreement. The
Trustee shall be deemed conclusively to have complied with this Section if it
follows the directions of the Servicer.

     In the event any tax that is guaranteed by Vanderbilt is refunded to the
Trust Fund or otherwise is determined not to be payable, Vanderbilt shall be
repaid the amount of such refund or that portion of any guarantee payment made
by Vanderbilt that is not applied to the payment of such tax.

     Notwithstanding the above provisions of this Section 3.05(a), Vanderbilt
shall not be required to repurchase or substitute for any Contract on account
of a breach of the representation or warranty contained in Section 3.02(k) or
(v) solely on the basis of failure by Vanderbilt to cause notations to be made
on any document of title relating to any Manufactured Home or to execute any
transfer instrument relating to any Manufactured Home (other than a notation
or a transfer instrument necessary to show Vanderbilt as lienholder or legal
title holder) unless (i) a court of competent jurisdiction has adjudged that,
because of such failure, the Trustee does not have a perfected first-priority
security interest in the related Manufactured Home or (ii) (A) the Servicer
has received written advice of counsel (with a copy to the Trustee) to the
effect that a court of competent jurisdiction has held that, solely because of
a substantially similar failure on the part of a pledgor or assignor of
manufactured housing contracts (who has perfected the assignment or pledge of
such contracts), a perfected first-priority security interest was not created
in favor of the pledgee or assignee (as the case may be) in a related
manufactured home which is located in such jurisdiction and which is subject
to the same laws regarding the

                                      43
<PAGE>

perfection of security interest therein as apply to Manufactured Homes located
in such jurisdiction, and (B) the Servicer shall not have completed all
appropriate remedial action with respect to such Manufactured Home within 180
days after receipt of such written advice. Any such advice shall be from
counsel selected by the Servicer on a non-discriminatory basis from among the
counsel used by the Servicer in its general business in the jurisdiction in
question. The Servicer shall have no obligation on an ongoing basis to seek
any advice with respect to the matters described in clause (ii) above.
However, the Servicer shall seek advice with respect to such matters whenever
information comes to the attention of its General Counsel which causes such
General Counsel to determine that a holding of the type described in clause
(ii) (A) might exist.

     (b) On or prior to the date that is the second anniversary of the Closing
Date, Vanderbilt, at its election, may substitute one or more Contracts for a
Contract that it is obligated to repurchase pursuant to Section 3.05(a) (such
Contract being referred to as the "Replaced Contract") upon satisfaction of
the following conditions:

          (i) each Contract to be substituted for the Replaced Contract is an
     Eligible Substitute Contract and Vanderbilt delivers an Officer's
     Certificate, substantially in the form of Exhibit F hereto, to the
     Trustee certifying that such Contract is an Eligible Substitute Contract,
     describing in reasonable detail how such Contract satisfies the
     definition of the term "Eligible Substitute Contract" (as to satisfaction
     of representations and warranties, such description shall be that such
     Contract satisfies such representations and warranties) and certifying
     that (a) the Contract File for such Contract is in the possession of the
     Servicer or (b) the Land-and-Home Contract File or the Mortgage Loan File
     for such Contract is in the possession of a custodian acting on behalf of
     the Trustee;

          (ii) Vanderbilt shall have delivered to the Trustee evidence of
     filing with the appropriate office in Tennessee of a UCC-1 financing
     statement describing such Contract executed by Vanderbilt as seller,
     naming the Trustee as purchaser and bearing the statement set forth in
     Section 2.02(a);

          (iii) Vanderbilt shall have delivered to the Trustee an Opinion of
     Counsel (a) to the effect that the substitution of such Contract for such
     Replaced Contract will not cause the Trust Fund to fail to qualify as a
     REMIC at any time under then applicable REMIC Provisions or cause any
     "prohibited transaction" that will result in the imposition of a tax
     under such REMIC Provisions and (b) to the effect that no filing or other
     action other than the filing of a financing statement on Form UCC-1 with
     the Secretary of State of the State of Tennessee, naming Vanderbilt as
     debtor and the Trustee as secured party, and the filing of continuation
     statements as required by Section 2.02(a) of this Agreement, is necessary
     to perfect as against third parties the conveyance of the Contracts by
     Vanderbilt to the Trustee; and

          (iv) if the aggregate of the Scheduled Principal Balances of the
     Replaced Contracts, if any, is greater than the Scheduled Principal
     Balances of the Contracts substituted for such Replaced Contracts,
     Vanderbilt shall have deposited in the Certificate Account the amount of
     such excess and shall have included in the Officer's Certificate required
     by clause (i) above a certification that such deposit has been made.

                                      44
<PAGE>

Upon satisfaction of such conditions, the Servicer shall add each such
Contract to, and delete each such Replaced Contract from (or cause such
addition and deletion to be accomplished), the Contract Schedule and shall
deliver a copy of such amended Contract Schedule to the Trustee. Such
substitution shall be effected prior to the first Determination Date that
occurs more than 90 days after Vanderbilt becomes aware, or receives written
notice from the Servicer or the Trustee, of the breach referred to in Section
3.05(a).

     (c) Promptly after the repurchase referred to in Section 3.05(a) or the
substitution referred to in Section 3.05(b), the Trustee shall execute such
documents as are presented to it by Vanderbilt and are reasonably necessary to
reconvey, without recourse, representation or warranty, the repurchased
Contract or Replaced Contract, as the case may be, to Vanderbilt.

                             [End of Article III]

                                      45
<PAGE>

                                  Article IV

                               THE CERTIFICATES

     Section 4.01. The Certificates. The Class A, Class M-1, Class B and Class
R Certificates shall be substantially in the forms annexed hereto as Exhibit
B-1, Exhibit B-2, Exhibit C and Exhibit D, respectively, and Exhibit E
(reverse of all Certificates), with such immaterial changes as Vanderbilt
deems appropriate, and on original issue, shall be executed by manual or
facsimile signature at the written direction of Vanderbilt by an authorized
officer of the Trustee, countersigned by the Trustee and delivered to or upon
the written order of Vanderbilt. The Class A-1F Certificates, Class A-1V
Certificates, Class A-2 Certificates, Class A-3 Certificates, Class A-4
Certificates, Class A-5 Certificates, Class M-1 Certificates, Class B-1
Certificates and Class B-2 Certificates shall each be evidenced initially by
single certificates representing $30,000,000, $101,726,000, $120,364,000,
$64,300,000, $96,110,000, $22,500,000, $20,000,000, $18,750,000, and
$26,250,000, respectively, in initial aggregate principal balance, beneficial
ownership of such Certificates to be held through Book-Entry Certificates. The
Class R Certificate shall initially be held in the name of Vanderbilt SPC,
Inc. Each Certificate other than the Class R Certificate shall be issued in
minimum dollar denominations of $50,000 and integral dollar multiples of $1 in
excess thereof. Upon original issuance, the sum of the denominations of each
Class of the Class A-1F Certificates, Class A-1V Certificates, Class A-2
Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class M-1 Certificates, Class B-1 Certificates and Class B-2
Certificates, as the case may be, shall equal the Original Class A-1F
Principal Balance, the Original Class A-1V Principal Balance, the Original
Class A-2 Principal Balance, the Original Class A-3 Principal Balance, the
Original Class A-4 Principal Balance, the Original Class A-5 Principal
Balance, the Original Class M-1 Principal Balance, the Original Class B-1
Principal Balance and the Original Class B-2 Principal Balance, respectively.
The Class R Certificate shall not have a principal balance.

     The Certificates shall be countersigned by manual signature on behalf of
the Trustee by one of its authorized officers or its Authenticating Agent
pursuant to Section 4.07 at the written direction of Vanderbilt. Certificates
bearing the signatures of individuals who were at any time the proper officers
of the Trustee shall bind the Trustee, notwithstanding that such individuals
or any of them have ceased to hold such offices prior to the countersignature
and delivery of such Certificate or did not hold such offices at the date of
such Certificates. No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless there appears on such
Certificate a manual countersignature by the Trustee or its Authenticating
Agent and such countersignature upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
countersigned and delivered hereunder. All Certificates shall be dated the
date of their countersignature.

     The rights of the Certificateholders to receive payments with respect to
the Trust Fund in respect of the Certificates, and all ownership interests of
the Certificateholders in such payments, shall be as set forth in this
Agreement.

                                      46
<PAGE>

     Section 4.02. Registration of Transfer and Exchange of Certificates.

     (a) The Trustee shall cause to be kept at its Corporate Trust Office or,
at the election of the Trustee, at the office of its designated agent in New
York City, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided.

     (b) Subject to Section 4.02(c) and the other provisions of this Section,
upon surrender for registration of transfer of any Certificate at any office
or agency of the Trustee maintained for such purpose, the Trustee shall
execute, countersign and deliver, in the name of the designated transferee or
transferees, a Certificate of a like aggregate Percentage Interest and dated
the date of countersignature by the Trustee or its Authenticating Agent. No
transfer of an ERISA Restricted Certificate that is a Definitive Certificate
shall be made unless the Trustee shall have received either (i) a written
representation from the proposed transferee to the effect that it is not an
employee benefit plan subject to Section 406 of ERISA or Section 4975 of the
Code or a person acting on behalf of any such plan or using the assets of any
such plan to effect such transfer, (ii) except in the case of a Class R
Certificate, if the purchaser is an insurance company, a written
representation that the purchaser is an insurance company which is purchasing
such Certificates with funds contained in an "insurance company general
account" (as such term is defined in Section V(e) of Prohibited Transaction
Class Exemption 95-60 ("PTCE 95-60") and that the purchase and holding of such
Certificates are covered under Section I and III of PTCE 95-60 or (iii) in the
case of any such ERISA Restricted Certificate presented for registration in
the name of an employee benefit plan subject to ERISA, or a plan or
arrangement subject to Section 4975 of the Code (or comparable provisions of
any subsequent enactments), or a trustee of any such plan or any other person
acting on behalf of any such plan or arrangement or using such plan's or
arrangement's assets, an Opinion of Counsel satisfactory to the Trustee, which
Opinion of Counsel shall not be an expense of either the Trustee, the Trust
Fund, Vanderbilt or the Servicer, addressed to the Trustee, to the effect that
the purchase or holding of such Certificate will not result in the assets of
the Trust Fund being deemed to be "plan assets" and subject to the prohibited
transaction provisions of ERISA and the Code and will not subject the Trustee
to any obligation in addition to those expressly undertaken in this Agreement
or to any liability financial or otherwise. For purposes of the preceding
sentence, with respect to an ERISA Restricted Certificate that is a Book-Entry
Certificate, in the event the representation letter referred to in the
preceding sentence is not furnished, such representation shall be deemed to
have been made to the Trustee by the transferee's (including an initial
acquiror's) acceptance of the Certificates. Notwithstanding anything else to
the contrary herein, any purported transfer of an ERISA Restricted Certificate
to or on behalf of an employee benefit plan subject to ERISA or to the Code
without the delivery to the Trustee of an Opinion of Counsel satisfactory to
the Trustee as described above shall be void and of no effect.

     Each Private Certificate shall bear a legend substantially to the
following effect:

     "THIS CLASS [ ] CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
     ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
     BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT OR
     LAWS OR

                                      47
<PAGE>

     IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
     REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE LAW AND IS
     TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4.02 [WITH
     RESPECT TO CLASS R: SECTION 4.08] OF THE AGREEMENT REFERRED TO HEREIN."

     No transfer of a Private Certificate shall be made unless such transfer
is made pursuant to an effective registration statement or in accordance with
an exemption from the requirements under the Securities Act of 1933, as
amended, or any applicable state securities laws. If such a transfer is to be
made in reliance upon an exemption from said Act and laws, prior to the
registration of any such transfer (i) the Trustee or Vanderbilt may require a
written Opinion of Counsel acceptable to and in form and substance
satisfactory to the Trustee and Vanderbilt that such transfer may be made
pursuant to an exemption, describing the applicable exemption and the basis
therefor, from said Act and laws or is being made pursuant to said Act and
laws, which Opinion of Counsel shall not be an expense of the Trustee,
Vanderbilt or the Servicer, and (ii) the Trustee shall require the transferee
to execute a certification, substantially in the form of Exhibit I hereto,
acceptable to and in form and substance satisfactory to Vanderbilt and the
Trustee setting forth the facts surrounding such transfer; provided that such
Opinion of Counsel shall not be required in the case of transfers by or to
Vanderbilt SPC, Inc. Such Opinions of Counsel shall not be an expense of the
Trustee, Vanderbilt or the Servicer. If a transfer of a Private Certificate is
to be made pursuant to an effective registration statement, prior to
registration of any such transfer, the transferor shall surrender such Private
Certificate to be exchanged at any office or agency of the Trustee maintained
for such purpose. Whenever such Private Certificate is so surrendered for
exchange, the Trustee or its Authenticating Agent shall execute, countersign
and deliver, a Certificate or Certificates which does not include the legend
set forth in the preceding paragraph. Each such Certificate which is also a
Book-Entry Certificate shall include the legend set forth Section 4.03(g) and
shall be delivered to the Depository.

     (c) At the option of the Certificateholder, a Certificate may be
exchanged for another Certificate or Certificates of the same Class and of
authorized denominations of the same aggregate denomination, upon surrender of
the Certificate to be exchanged at any office or agency of the Trustee
maintained for such purpose. Whenever the Certificate is so surrendered for
exchange, the Trustee or its Authenticating Agent shall execute, countersign
and deliver, the Certificate or Certificates which the Certificateholder
making the exchange is entitled to receive. Every Certificate presented or
surrendered for registration of transfer or exchange (if so required by the
Trustee) shall be duly endorsed by, or be accompanied by a written instrument
of transfer in the form satisfactory to the Trustee or the Certificate
Registrar duly executed by, the Holder thereof or his attorney duly authorized
in writing.

     (d) No service charge shall be made to the Holder for any registration of
transfer or exchange of a Certificate, but the Trustee may require payment of
a sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer or exchange of such Certificate.

                                      48
<PAGE>

     (e) All Certificates surrendered for registration of transfer or exchange
shall be held in accordance with the retention policy of the Trustee.

     (f) Except as provided in paragraph (g) below, the Book-Entry
Certificates shall at all times remain registered in the name of the
Depository or its nominee and at all times: (i) transfer of the Book-Entry
Certificates may not be registered by the Trustee except to another
Depository; (ii) the Depository shall maintain book-entry records with respect
to the Certificate Owners and with respect to ownership and transfers of such
Book-Entry Certificates; (iii) ownership and transfers of registration of the
Book-Entry Certificates on the books of the Depository shall be governed by
applicable rules established by the Depository; (iv) the Depository may
collect its usual and customary fees, charges and expenses from its Depository
Participants; (v) the Trustee shall deal only with the Depository and its
nominee, which, in the case of the initial Depository, shall be Cede & Co., as
registered Holder of the Book-Entry Certificates for purposes of exercising
the rights of Holders under this Agreement, and requests and directions for
and votes of such Persons shall not be deemed to be inconsistent if they are
made with respect to different Certificate Owners; and (vi) the Trustee may
conclusively rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its Depository Participants and
furnished by the Depository Participants with respect to indirect
participating firms and Persons shown on the books of such indirect
participating firms as direct or indirect Certificate Owners.

     All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owner. Each
Depository Participant shall only transfer Book-Entry Certificates of
Certificate Owners it represents or of brokerage firms for which it acts as
agent in accordance with the Depository's normal procedures.

     (g) If (x)(i) Vanderbilt or the Depository advises the Trustee in writing
that the Depository is no longer willing, qualified or able to properly
discharge its responsibilities as Depository, and (ii) the Trustee and
Vanderbilt are unable to locate a qualified successor, (y) Vanderbilt at its
option advises the Trustee in writing that it elects to terminate the
book-entry system through the Depository and obtains the consent of the
Trustee and the Servicer to such termination, or (z) after the occurrence of
an Event of Default, the Depository notifies the Trustee that Certificate
Owners representing Fractional Interests aggregating not less than 51% of the
aggregate Fractional Interests of the Book-Entry Certificates together have
advised the Depository through the Depository Participants in writing that the
continuation of a book-entry system through the Depository is no longer in the
best interests of the Certificate Owners, the Trustee shall send notice to the
Depository for distribution to the Certificate Owners, of the occurrence of
any such event and of the availability of definitive, fully registered
Certificates (the "Definitive Certificates") to Certificate Owners requesting
the same. Upon surrender to the Trustee of the Certificates by the Depository,
accompanied by registration instructions from the Depository for registration
of transfer, the Trustee shall countersign the Definitive Certificates.
Neither Vanderbilt nor the Trustee shall be liable for any delay in delivery
of such instructions and may conclusively rely on, and shall be fully
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates; all references herein to obligations imposed upon or to be
performed by the Depository shall be deemed to be imposed upon and performed
by the Trustee,

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<PAGE>

to the extent applicable with respect to such Definitive Certificates, and the
Trustee shall recognize the Holders of the Definitive Certificates as
Certificateholders hereunder.

     (h) On or prior to the Closing Date, there shall be delivered to the
Depository one Class A-1F Certificate, Class A-1V Certificate, one Class A-2
Certificate, one Class A-3 Certificate, one Class A-4 Certificate, one Class
A-5 Certificate, one Class M-1 Certificate, one Class B-1 Certificate and one
Class B-2 Certificate in registered form registered in the name of the
Depository's nominee, Cede & Co., the total face amount of each of which
represents 100% of the Original Class A-1F Principal Balance, 100% of the
Original Class A-1V Principal Balance, 100% of the Original Class A-2
Principal Balance, 100% of the Original Class A-3 Principal Balance, 100% of
the Original Class A-4 Principal Balance, 100% of the Original Class A-5
Principal Balance, 100% of the Original Class M-1 Principal Balance, 100% of
the Original Class B-1 Principal Balance and 100% of the Original Class B-2
Principal Balance, respectively. Each Certificate registered in the name of
the Depository shall bear the following legend:

          "Unless this Certificate is presented by an authorized
     representative of The Depository Trust Company to the Trustee or its
     agent for registration of transfer, exchange or payment, and any
     certificate issued is registered in the name of Cede & Co. or such other
     name as requested by an authorized representative of The Depository Trust
     Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR
     OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
     since the registered owner hereof, Cede & Co., has an interest herein."

     (i) All transfers of a Class R Certificate shall be made in accordance
with Section 4.08.

     (j) In order to assure the inapplicability of certain prohibitions
imposed by Section 406(b)(1) and (2) of ERISA and Section 4975(a)(1)(E) of the
Code in connection with the initial issuance of the Certificates, each Plan or
person using Plan Assets that acquires Certificates from the Underwriters or
from Vanderbilt or any of its affiliates shall be deemed to represent and
warrant that no person who has discretionary authority or renders investment
advice with respect to such acquisition (and no affiliate of such a person) is
an obligor with respect to any of the Contracts.

     Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificate. If (i)
any mutilated Certificate is surrendered to the Trustee or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee and any Certificate
Registrar such security or indemnity as may be required by it to save each of
them harmless, then, in the absence of notice to a Responsible Officer of the
Trustee that such Certificate has been acquired by a bona fide purchaser, the
Trustee shall countersign and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of the
same Class and of like tenor and denomination. Upon the issuance of any new
Certificate under this Section, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses connected therewith. Any
replacement Certificate issued pursuant to this Section shall constitute
complete and indefeasible evidence of ownership in the Trust Fund, as if
originally issued, whether or not the destroyed, lost or stolen Certificate
shall be found at any time.

     Section 4.04. Persons Deemed Owners. Vanderbilt, the Servicer, the
Certificate Registrar, the Trustee and any Paying Agent may treat the Person
in whose name any Certificate is registered as the owner of such Certificate
for the purpose of receiving payments pursuant to Section 6.01 and for all
other purposes whatsoever, and none of Vanderbilt, the Servicer, any Paying
Agent, the Certificate Registrar nor the Trustee shall be affected by notice
to the contrary.

     Section 4.05. Appointment of Paying Agent. The Trustee may appoint a
Paying Agent for the purpose of making distributions to Certificateholders
pursuant to Section 6.01 and

                                      50
<PAGE>

payments pursuant to Section 5.17. Any Paying Agent or its parent company so
appointed either shall be a bank or trust company or shall have a rating
acceptable to the Rating Agencies. In the event of any such appointment, on or
prior to each Remittance Date, the Trustee shall deposit or cause to be
deposited with the Paying Agent, from amounts in each Certificate Account, a
sum sufficient to make the payments to the related Certificateholders in the
amounts and in the manner provided for in Section 6.01, such sum to be held in
trust for the benefit of the related Certificateholders. The Trustee initially
appoints itself as Paying Agent.

     The Trustee shall cause each Paying Agent (other than itself) to execute
and deliver to the Trustee an instrument in which such Paying Agent shall
agree with the Trustee that such Paying Agent is at all times acting as agent
for the Trustee and such Paying Agent will hold all sums held by it for the
payment to Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders.

     Section 4.06. Access to List of Certificateholders' Names and Addresses.
The Certificate Registrar will furnish to the Trustee (if the Trustee is not
the Certificate Registrar), Vanderbilt and the Servicer within five days after
receipt by the Certificate Registrar of a written request therefor from the
Trustee, Vanderbilt or the Servicer a list, in such form as the Trustee,
Vanderbilt or the Servicer reasonably may require, of the names and addresses
of the Certificateholders as of the most recent Record Date. If Holders of
Certificates of any Class evidencing, as to such Class, aggregate Percentage
Interests of 25% or more (the "Applicants") apply in writing to the Trustee,
and such application states that the Applicants desire to communicate with
other Certificateholders of such Class with respect to their rights under this
Agreement or under the Certificates of such Class and is accompanied by a copy
of the communication which such Applicants propose to transmit, then the
Trustee, within five Business Days after the receipt of such application,
shall afford such Applicants access during normal business hours to the most
recent list of Certificateholders of such Class held by the Trustee. If such
list is as of a date more than 90 days prior to the date of receipt of such
applicants' request, the Trustee promptly shall request from the Certificate
Registrar a current list as provided above, and shall afford such Applicants
access to such list during normal business hours promptly upon receipt. Every
Certificateholder, by receiving and holding a Certificate, agrees with the
Certificate Registrar and the Trustee that neither the Servicer, the
Certificate Registrar, Vanderbilt nor the Trustee shall be held accountable by
reason of the disclosure of any such information as to the names and addresses
of the Certificateholders hereunder, regardless of the source from which such
information was derived.

     Section 4.07. Authenticating Agents. The Trustee may appoint one or more
Authenticating Agents with power to act on its behalf and subject to its
direction in the execution and delivery of the Certificates. For all purposes
of this Agreement, the execution and delivery of Certificates by the
Authenticating Agent pursuant to this Section shall be deemed to be the
execution and delivery of Certificates "by the Trustee."

     Section 4.08. Class R Certificate.

     (a) The Class R Certificate shall not be assigned or transferred except
in accordance with this Section 4.08 and any other applicable provision of
this Agreement.

                                      51
<PAGE>

     (b) Each Person who has or acquires any Ownership Interest (as defined
below) in the Class R Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest in such Class R Certificate to have
agreed to be bound by the following provisions and to have irrevocably
appointed the Servicer as its attorney-in-fact to negotiate the terms of any
mandatory sale under clause (vi) below and to execute all instruments of
transfer and to do all other things necessary in connection with any such
sale, and the rights of each Person acquiring any Ownership Interest in a
Class R Certificate are expressly subject to the following provisions:

          (i) Each Person holding or acquiring any Ownership Interest in a
     Class R Certificate shall be a Permitted Transferee (as defined below)
     and shall promptly notify the Servicer and the Trustee in writing of any
     change or impending change in its status as a Permitted Transferee.

          (ii) Any Ownership Interest in a Class R Certificate may not be
     subject to a Transfer (as defined below) without the express written
     consent of the Servicer (with a copy to the Trustee), and the Trustee
     shall not recognize the Transfer (as defined below) of such Class R
     Certificate, and such proposed Transfer shall not be effective, without
     such consent with respect thereto. In connection with any proposed
     Transfer of any Ownership Interest in a Class R Certificate, the Servicer
     shall, as a condition to such consent, require delivery to it, in form
     and substance satisfactory to it, and the proposed Transferee shall
     deliver to the Servicer and the Trustee, the following:

               (A) an affidavit (a "Transfer Affidavit") of the proposed
          Transferee in the form attached as Exhibit H hereto; and

               (B) an express agreement by the proposed Transferee to be bound
          by and to abide by the provisions of this Section.

     The Servicer shall notify the Trustee in writing of any such Transfer to
which it consents.

          (iii) Notwithstanding the delivery of a Transfer Affidavit by a
     proposed Transferee under clause (ii) above, if the Servicer or a
     Responsible Officer of the Trustee has actual knowledge that the proposed
     Transferee is not a Permitted Transferee, no Transfer of any Ownership
     Interest in a Class R Certificate to such proposed Transferee shall be
     effected.

          (iv) Each Person holding or acquiring any Ownership Interest in a
     Class R Certificate shall agree (A) to require a Transfer Affidavit from
     any other Person to whom such Person attempts to Transfer any Ownership
     Interest in such Class R Certificate and (B) not to Transfer any
     Ownership Interest in such Class R Certificate or to cause the Transfer
     of any Ownership Interest in such Class R Certificate to any other Person
     if it has actual knowledge that such Person is not a Permitted
     Transferee.

          (v) Any attempted or purported Transfer of any Ownership Interest in
     a Class R Certificate in violation of the provisions of this Section
     shall be absolutely null and void and shall vest no rights in the
     purported Transferee. If any purported Transferee shall become the holder
     of an Ownership Interest in a Class R Certificate in violation of the
     provisions of this Section, then, upon discovery by a Responsible Officer
     of the

                                      52
<PAGE>

     Trustee of, or due notification to the Trustee that the recognition of
     the Transfer of such Ownership Interest in such Class R Certificate was
     not in fact permitted by this Section, the last preceding Permitted
     Transferee shall be restored to all rights as Holder thereof retroactive
     to the date of Transfer of such Ownership Interest in such Class R
     Certificate. The Trustee shall promptly notify the Servicer if it
     discovers or receives notice of such an impermissible Transfer. The
     Trustee shall be under no liability to any Person for permitting the
     Transfer of an Ownership Interest in a Class R Certificate that is in
     fact not permitted by this Section or for making any payments in respect
     of a Class R Certificate to the Holder thereof or taking any other action
     with respect to such Holder under the provisions of this Agreement so
     long as the Transfer was made with the express prior written consent of
     the Servicer. The Trustee shall be entitled but not obligated to recover
     from any Holder of a Class R Certificate that was in fact not a Permitted
     Transferee at the time it became a Holder or, at such subsequent time as
     it became other than a Permitted Transferee, all payments made on such
     Class R Certificate at and after such time. Any such payments so
     recovered by the Trustee shall be paid and delivered by the Trustee to
     the last preceding Permitted Transferee of such Class R Certificate.

          (vi) If any purported Transferee shall be a Holder of a Class R
     Certificate in violation of the restrictions in this Section, then the
     Servicer shall have the right without notice to the Holder or any prior
     Holder of such Class R Certificate to sell such Class R Certificate to a
     purchaser selected by the Servicer on such terms as the Servicer may
     choose. Such purchaser may be the Servicer itself or any Affiliate of the
     Servicer. The proceeds of such sale, net of commissions (which may
     include commissions payable to the Servicer or its Affiliates), expenses
     and taxes due, if any, will be remitted by the Servicer to the last
     preceding Permitted Transferee of such Class R Certificate, except that
     in the event that the Servicer determines that the Holder or any prior
     Holder of such Class R Certificate will be liable for any amount due
     under this Section or any other provisions of this Agreement, the
     Servicer shall so inform the Trustee in writing, and the Trustee shall
     withhold a corresponding amount from such remittance as security for such
     claim, and shall incur no liability to any Person for doing so. The terms
     and conditions of any sale under this clause (vi) shall be determined in
     the sole discretion of the Servicer, and it shall not be liable for the
     exercise of such discretion to any Person holding or purporting to hold a
     Class R Certificate.

     Upon notice to the Servicer that any legal or beneficial interest in any
portion of a Class R Certificate has been transferred, either directly or
indirectly, to any Person that is not a Permitted Transferee or an agent
thereof (including a broker, nominee, or middleman) in contravention of the
foregoing restrictions, or that is a pass-through entity, as defined in
Section 860E(e)(6) of the Code, an interest in which is held of record by a
Person that is not a "Permitted Transferee," the Servicer agrees to furnish to
the Internal Revenue Service and those Persons specified in Section 860E(e)(5)
of the Code such information necessary to the application of Section 860E(e)
of the Code as may be required by the Code, including but not limited to, the
present value of the total anticipated excess inclusions with respect to such
Class R Certificate (or portion thereof) for periods after such Transfer and
the total excess inclusions for any taxable year allocable to any holder of an
interest in such pass-through entity which is not a Permitted Transferee. At
the election of the Servicer, the Servicer may charge a reasonable fee for
computing and furnishing such information to the transferor or to such agent
or to such pass-

                                      53
<PAGE>

through entity referred to above; however, the Servicer shall in no event be
excused from furnishing such information to the Internal Revenue Service. The
foregoing restrictions on transfer contained in this Section 4.08(b) shall
cease to apply to Transfers occurring on or after the date on which there
shall have been delivered to the Trustee, Vanderbilt and the Servicer, in form
and substance satisfactory to the Servicer, an Opinion of Counsel that
eliminating such restrictions will not cause the Trust Fund to fail to qualify
as a REMIC at any time while the Certificates are outstanding.

     "Ownership Interest" means any legal or beneficial, direct or indirect,
ownership or other interest.

     "Permitted Transferee" means any Person other than (a) the United States,
a State or any political subdivision thereof, any possession of the United
States, or any agency or instrumentality of any of the foregoing (other than
an instrumentality that is a corporation if all of its activities are subject
to tax and, except for the Federal Home Loan Mortgage Corporation, a majority
of its board of directors is not selected by any such governmental unit), (b)
a foreign government, international organization or agency or instrumentality
of either of the foregoing (other than an instrumentality that is a
corporation if all of its activities are subject to tax and a majority of its
board of directors is not selected by any such governmental unit), (c) an
organization which is exempt from tax imposed by Chapter 1 of the Code
(including the tax imposed by Code Section 511 on unrelated business taxable
income) on any excess inclusions (as defined in Code Section 860E(c)(1)) with
respect to a Class R Certificate (except certain farmers' cooperatives
described in Code Section 521), (d) rural electric and telephone cooperatives
described in Code Section 1381(a)(2), (e) a Non-U.S., Person, (f) an "electing
large partnership" within the meaning of Section 775 of the Code, (g) or a
foreign permanent establishment or fixed base (within the meaning of an
applicable income tax treaty) of a U.S. Person and (h) any other Person so
designated by the Servicer based upon an Opinion of Counsel that the Transfer
of an Ownership Interest in a Class R Certificate to such Person may cause the
Trust Fund to fail to qualify as a REMIC at any time that the Certificates are
outstanding. The terms "United States," "State" and "International
Organization" shall have the meanings set forth in Code Section 7701 or
successor provisions. A "Non-U.S. Person" means an individual, corporation,
partnership or other entity which is not a "U.S. Person."

     A "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity treated as a corporation or
partnership for United States federal income tax purposes organized in or
under the laws of the United States or any state thereof or the District of
Columbia (other than a partnership that is not treated as a United States
person under any applicable Treasury regulations) or (iii) an estate the
income of which is includible in gross income for United States tax purposes,
regardless of its source, or (iv) a trust if a court within the United States
is able to exercise primary supervision over the administration of the trust
and one or more United States persons have authority to control all
substantial decisions of the trust. Notwithstanding the preceding sentence, to
the extent provided in regulations, certain trusts in existence on August 20,
1996 and treated as United States persons prior to such date that elect to
continue to be treated as United States persons shall be considered United
States persons as well.

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<PAGE>

     "Transfer" means any direct or indirect transfer or sale of any Ownership
Interest in a Class R Certificate.

     "Transferee" means any Person who is acquiring by Transfer any Ownership
Interest in a Class R Certificate.

     (c) Except as otherwise provided herein, a Class A-5, Class M-1, Class
B-1 or Class B-2 Certificate shall not be registered in the name of Vanderbilt
or any Affiliate thereof, unless the Trustee shall first have received written
notification from the Rating Agencies that such Transfer will not cause a
reduction or withdrawal of the rating then assigned to any of the
Certificates.

                              [End of Article IV]

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<PAGE>

                                  Article V

                   ADMINISTRATION AND SERVICING OF CONTRACTS

     Section 5.01. Responsibility for Contract Administration and Servicing.
The Servicer shall service and administer the Contracts and, subject to the
terms of this Agreement, shall have full power and authority to do any and all
things which it may deem necessary or desirable in connection with such
servicing and administration. Subject to Section 5.02, without limiting the
generality of the foregoing, the Servicer hereby is authorized and empowered
when the Servicer believes it appropriate in its best judgment, to execute and
deliver, on behalf of the Certificateholders and the Trustee or any of them,
any and all instruments of satisfaction or cancellation, or of partial or full
release or discharge and all other comparable instruments, with respect to the
Contracts and any related Mortgages and with respect to the Manufactured Homes
and any related Mortgaged Property. The Trustee shall execute and deliver to
the Servicer any powers of attorney and other documents prepared by the
Servicer and certified to the Trustee as being necessary or appropriate to
enable the Servicer to service and administer the Contracts. Such power of
attorney shall be in the form of Exhibit L hereto.

     The Servicer may perform its servicing and administration functions, as
Servicer, pursuant to this Agreement through one or more subservicers. All
actions by any subservicer with respect to the servicing and administration of
the Contracts shall be treated as though done by the Servicer itself. All
documents, instruments or contracts executed by any subservicer on behalf of
the Servicer shall be treated by the Trustee as though executed by the
Servicer itself. The Servicer shall remain primarily liable for all actions of
any subservicer.

     Section 5.02. Standard of Care. In managing, administering, servicing and
making collections on the Contracts pursuant to this Agreement, the Servicer
will exercise the same degree of skill and care, consistent with the terms of
this Agreement, that the Servicer exercises with respect to similar
manufactured housing contracts owned and serviced by the Servicer but in no
event shall such standard be lower than the standard prevailing in the
industry; provided, however, that notwithstanding the foregoing, the Servicer
shall not release or waive the right to collect the unpaid balance on any
Contract; provided further that nothing herein shall require the Servicer to
violate any applicable law.

     Section 5.03. Records. The Servicer, during the period it is servicer
hereunder, shall maintain such books of account and other records as will
enable the Trustee (if the Trustee so elects) to determine the status of each
Contract. Without limiting the generality of the preceding sentence, the
Servicer shall keep such records in respect of Liquidation Expenses as will
enable the Trustee (if the Trustee so elects) to determine that the correct
amount of Net Liquidation Proceeds in respect of a Liquidated Contract has
been deposited in the related Certificate Account.

     Section 5.04. Inspection.

     (a) At all times during the term hereof, the Servicer shall afford the
Trustee and its authorized agents reasonable access during normal business
hours to the Servicer's records relating to the Contracts and will cause its
personnel to assist in any examination of such records

                                      56
<PAGE>

by the Trustee or any of its authorized agents. The examination referred to in
this Section will be conducted in a manner which does not interfere
unreasonably with the Servicer's normal operations or customer or employee
relations. Without otherwise limiting the scope of the examination the Trustee
may make, the Trustee or its authorized agents, using generally accepted audit
procedures, may in their discretion verify the status of each Contract and
review the records relating thereto for conformity to Monthly Reports prepared
pursuant to Article VII and compliance with the standards represented to exist
as to each Contract in this Agreement

     (b) At all times during the term hereof, the Servicer shall keep
available a copy of the Contract Schedule at its principal executive office
for inspection by Certificateholders.

     (c) On or before each Determination Date, the Servicer will, upon the
written request of the Trustee, provide to the Trustee a list of outstanding
Contracts, setting forth the principal balance of each such Contract as of the
Due Period immediately preceding such Determination Date.

     (d) Notwithstanding the provisions of this Section 5.04, the Trustee
shall at no time have any duty or obligation to examine any records of the
Servicer or to recalculate or otherwise verify the accuracy of any certificate
or report prepared by the Servicer (including certificates or reports as to
the amount required to be deposited into the Certificate Account), and no
implied duty to do so shall be asserted against the Trustee.

     Section 5.05. Establishment of and Deposits in the Certificate Account.
On or before the Closing Date, the Trustee shall have established, and
thereafter shall maintain, a Certificate Account which is an Eligible Account,
in the form of one or more separate custodial accounts, titled "Manufactured
Housing Contract Senior/Subordinate Pass-Through Certificates, 2002-B
(Vanderbilt Mortgage and Finance, Inc., Seller), in trust for the Trustee."
The Trustee shall cause monies in the Certificate Account to be invested in
Eligible Investments as directed in writing by the Servicer, which shall
mature or, in the case of a money market fund, be redeemed not later than the
Business Day immediately preceding the Remittance Date next following the date
of such investment (except that if such Eligible Investment is an obligation
of the institution that maintains the Certificate Account, then such Eligible
Investments shall mature or, in the case of a money market fund, be redeemed
not later than such Remittance Date) and shall not be sold or disposed of
prior to its maturity. All such Eligible Investments shall be made in the name
of the Trustee. The Servicer shall promptly notify the Trustee upon obtaining
knowledge that an instrument or account in which the Certificate Account is
invested has ceased to be an Eligible Investment or Eligible Account. All net
income and gain realized from any such investments, to the extent provided by
this Agreement, shall be added to the Certificate Account. If a selection is
not made and a written direction not given to the Trustee, funds shall remain
uninvested in a segregated non-interest bearing account with no liability for
interest thereon.

     The Servicer shall deposit in the Certificate Account, as promptly as
practicable (but not later than the close of business of the second Business
Day) following receipt thereof:

          (1) All amounts received from Obligors with respect to principal of
     and interest on the Contracts;

                                      57
<PAGE>

          (2) All Net Liquidation Proceeds with respect to the Contracts;

          (3) All amounts required to be deposited by Vanderbilt pursuant to
     Sections 3.05(a) and (b) with respect to the Contracts;

          (4) All Monthly Advances with respect to the Contracts pursuant to
     Section 6.04; and

          (5) All amounts required to be withdrawn from an REO Account and
     deposited in the Certificate Account in accordance with Section 5.17.

     Section 5.06. Payment of Taxes. If the Servicer becomes aware of the
nonpayment by an Obligor of a personal property tax or other tax or charge
which may result in a lien upon a Manufactured Home prior to, or equal to or
coordinate with, the lien of the related Contract, the Servicer, consistent
with Section 5.02, shall take action to avoid the attachment of any such lien.
If the Servicer shall have paid any such personal property tax or other tax or
charge directly on behalf of an Obligor, the Servicer shall seek reimbursement
therefor only from the related Obligor (except as provided in the last
sentence of this Section) and may separately add such amount to the Obligor's
obligation as provided by the Contract, but, for the purposes of this
Agreement, may not add such amount to the remaining principal balance of the
Contract. If the Servicer shall have repossessed a Manufactured Home on behalf
of the Certificateholders and the Trust Fund, the Servicer shall pay the
amount of any such personal property tax or other tax or charge arising during
the time such Manufactured Home is in the Servicer's possession, unless the
Servicer is contesting in good faith such personal property tax or other tax
or charge or the validity of the claimed lien on such Manufactured Home. If
the Obligor does not reimburse the Servicer for payment of taxes pursuant to
this Section and the related Contract is liquidated after a default, the
Servicer shall be reimbursed for its payment of such taxes out of the related
Liquidation Proceeds.

     Section 5.07. Enforcement.

     (a) The Servicer, consistent with Section 5.02, will act with respect to
the Contracts in such manner as will maximize the receipt of principal and
interest on such Contracts.

     (b) The Servicer shall sue to enforce, foreclose or otherwise collect
upon Contracts, in its own name, if possible, or as agent for the Trust Fund.
If the Servicer elects to commence a legal proceeding to enforce a Contract,
the act of commencement shall be deemed to be an automatic assignment of the
Contract to the Servicer for purposes of collection only. If, however, in any
enforcement suit or legal proceeding it is held that the Servicer may not
enforce a Contract on the ground that it is not a real party in interest or a
holder entitled to enforce the Contract, the Trustee on behalf of the
Certificateholders shall, at the Servicer's expense, take such steps as the
Servicer deems necessary to enforce the Contract, including bringing suit in
its name or the names of the Certificateholders. If there has been a recovery
of attorneys' fees in favor of the Servicer or the Trust Fund in an action
involving the enforcement of a Contract, the Servicer shall be reimbursed out
of such recovery for its out-of-pocket attorney's fees and expenses incurred
in such enforcement action.

                                      58
<PAGE>

     (c) The Servicer shall exercise any rights of recourse against third
persons that exist with respect to any Contract in accordance with Section
5.02. In exercising recourse rights, the Servicer is authorized on the
Trustee's behalf to reassign the Contract or to resell the related
Manufactured Home to the Person against whom recourse exists at the price set
forth in the document creating the recourse.

     (d) The Servicer may grant to the Obligor on any Contract any rebate,
refund or adjustment out of the Certificate Account that is required because
of an overpayment in connection with the prepayment in full of such Contract
or otherwise. The Servicer will not permit any rescission or cancellation of
any Contract.

     Section 5.08. Transfer of the Certificate Account. The Trustee may
transfer the Certificate Account to a different depository institution from
time to time, so long as the Certificate Account remains an Eligible Account.
The Trustee shall give notice of any transfer of the Certificate Account to
the Rating Agencies prior to such transfer.

     Section 5.09. Maintenance of Hazard Insurance Policies.

     (a) Except as otherwise provided in subsection (b) of this Section 5.09,
the Servicer shall cause to be maintained with respect to each Contract one or
more Hazard Insurance Policies which provide, at a minimum, the same coverage
as a standard form fire and extended coverage insurance policy that is
customary for manufactured housing, issued by a company authorized to issue
such policies in the state in which the Manufactured Home is located, and in
an amount which is not less than the maximum insurable value of such
Manufactured Home or the principal balance due from the Obligor on the related
Contract, whichever is less; provided that such Hazard Insurance Policies may
provide for customary deductible amounts, and provided further that the amount
of coverage provided by each Hazard Insurance Policy shall be sufficient to
avoid the application of any co-insurance clause contained therein. If a
Manufactured Home is located within a federally designated special flood
hazard area, the Servicer shall also cause such flood insurance to be
maintained, which coverage shall be at least equal to the minimum amount
specified in the preceding sentence or such lesser amount as may be available
under the federal flood insurance program. Each Hazard Insurance Policy caused
to be maintained by the Servicer shall contain a standard loss payee clause in
favor of the Servicer and its successors and assigns. If any Obligor is in
default in the payment of premiums on its Hazard Insurance Policy or Policies,
the Servicer shall pay such premiums out of its own funds, and may add
separately such premium to the Obligor's obligation as provided by the
Contract, but may not add such premium to the remaining principal balance of
the Contract for purposes of this Agreement. If the Obligor does not reimburse
the Servicer for payment of such premiums and the related Contract is
liquidated after a default, the Servicer shall be reimbursed for its payment
of such premiums out of the related Liquidation Proceeds.

     (b) The Servicer may, in lieu of causing individual Hazard Insurance
Policies to be maintained with respect to each Manufactured Home pursuant to
subsection (a) of this Section 5.09, and shall, to the extent that the related
Contract does not require the Obligor to maintain a Hazard Insurance Policy
with respect to the related Manufactured Home, maintain one or more blanket
insurance policies covering losses as provided in subsection (a) of this
Section resulting from the absence or insufficiency of individual Hazard
Insurance Policies. Any such blanket

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policy shall be substantially in the form that is the industry standard for
blanket insurance policies issued to cover Manufactured Homes and in the
amount sufficient to cover all losses on the Contracts. The Servicer shall
pay, out of its own funds, the premium for such policy on the basis described
therein and shall deposit in the Certificate Account, on the Business Day next
preceding the Determination Date following the Due Period in which the
insurance proceeds from claims in respect of any Contracts under such blanket
policy are or would have been received, the deductible amount with respect to
such claims. The Servicer shall not, however, be required to deposit any
deductible amount with respect to claims under individual Hazard Insurance
Policies maintained pursuant to subsection (a) of this Section.

     (c) If the Servicer shall have repossessed a Manufactured Home on behalf
of the Trust Fund or foreclosed upon or otherwise acquired any Mortgaged
Property, the Servicer shall either (i) maintain at its expense a Hazard
Insurance Policy with respect to such Manufactured Home or Mortgaged Property
meeting the requirements of subsections (a) or (b), except that the Servicer
shall be responsible for depositing any deductible amount with respect to all
claims under individual Hazard Insurance Policies, or (ii) indemnify the Trust
Fund against any damage to such Manufactured Home prior to resale or other
disposition.

     (d) Any cost incurred by the Servicer in maintaining any of the foregoing
insurance, for the purpose of calculating monthly distributions to
Certificateholders, shall not be added to the amount owing under the Contract,
notwithstanding that the terms of the Contract so permit. The Servicer shall
not be entitled to reimbursement from Vanderbilt, the Trustee or the
Certificateholders for such costs. Such costs (other than the cost of the
blanket policy) shall only be recovered out of late payments by the Obligor
for such premiums or, if the related Contract is liquidated after a default,
out of the related Liquidation Proceeds.

     Section 5.10. Fidelity Bond and Errors and Omissions Insurance. The
Servicer shall maintain, at its own expense, a blanket fidelity bond and an
errors and omissions insurance policy, with broad coverage with responsible
companies acceptable to the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation, on all officers, employees or other
persons acting in any capacity with regard to the Contracts to handle funds,
money, documents and papers relating to the Contracts. Any such fidelity bond
and errors and omissions insurance shall protect and insure the Servicer
against losses, including forgery, theft, embezzlement, fraud, errors and
omissions and negligent acts of such persons. No provision of this Section
5.10 requiring such fidelity bond and errors and omissions insurance shall
diminish or relieve the Servicer from its duties and obligations as set forth
in this Agreement. The minimum coverage under any such bond and insurance
policy, shall be in an amount as is customary for servicers that service a
portfolio of manufactured housing installment sales contracts of $100 million
or more and that are generally acceptable as servicers to institutional
investors. Upon request of the Trustee, the Servicer shall cause to be
delivered to the Trustee a certified true copy of such fidelity bond and
insurance policy and a statement from the surety and the insurer that such
fidelity bond or insurance policy shall in no event be terminated or
materially modified without 30 days' prior written notice to the Trustee.

     Section 5.11. Collections under Hazard Insurance Policies; Consent to
Transfers of Manufactured Homes; Assumption Agreements.

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     (a) In connection with its activities as administrator and servicer of
the Contracts, the Servicer agrees to present, on behalf of itself, the
Trustee and Certificateholders, claims to the insurer under any Hazard
Insurance Policies and, in this regard, to take such reasonable action as
shall be necessary to permit recovery under any Hazard Insurance Policies. Any
amounts collected by the Servicer under any such Hazard Insurance Policies
shall be deposited within two Business Days after receipt in the Certificate
Account pursuant to Section 5.05, except to the extent they are applied to the
restoration of the related Manufactured Home or released to the related
Obligor in accordance with the normal servicing procedures of the Servicer.

     (b) The Servicer shall not withhold its consent to any transfer of
ownership of a Manufactured Home in accordance with the related Contract
unless the proposed transferee does not meet the Servicer's then applicable
underwriting standards (exclusive of down payment requirements). In addition,
the Servicer shall not withhold such consent if such withholding of consent is
not permitted under applicable law and governmental regulations.

     (c) In any case in which a Manufactured Home is to be conveyed to a
Person by an Obligor, and such Person is to enter into an assumption agreement
or modification agreement or supplement to the Contract, upon the closing of
such conveyance, the Servicer shall cause the originals of the assumption
agreement, the release (if any), or the modification or supplement to the
Contract to be deposited with the Contract File, the Land-and-Home Contract
File or the Mortgage Loan File, as applicable, for such Contract. Any fee
collected by the Servicer for entering into an assumption or substitution of
liability agreement with respect to such Contract will be retained by the
Servicer as additional servicing compensation. In connection with any such
assumption, the rate of interest borne by, and all other material terms of,
the related Contract shall not be changed.

     (d) Notwithstanding any of the foregoing, the Servicer shall not permit
the extension of the maturity date of any Contract beyond the latest-occurring
scheduled maturity date of any Contract as of the Cut-off Date.

     Section 5.12. Realization upon Defaulted Contracts. Subject to applicable
law, the Servicer shall repossess, foreclose upon or otherwise comparably
convert the ownership of Manufactured Homes and any related Mortgaged Property
securing all Contracts that come into default and which the Servicer believes
in its good faith business judgment will not be brought current; provided,
however, that notwithstanding anything else in this Agreement to the contrary,
but subject to the requirements of law, the Servicer shall commence
repossession, foreclosure and other realization procedures in respect of any
Contract that is at any one time delinquent as to all or part of five or more
(or ten or more, in the case of Bi-weekly Contracts and Semi-Monthly
Contracts) scheduled payments; provided that if the Servicer has actual
knowledge that a Mortgaged Property is affected by hazardous waste, then the
Servicer shall not cause the Trust Fund to acquire title to such Mortgaged
Property in a foreclosure or similar proceeding. For purposes of the last
proviso in the preceding sentence, the Servicer shall not be deemed to have
actual knowledge that a Mortgaged Property is affected by hazardous waste
unless it shall have received written notice that hazardous waste is present
on such property and such written notice has been made a part of the Servicing
File with respect to the related Contract. Such written notice shall be
provided to the Trustee. In the event that the Trustee is responsible for
foreclosing on a Contract, if a Responsible Officer of the Trustee has actual
knowledge that a

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Mortgaged Property is affected by hazardous waste, then the Trustee shall not
cause the Trust Fund to acquire title to such Mortgaged Property in a
foreclosure or similar proceeding. In connection with such repossession,
foreclosure or other conversion, the Servicer shall follow such practices and
procedures as it shall deem necessary or advisable and as shall be consistent
with Section 5.02. Subject to the foregoing proviso, in the event that title
to any Mortgaged Property is acquired in foreclosure or by deed in lieu of
foreclosure, the deed or certificate of sale shall be issued to the Trustee,
as Trustee, or, at its election, to its nominee on behalf of the Trustee, as
Trustee. The Servicer shall manage, conserve and protect such Manufactured
Homes and any related Mortgaged Property for the purposes of their prompt
disposition and sale, and shall dispose of such Manufactured Homes and any
related Mortgaged Property on such terms and conditions as it deems in the
best interests of the Certificateholders. In connection with such activities,
the Servicer shall follow such practices and procedures as are consistent with
Section 5.02.

     Section 5.13. Costs and Expenses. All costs and expenses incurred by the
Servicer in carrying out its duties under this Agreement, including all fees
and expenses incurred in connection with the enforcement of Contracts
(including enforcement of defaulted Contracts and repossessions of
Manufactured Homes securing such Contracts), shall be paid by the Servicer and
the Servicer shall not be entitled to reimbursement hereunder, except to the
extent such reimbursement is specifically provided for in this Agreement.
Notwithstanding the foregoing, the Servicer shall be reimbursed out of the
Liquidation Proceeds of a defaulted Contract for Liquidation Expenses incurred
by it in realizing upon the related Manufactured Home and any related
Mortgaged Property, including, but not limited to: (i) costs of refurbishing
and securing such Manufactured Home; (ii) transportation expenses incurred in
moving the Manufactured Home; (iii) reasonable legal fees and expenses of
outside counsel; (iv) rental expenses (including the payment of rent not paid
by the defaulting Obligor) incurred in maintaining a leasehold interest for
the Manufactured Home; and (v) sales commissions paid to (a) Persons that are
not Affiliates of the Servicer or (b) Affiliates of the Servicer, if such
sales commission is no greater than the sales commission that would be paid to
a Person that is not an Affiliate of the Servicer. The Servicer shall not
incur the foregoing Liquidation Expenses unless it determines in its good
faith business judgment that incurring such expenses will increase the Net
Liquidation Proceeds from such Manufactured Home.

     Notwithstanding anything in this Agreement to the contrary, so long as
Vanderbilt is the Servicer, the Servicer, in its sole discretion, may, but is
not obligated to, liquidate a defaulted Contract by depositing into the
Certificate Account, as Liquidation Proceeds, an amount equal to (i) the
outstanding principal balance of such Contract plus accrued and unpaid
interest thereon to the Due Date in the Due Period in which such deposit is
made less (ii) $2,000. The Servicer shall not be reimbursed for any
Liquidation Expenses incurred in connection with such Contract and shall
retain any liquidation proceeds thereafter collected in liquidating such
Contract.

     Section 5.14. Trustee to Cooperate. Upon payment in full of any Contract,
the Servicer will notify the Trustee on the next Determination Date by a
certificate of a Servicing Officer (which certification shall include a
statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the related
Certificate Account pursuant to Section 5.05 have been deposited). The
Servicer is authorized to execute an instrument in satisfaction of such
Contract and any related Mortgage and do such

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other acts and execute such other documents as the Servicer deems necessary to
discharge the Obligor thereunder and eliminate the security interest in the
Manufactured Home and any related Mortgaged Property related thereto. The
Servicer shall determine when a Contract has been paid in full; to the extent
insufficient payments are received on a Contract mistakenly determined by the
Servicer to be prepaid or paid in full and satisfied, the shortfall shall be
paid by the Servicer out of its own funds by deposit into the Certificate
Account. Upon request of a Servicing Officer, the Trustee shall, at the
expense of the Servicer, perform such other acts as are reasonably requested
by the Servicer (including, without limitation, the execution of documents)
and otherwise cooperate with the Servicer in enforcement of rights and
remedies with respect to Contracts, and the Trustee shall not be liable or
responsible for the execution of any documents or performance of any acts
requested by the Servicer pursuant to this Section.

     Section 5.15. Servicing and Other Compensation. The Servicer, as
compensation for its activities hereunder including, without limitation, the
payment of fees and expenses of the Trustee pursuant to Section 10.05, shall
be entitled to receive on each Remittance Date the Monthly Servicing Fee
pursuant to, and to the extent provided in, Section 6.02. In addition, the
Servicer may obtain any additional compensation permitted pursuant to this
Agreement.

     Additional servicing compensation in the form of Late Payment Fees or
Extension Fees and any transfer of equity or assumption fees shall be retained
by the Servicer.

     The Servicer shall not be reimbursed for its costs and expenses in
servicing the Contracts except as provided pursuant to Sections 5.06, 5.09 and
5.13.

     Section 5.16. Custody of Contracts.

     (a) Subject to the terms and conditions of this Section and Section
3.04(a), the Servicer shall maintain custody of the Contract Files as
custodian for the benefit of the Certificateholders and the Trustee. The
Trustee, or a custodian appointed by or on behalf of the Trustee, shall
maintain custody of the Land-and-Home Contract Files and the Mortgage Loan
Files.

     (b) The Servicer agrees to maintain the related Contract Files at its
offices where they are presently maintained, or at such other offices of the
Servicer in the State of Tennessee as shall from time to time be identified to
the Trustee by ten days' prior written notice. The Servicer may temporarily
move individual Contract Files or any portion thereof without notice as
necessary to conduct collection and other servicing activities in accordance
with its customary practices and procedures.

     (c) As custodian, the Servicer shall have and perform the following
powers and duties:

          (i) hold the Contract Files on behalf of the Certificateholders and
     the Trustee, maintain accurate records pertaining to each Contract to
     enable it to comply with the terms and conditions of this Agreement,
     maintain a current inventory thereof;

          (ii) implement policies and procedures in writing and signed by a
     Servicing Officer, with respect to persons authorized to have access to
     the Contract Files on the Servicer's premises and the receipting for
     Contract Files taken from their storage area by an employee of the
     Servicer for purposes of servicing or any other purposes; and

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          (iii) attend to all details in connection with maintaining custody
     of the Contract Files on behalf of the Certificateholders and the
     Trustee.

     (d) In performing its duties under this Section, the Servicer agrees to
act with reasonable care, using that degree of skill and care that it
exercises with respect to similar contracts owned and/or serviced by it, but
in no event using a degree of skill and care that is lower than that used
generally in the servicing industry for such contracts. The Servicer shall
promptly report to the Trustee any failure by it to hold the Contract Files as
herein provided and shall promptly take appropriate action to remedy any such
failure. In acting as custodian of the Contract Files, the Servicer agrees
further not to assert any beneficial ownership interests in the Contracts or
the Contract Files. The Servicer agrees to indemnify the Certificateholders
and the Trustee for any and all liabilities, obligations, losses, damages,
payments, costs or expenses of any kind whatsoever which may be imposed on,
incurred or asserted against the Certificateholders or the Trustee as the
result of any act or omission by the Servicer relating to the maintenance and
custody of the Contract Files; provided, however, that the Servicer will not
be liable to the Certificateholders for any portion of any such amount
resulting from the negligence or willful misconduct of any Certificateholder
or the Trustee and will not be liable to the Trustee for any portion of such
amount resulting from the negligence or willful misconduct of the Trustee. The
agreement of the Servicer to indemnify the Trustee shall survive the
resignation or removal of the Trustee and the termination of this Agreement.

     Section 5.17. REMIC Compliance. The parties intend that the Trust Fund
formed hereunder shall constitute, and that the affairs of the Trust Fund
shall be conducted so as to qualify it as, a "real estate mortgage investment
conduit" as defined in and in accordance with the REMIC Provisions. In
furtherance of such intention, the Servicer shall, to the extent permitted by
applicable law, act as agent, and is hereby appointed to act as agent, of the
Trust Fund and shall on behalf of the Trust Fund: (a) prepare, file and
present to the Trustee to sign, or cause to be prepared, filed and presented
to the Trustee to be signed, all required federal tax returns for the Trust
Fund, including, but not limited to, Form 1066 using a calendar year as the
taxable year for the Trust Fund when and as required by the REMIC Provisions
and other applicable federal income tax laws; (b) make an election, on behalf
of the Trust Fund, to be treated as a REMIC on the Form 1066 for its first
taxable year, in accordance with the REMIC Provisions; (c) prepare and
forward, or cause to be prepared and forwarded, to the Certificateholders all
information reports as and when required to be provided to them in accordance
with the REMIC Provisions; (d) take such other actions as are necessary or
appropriate to maintain the status of the Trust Fund as a REMIC; and (e) serve
as tax matters person for the Trust Fund pursuant to Treasury Regulations
Section 1.860F-4(d) or serve as attorney-in-fact and agent for any Person that
is the tax matters person. Neither the Trustee nor the Servicer shall take any
action or omit to take any action if such action or omission (as the case may
be) would cause the termination of the REMIC status of the Trust Fund;
provided, however, that neither the Trustee nor the Servicer shall be required
to take any action if a Responsible Officer of the Trustee or the Servicer, as
applicable, in good faith believes such action or omission to be inconsistent
with any other provision of this Agreement. Vanderbilt and the Servicer shall
cooperate with the Servicer or its agent for such purpose in supplying any
information within their control that is necessary to enable the Servicer to
perform its duties under this Section. The Holder of the Class R Certificate,
by purchasing such Class R Certificate, (a) shall be deemed to consent to the
appointment of the Servicer as (i) the tax

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matters person for the Trust Fund and (ii) the attorney-in-fact and agent for
any person that is the tax matters person if the Servicer is unable to serve
as the tax matters person and (b) agrees to execute any documents required to
give effect to clause (a) of this sentence.

     The Holder of the Class R Certificate, by purchasing such Class R
Certificate, agrees to give the Servicer written notice that it is a
"pass-through interest holder" within the meaning of Temporary Treasury
Regulations section 1.67-3T(a)(2)(i)(A) immediately upon becoming the Holder
of the Class R Certificate, if it is, or is holding the Class R Certificate on
behalf of, a "pass-through interest holder."

     In the event that any tax, including interest, penalties, additional
amounts or additions to tax (a "Tax"), is imposed on the Trust Fund, such tax
shall be charged against amounts otherwise required to be distributed on the
Class R Certificate. The Servicer shall notify the Trustee if any Tax is
imposed on the Trust Fund and the amount of any such Tax. The Trustee is
hereby authorized to retain, or cause the Paying Agent to retain, from amounts
otherwise required to be distributed on the Class R Certificate, sufficient
funds to pay or provide for the payment of, and to actually pay, or cause the
Paying Agent to pay, such Tax as is legally owed by the Trust Fund (but such
authorization shall not prevent the Trustee from contesting any such Tax in
appropriate proceedings, and withholding payment of such Tax, if permitted by
law, pending the outcome of such proceedings). To the extent that sufficient
amounts cannot be so retained to pay or provide for the payment of any tax
imposed on gain realized from any prohibited transaction (as defined in the
REMIC Provisions), the Trustee is hereby authorized to and, upon the receipt
of written notice of the existence of any tax liability, shall segregate, into
a separate non-interest-bearing account, the net income from such prohibited
transactions and pay, or cause the Paying Agent to pay, such Tax. In the event
any (i) amounts initially retained from amounts required to be distributed on
the Class R Certificate and (ii) income so segregated and applied towards the
payment of such Tax shall not be sufficient to pay such Tax in its entirety,
the amount of the shortfall shall be paid from funds in each Certificate
Account after distributions of principal and interest to the related
Certificateholders pursuant to Section 6.01 in respect of the related
Remittance Date notwithstanding anything to the contrary contained herein. To
the extent any such segregated income or funds from the Certificate Account
are paid to the Internal Revenue Service, the Trustee shall retain, or cause
to be retained, an amount equal to the amount of such income or funds so paid
from future amounts otherwise required to be distributed on the Class R
Certificate and shall deposit such retained amounts in the Certificate Account
for distribution to the Holders of Certificates other than the Class R
Certificate.

     Except as provided in Section 3.05 and except in connection with REO
Property, the Trustee shall not sell any Contract or any other asset of the
Trust Fund unless either (i) it has received an Opinion of Counsel to the
effect that such sale will not result in the imposition of taxes on
"prohibited transactions" on the Trust Fund as defined in Section 860F of the
Code, or (ii) the proceeds of such sale, net of any related taxes on
"prohibited transactions" on the Trust Fund as defined in Section 860F of the
Code, will at least equal the Repurchase Price of such Contract.

     In the event that any Manufactured Home is acquired in a repossession or
foreclosure (an "REO Property"), the Servicer shall sell any REO Property
within 3 years of its acquisition by the Trust Fund, unless, at the request
and expense of the Servicer, the Servicer seeks, and

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subsequently receives, an Opinion of Counsel, addressed to the Trustee and the
Servicer, to the effect that the holding by the Trust Fund of such REO
Property subsequent to 3 years after its acquisition will not result in the
imposition of taxes on "prohibited transactions" of the Trust Fund as defined
in Section 860F of the Code or cause the Trust Fund to fail to qualify as a
REMIC at any time that any Certificates are outstanding. The Servicer shall
manage, conserve, protect and operate each REO Property solely for the purpose
of its prompt disposition and sale in a manner that does not cause any such
REO Property to fail to qualify as "foreclosure property" within the meaning
of Section 860G(a)(8) or result in the receipt by the REMIC of any "income
from non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the
Code or any "net income from foreclosure property" which is subject to
taxation under the REMIC Provisions. Pursuant to its efforts to sell such REO
Property, the Servicer shall either itself or through an agent selected by the
Servicer protect and conserve such REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located and
may, incident to its conservation and protection of the interests of the
Certificateholders, rent the same, or any part thereof, as the Servicer deems
to be in the best interest of the Servicer and the Certificateholders for the
period prior to the sale of such REO Property.

     The Servicer shall segregate and hold all funds collected and received in
connection with the operation of any REO Property separate and apart from its
own funds and general assets and shall establish and maintain with respect to
each REO Property an account held in trust for the Trustee for the benefit of
the Certificateholders (each, an "REO Account"), which shall be an Eligible
Account. The Servicer shall be entitled to retain or withdraw any interest
income paid on funds deposited in each REO Account by the depository.

     The Servicer shall deposit, or cause to be deposited, within two Business
Days after receipt on a daily basis in each REO Account all revenues received
with respect to the related REO Property and shall withdraw therefrom funds
necessary for the proper operation, management and maintenance of the REO
Property. On or before each Determination Date, the Servicer shall withdraw
from each REO Account and deliver to the Trustee for deposit into the
Certificate Account the income from the REO Property on deposit in the REO
Account, net of its reasonable fees and expenses.

     The disposition of REO Property shall be carried out by the Servicer at
such price and upon such terms and conditions as the Servicer shall deem
necessary or advisable, as shall be normal and usual in its general servicing
activities.

     The proceeds from the REO disposition, net of any reimbursement to the
Servicer as provided above, shall be deposited in the REO Account and shall be
deposited in the Certificate Account when the related Contract becomes a
Liquidated Contract.

     Section 5.18. Establishment of and Deposits in the Distribution Account.
On or before the Closing Date, the Trustee shall have established, and
thereafter shall maintain, a Distribution Account which is an Eligible
Account, in the form of one or more separate custodial accounts, titled
"Manufactured Housing Contract Senior/Subordinate Pass-Through Certificates,
Series 2002-B (Vanderbilt Mortgage and Finance, Inc., Seller), in trust for
the Trustee." The monies in the Distribution Account shall not be invested.
One Business Day prior to each Remittance Date, the Trustee shall deposit in
the Distribution Account the Available Distribution Amount.

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     Section 5.19. Pre-Funding Account. (a) On or before the Closing Date, the
Trustee shall have established, and thereafter shall maintain until the
Remittance Date in December 2002, a Pre-Funding Account to be held by the
Trustee in the name of the Trust Fund for the benefit of the
Certificateholders. The Trustee shall cause moneys in the Pre-Funding Account
to be invested in Eligible Investments as directed in writing by the Servicer,
which shall mature or, in the case of a money market fund, be redeemed not
later than the Business Day immediately preceding the Remittance Date next
following the date of such investment (except that if such Eligible Investment
is an obligation of the institution that maintains the Pre-Funding Account,
then such Eligible Investments shall mature or, in the case of a money market
fund, be redeemed not later than such Remittance Date) and shall not be sold
or disposed of prior to its maturity. If a selection is not made and a written
direction not given to the Trustee, funds shall remain uninvested in a
segregated non-interest bearing account with no liability for interest
thereon. All such Eligible Investments shall be made in the name of the
Trustee. The Servicer shall promptly notify the Trustee upon obtaining
knowledge that an instrument or account in which the Pre-Funding Account is
invested has ceased to be an Eligible Investment or Eligible Account.

     (b) On the Closing Date, the Trustee will deposit in the Pre-Funding
Account the Original Pre-Funded Amount.

     (c) On any Subsequent Transfer Date, Vanderbilt shall instruct the
Trustee in writing to withdraw from the Pre-Funding Account an amount equal to
100% of the aggregate principal balances of the Subsequent Contracts sold to
the Trustee or any separate trustee on such Subsequent Transfer Date and pay
such amount to or upon the order of Vanderbilt upon satisfaction of the
conditions set forth in Section 5.20 hereof with respect to such transfer. In
no event shall Vanderbilt be permitted to instruct the Trustee to release from
the Pre-Funding Account to the Certificate Account with respect to Subsequent
Contracts to be transferred an aggregate amount in excess of the Original
Pre-Funded Amount.

     (d) If (x) the Pre-Funded Amount with respect to the Contracts has not
been reduced to zero by the end of the Funding Period or (y) the Pre-Funded
Amount has been reduced to $100,000 or less, then Vanderbilt shall instruct
the Trustee in writing to withdraw from the Pre-Funding Account the amount
(exclusive of any related Pre-Funding Account Earnings still on deposit
therein) remaining in the Pre-Funding Account and deposit such amount to the
Certificate Account on the Remittance Date in the month following the month in
which the earlier of either (x) or (y) occurs.

     (e) On the first four Remittance Dates the Trustee shall, based upon the
information furnished by the Servicer to the Trustee pursuant to Section
5.20(d), transfer from the Pre-Funding Account to the Certificate Account, the
Pre-Funding Account Earnings, if any, applicable to such Remittance Date.

It is the intention of the parties that the funds in the Pre-Funding Account
be held by the Trustee as the owner thereof for the sole benefit of the
Certificateholders. Should the funds in the Pre-Funding Account constitute
assets that are not so owned by the Trustee, however, the parties agree that
the Trustee shall have, and Vanderbilt hereby grants to the Trustee, a
security interest in such funds and all proceeds thereof, including all
investments that the Trustee may acquire

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with such funds from time to time, which security interest is of first
priority and has been and shall be duly perfected.

     Section 5.20. Conveyance of the Subsequent Contracts. (a) Subject to the
satisfaction of the conditions set forth in paragraph (b) below (based on the
Trustee's receipt of Vanderbilt's Officer's Certificate pursuant to condition
(vi) or, if a Responsible Officer of the Trustee has actual knowledge relating
to the satisfaction of a condition, based on such actual knowledge) in
consideration of the Trustee's delivery on the relevant Subsequent Transfer
Dates to or upon the order of Vanderbilt of all or a portion of the balance of
funds in the Pre-Funding Account, Vanderbilt shall on any Subsequent Transfer
Date sell, transfer, assign, set over and otherwise convey without recourse,
to the Trustee, as trustee, or a separate trustee, all of Vanderbilt's right,
title and interest in and to any and all benefits accruing to Vanderbilt from
the Subsequent Contracts which Vanderbilt is causing to be delivered to the
Trustee (and all substitutions therefor as provided by Section 3.05), together
with the related Contract Files and all payments thereon and proceeds of the
conversion, voluntary or involuntary, of the foregoing and proceeds of all the
foregoing (including, but not by way of limitation, all proceeds of any
mortgage insurance, hazard insurance and title insurance policy relating to
the Subsequent Contracts, cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, rights to
payment of any and every kind, and other forms of obligations and receivables
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing).

     The transfer by the Seller of the Subsequent Contracts set forth on the
Contract Schedule (relating to a Subsequent Transfer Date) to the Trustee, as
trustee, or a separate trustee shall be absolute and shall be intended by the
Certificateholders and all parties hereto to be treated as a sale by
Vanderbilt. Each such conveyance and each Subsequent Contract shall be
governed by Section 2.01(b). The amount released from the Pre-Funding Account
shall be one-hundred percent (100%) of the aggregate principal balances of the
Subsequent Contracts so transferred. Upon the transfer by Vanderbilt of the
Subsequent Contracts, such Subsequent Contracts (and all principal collected
and interest accruing thereon subsequent to the Subsequent Cut-Off Date) and
all other rights and interests with respect to such Subsequent Contracts and
all proceeds derived therefrom shall be deemed for all purposes hereunder to
be part of the Trust Fund.

     (b) The obligation of the Trustee to accept the transfer of the
Subsequent Contracts and the other property and rights related thereto
described in paragraph (a) above is subject to the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:

          (i) Vanderbilt shall have provided the Trustee with an updated
     Contract Schedule and shall have provided any information reasonably
     requested with respect to the Subsequent Contracts;

          (ii) Vanderbilt shall have delivered to the Trustee or a separate
     trustee a duly executed written assignment (including an acceptance by
     the Trustee) in substantially the form of Exhibit M, which shall include
     a Schedule of Contracts, listing the Subsequent Contracts and any other
     exhibits listed thereon;

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          (iii) Vanderbilt shall have deposited in the Certificate Account all
     principal collected and interest accruing in respect of such Subsequent
     Contracts on or after the related Subsequent Cut-Off Date;

          (iv) as of each Subsequent Transfer Date, Vanderbilt was not
     insolvent, nor will it be made insolvent by such transfer, nor is it
     aware of any pending insolvency;

          (v) the Funding Period shall not have ended; and

          (vi) Vanderbilt shall have delivered to the Trustee an Officer's
     Certificate confirming the satisfaction of each condition precedent
     specified in this paragraph (b) and in the related Subsequent Transfer
     Agreement.

     (c) The obligation of the Trust Fund to purchase a Subsequent Contract on
any Subsequent Transfer Date is subject to the following requirements:

          (i) such Subsequent Contracts may not be 30 or more days
     contractually delinquent as of the related Subsequent Cut-Off Date and
     shall have a scheduled payment (or in the case of Bi-Weekly Contracts,
     two scheduled payments) due and payable to the Trust Fund on or after the
     related Subsequent Cut-Off Date and prior to the end of the Due Period
     with respect to the Remittance Date next succeeding such Subsequent
     Cut-Off Date; and

          (ii) following the purchase of such Subsequent Contracts by the
     Trust Fund, the Contract Pool (including the Subsequent Contracts):

               (a) will have a weighted average Contract Rate of at least
               10.222%;

               (b) will have a weighted average remaining term to stated
               maturity of not more than 228 months;

               (c) will have a weighted average original term to maturity of
               not more than 236 months;

               (d) will have a weighted average Loan-to-Value Ratio of not
               more than 85%;

               (e) the percentage of the Contracts by outstanding principal
               balance (as of the Subsequent Cut-Off Date in the case of the
               Subsequent Contracts) secured by Manufactured Homes which were
               new at the time the related Contracts were originated will be
               at least 66%;

               (f) the percentage of the Contracts by outstanding principal
               balance (as of the Subsequent Cut-Off Date in the case of the
               Subsequent Contracts) secured by Manufactured Homes which were
               located in Texas at the time the related Contracts were
               originated will be no more than 20%;

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<PAGE>

               (g) the percentage of the Contracts by outstanding principal
               balance (as of the Subsequent Cut-Off Date in the case of the
               Subsequent Contracts) secured by Manufactured Homes which were
               located in Tennessee at the time the related Contracts were
               originated will be no more than 12%;

               (h) the percentage of the Contracts by outstanding principal
               balance (as of the Subsequent Cut-Off Date in the case of the
               Subsequent Contracts) secured by Land-and-Home Contracts will
               be at least 14%;

               (i) the percentage of the Contracts by outstanding principal
               balance (as of the Subsequent Cut-Off Date in the case of the
               Subsequent Contracts) secured by "single-wide" Manufactured
               Homes will be no more than 43%;

               (j) the percentage of the Contracts by outstanding principal
               balance (as of the Subsequent Cut-Off Date in the case of the
               Subsequent Contracts) secured by Manufactured Homes which were
               located in a "park" (where such information is available) will
               be no more than 24%;

               (k) the percentage of the Contracts by outstanding principal
               balance (as of the Subsequent Cut-Off Date in the case of the
               Subsequent Contracts) with an LTV in excess of 90% at the time
               of origination will be no more than 43%;

               (l) will have a weighted average of internal credit scores by
               Vanderbilt of not less than 218;

               (m) will have a weighted average FICO score of not less than
               638 for those loans for which a FICO score is available;

               (n) the percentage of the Contracts by outstanding principal
               balance (as of the Subsequent Cut-Off Date in the case of the
               Subsequent Contracts) which were repossessed and subsequently
               refinanced at the time of origination will be no more than 15%;
               and

               (o) the percentage of the Contracts by outstanding principal
               balance (as of the Subsequent Cut-Off Date in the case of the
               Subsequent Contracts) which were originated by Vanderbilt will
               be at least 59%.

     (d) In connection with each Subsequent Transfer Date and on the first
four Determination Dates, the Servicer shall determine and, no later than
10:00 a.m. New York City time on such date, advise the Trustee in writing: (i)
Pre-Funding Account Earnings and the Pre-Funded Amount and (ii) any other
necessary matters in connection with the administration of the Pre-Funding
Account. In the event that any amounts are released to the Certificateholders
or Vanderbilt from the Pre-Funding Account as a result of an error in
calculation, such Certificateholders or Vanderbilt, as applicable, shall
immediately repay such amounts to the Trustee.

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                              [End of Article V]

                                      71
<PAGE>

                                  Article VI

             PAYMENTS TO THE CERTIFICATEHOLDERS; WITHDRAWALS FROM
                              CERTIFICATE ACCOUNT

     Section 6.01. Monthly Payments.

     (a) On each Remittance Date the Trustee shall, based upon the information
set forth in the Monthly Report for such Remittance Date, withdraw from the
Distribution Account an amount equal to the Available Distribution Amount for
such Remittance Date and apply such amount as set forth below:

     A. On each Remittance Date on which the Class M-1 and Class B Principal
Distribution Test is not met, the Available Distribution Amount will be
distributed in the following amounts in the following order of priority:

          (i) interest accrued during the related Interest Period on the Class
     A-1F Certificates, Class A-1V Certificates, Class A-2 Certificates, Class
     A-3 Certificates and Class A-4 Certificates, at their respective
     Remittance Rates on the outstanding Class A-1F Principal Balance, Class
     A-1V Principal Balance, Class A-2 Principal Balance, Class A-3 Principal
     Balance and Class A-4 Principal Balance, respectively, together with any
     previously undistributed shortfalls in interest due on the Class A-1F
     Certificates, Class A-1V Certificates, Class A-2 Certificates, Class A-3
     Certificates and Class A-4 Certificates, respectively, in respect of
     prior Remittance Dates; if the Available Distribution Amount is not
     sufficient to distribute the full amount of interest due on the Class
     A-1F Certificates, Class A-1V Certificates, Class A-2 Certificates, Class
     A-3 Certificates and Class A-4 Certificates, the Available Distribution
     Amount will be distributed on such Classes of Certificates pro rata on
     the basis of the interest due thereon;

          (ii) the Formula Principal Distribution Amount in the following
     order of priority:

               (a) to the Class A-1F and Class A-1V Certificates, pro rata
               until the Class A-1F and Class A-1V Principal Balances are
               reduced to zero;

               (b) to the Class A-2 Certificates until the Class A-2 Principal
               Balance is reduced to zero;

               (c) to the Class A-3 Certificates until the Class A-3 Principal
               Balance is reduced to zero;

               (d) to the Class A-4 Certificates until the Class A-4 Principal
               Balance is reduced to zero;

          (iii) interest accrued during the related Interest Period at the
     Class A-5 Remittance Rate on the Class A-5 Principal Balance to the Class
     A-5 Certificates,

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<PAGE>

     together with any previously undistributed shortfalls in interest due on
     the Class A-5 Certificates in respect of prior Remittance Dates;

          (iv) the remainder of the Formula Principal Distribution Amount, if
     any, to the Class A-5 Certificates until the Class A-5 Principal Balance
     is reduced to zero;

          (v) interest accrued during the related Interest Period at the Class
     M-1 Remittance Rate on the Class M-1 Principal Balance to the Class M-1
     Certificates, together with any previously undistributed shortfalls in
     interest due on the Class M-1 Certificates in respect of prior Remittance
     Dates;

          (vi) the remainder of the Formula Principal Distribution Amount, if
     any, to the Class M-1 Certificates until the Class M-1 Principal Balance
     is reduced to zero;

          (vii) interest accrued during the related Interest Period at the
     Class B-1 Remittance Rate on the Class B-1 Principal Balance to the Class
     B-1 Certificates, together with any previously undistributed shortfalls
     in interest due on the Class B-1 Certificates in respect of prior
     Remittance Dates;

          (viii) the remainder of the Formula Principal Distribution Amount,
     if any, to the Class B-1 Certificates until the Class B-1 Principal
     Balance is reduced to zero;

          (ix) interest accrued during the related Interest Period at the
     Class B-2 Remittance Rate on the Class B-2 Principal Balance to the Class
     B-2 Certificates, together with any previously undistributed shortfalls
     in interest due on the Class B-2 Certificates in respect of prior
     Remittance Dates;

          (x) the remainder of the Formula Principal Distribution Amount, if
     any, to the Class B-2 Certificates until the Class B-2 Principal Balance
     is reduced to zero;

          (xi) any remaining amount, to pay Clayton the Guarantee
     Reimbursement Amount, if any, with respect to the Class B-2 Certificates;

          (xii) any remaining amount, to pay the Monthly Servicing Fee, to the
     Servicer, if Vanderbilt is the Servicer;

          (xiii) any remaining amount, to the holder of the Class R
     Certificate;

     B. On each Remittance Date on which the Class M-1 and Class B Principal
Distribution Test is met, the Available Distribution Amount will be
distributed in the following amounts in the following order of priority:

          (i) interest accrued during the related Interest Period on the Class
     A-1F Certificates, Class A-1V Certificates, Class A-2 Certificates, Class
     A-3 Certificates and Class A-4 Certificates, at their respective
     Remittance Rates on the outstanding Class A-1F Principal Balance, Class
     A-1V Principal Balance, Class A-2 Principal Balance, Class A-3 Principal
     Balance and Class A-4 Principal Balance, respectively, together with any
     previously undistributed shortfalls in interest due on the Class A-1F
     Certificates, Class A-

                                      73
<PAGE>

     1V Certificates, Class A-2 Certificates, Class A-3 Certificates and Class
     A-4 Certificates, respectively, in respect of prior Remittance Dates; if
     the Available Distribution Amount is not sufficient to distribute the
     full amount of interest due on the Class A-1F Certificates, Class A-1V
     Certificates, Class A-2 Certificates, Class A-3 Certificates and Class
     A-4 Certificates, the Available Distribution Amount will be distributed
     on such Classes of Certificates pro rata on the basis of the interest due
     thereon;

          (ii) the Class A Percentage of the Formula Principal Distribution
     Amount in the following order of priority:

          (a) to the Class A-1F and Class A-1V Certificates, pro rata, until
          the Class A-1F and Class A-1V Principal Balances are reduced to
          zero;

          (b) to the Class A-2 Certificates until the Class A-2 Principal
          Balance is reduced to zero;

          (c) to the Class A-3 Certificates until the Class A-3 Principal
          Balance is reduced to zero; and

          (d) to the Class A-4 Certificates until the Class A-4 Principal
          Balance is reduced to zero;

          (iii) interest accrued during the related Interest Period at the
     Class A-5 Remittance Rate on the Class A-5 Principal Balance to the Class
     A-5 Certificates, together with any previously undistributed shortfalls
     in interest due on the Class A-5 Certificates in respect of prior
     Remittance Dates;

          (iv) the remainder of the Class A Percentage of the Formula
     Principal Distribution Amount, if any, to the Class A-5 Certificates
     until the Class A-5 Principal Balance is reduced to zero;

          (v) interest accrued during the related Interest Period at the Class
     M-1 Remittance Rate on the Class M-1 Principal Balance to the Class M-1
     Certificates, together with any previously undistributed shortfalls in
     interest due on the Class M-1 Certificates in respect of prior Remittance
     Dates;

          (vi) the Class M-1 Percentage of the Formula Principal Distribution
     Amount, if any, to the Class M-1 Certificates until the Class M-1
     Principal Balance is reduced to zero;

          (vii) interest accrued during the related Interest Period at the
     Class B-1 Remittance Rate on the Class B-1 Principal Balance to the Class
     B-1 Certificates, together with any previously undistributed shortfalls
     in interest due on the Class B-1 Certificates in respect of prior
     Remittance Dates;

          (viii) the Class B Percentage of the Formula Principal Distribution
     Amount to the Class B-1 Certificates until the Class B-1 Principal
     Balance is reduced to zero;

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<PAGE>

          (ix) interest accrued during the related Interest Period at the
     Class B-2 Remittance Rate on the Class B-2 Principal Balance to the Class
     B-2 Certificates, together with any previously undistributed shortfalls
     in interest due on the Class B-2 Certificates in respect of prior
     Remittance Dates;

          (x) the remainder of the Formula Principal Distribution Amount to
     the Class B-2 Certificates until the Class B-2 Principal Balance is
     reduced to zero; provided, however, if the Principal Balance of the Class
     A-1F Certificates, Class A-1V Certificates, Class A-2 Certificates, Class
     A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates and
     Class M-1 Certificates have not been reduced to zero on or before a
     Remittance Date, to the extent that allocations in respect of principal
     to the Class B-2 Certificates would reduce the Class B-2 Principal
     Balance below the Class B-2 Floor Amount, then the amount of such excess
     principal will instead by distributed, pro rata, to the Class A
     Certificates and the Class M-1 Certificates based on the respective
     Principal Balances of such Certificates prior to distributions pursuant
     to clauses B(ii), (iv) and (vi) above with respect to such Remittance
     Date. The allocations in respect of such excess principal to the Class A
     Certificates will be in the order of priority set forth in clauses
     (B)(ii) and (iv) above;

          (xi) any remaining amounts, to pay Clayton the Guarantee
     Reimbursement Amount, if any, with respect to the Class B-2 Certificates;

          (xii) any remaining amounts, to pay the Monthly Servicing Fee, to
     the Servicer, if Vanderbilt is the Servicer; and

          (xiii) any remaining amounts, to the holder of the Class R
     Certificate.

Notwithstanding the prioritization of the distribution of the Formula
Principal Distribution Amount among the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates and Class A-4 Certificates pursuant to
clauses A(ii) and B(ii) above, on each Remittance Date on and after the
Remittance Date, if any, on which a Deficiency Event occurs, the Available
Distribution Amount remaining after making the distributions of interest on
the Senior Certificates required by clauses A(i) and B(i) above will be
applied to distribute the Formula Principal Distribution Amount on each Class
of Class A-1 Certificates, Class A-2 Certificates, Class A-3 Certificates and
Class A-4 Certificates pro rata in accordance with the outstanding Principal
Balance of each such Class of Certificates; provided, further, that (I) the
aggregate amounts distributed on the Certificates on account of principal
shall not exceed their respective Original Principal Balances.

     The distributions on the Certificates on each Remittance Date shall be
made such that the Trustee shall distribute (x) to the holder of each Class A
Certificate as of the preceding Record Date an amount equal to the product of
(1) the aggregate Percentage Interest evidenced by such Class A Certificate
and (2) as applicable, the Class A-1F Distribution Amount, the Class A-1V
Distribution Amount, Class A-2 Distribution Amount, Class A-3 Distribution
Amount, Class A-4 Distribution Amount, Class A-5 Distribution Amount for such
Remittance Date, (y) to the holder of each Class M-1 Certificate as of the
preceding Record Date an amount equal to the product of (1) the aggregate
Percentage Interest evidenced by such Class M-1 Certificates and (2) the Class
M-1 Distribution Amount for such Remittance Date, and (z) to the holder of
each

                                      75
<PAGE>

Class B Certificate as of the preceding Record Date an amount equal to the
product of (1) the aggregate Percentage Interest evidenced by such Class B
Certificates and (2) as applicable, the Class B-1 Distribution Amount or Class
B-2 Distribution Amount for such Remittance Date.

     The Trustee shall pay each Certificateholder of record by check mailed to
such Certificateholder at the address for such Certificateholder appearing on
the Certificate Register; provided that if such Certificateholder holds
Certificates with original denominations aggregating at least $5,000,000 and
has given the Trustee appropriate written instructions at least 5 Business
Days prior to the related Record Date (which instructions, until revised,
shall remain operative for all Remittance Dates thereafter), the Trustee shall
pay such Certificateholder by wire transfer of funds. If on any Determination
Date the Servicer determines that there are no Contracts outstanding and no
other funds or assets in the Trust Fund other than the funds in the
Certificate Account, the Servicer promptly shall instruct the Trustee to send
the final distribution notice to each Certificateholder and make provision for
the final distribution in accordance with Section 11.01(b). Final payment of
any Certificate shall be made only upon presentation of such Certificate at
the office or agency of the Certificate Registrar.

     (b) On each Remittance Date for which the applicable Monthly Report
indicates that one or more Interest Deficiency Withdrawals is required, after
making the withdrawals and applications described in Section 6.01(a), the
Trustee shall, based upon the information set forth in the related Monthly
Report:

               (A) withdraw from the Distribution Account an amount equal to
          the Interest Deficiency Withdrawal with respect to such Remittance
          Date and apply such amount to payment of the Interest Deficiency
          Amount in the following order of priority:

          (i) to the Class A-5 Certificates, the Class A-5 Interest Deficiency
     Withdrawal, if any;

          (ii) the Class M-1 Certificates, the Class M-1 Interest Deficiency
     Withdrawal, if any; and

          (iii) to the Class B-1 Certificates, the Class B-1 Interest
     Deficiency Withdrawal, if any.

     (c) On each Remittance Date, the Trustee shall, based upon the
information set forth in the Monthly Report for such Remittance Date, withdraw
from the Distribution Account (solely out of the Available Distribution Amount
for such Remittance Date after giving effect to the distributions made on the
Certificates (other than the Class R Certificate) pursuant to Section 6.01(a)
on such Remittance Date) and distribute to the Holder of the Class R
Certificate the Class R Distribution Amount for such Remittance Date. Such
distribution shall be made by a means that is mutually acceptable to the
Trustee and the Holder of the Class R Certificate.

     (d) Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing
such distribution to the Certificate Owners that it represents and to

                                      76
<PAGE>

each indirect participating brokerage firm (a "brokerage firm" or "indirect
participating firm") for which it acts as agent. Each brokerage firm shall be
responsible for disbursing funds to the Certificate Owners that it represents.
All such credits and disbursements with respect to a Book-Entry Certificate
are to be made by the Depository and the Depository Participants in accordance
with the provisions of the Certificates. None of the Trustee, the Certificate
Registrar, Vanderbilt and the Servicer shall have any responsibility therefor
except as otherwise provided by applicable law.

     (e) On each Remittance Date the Trustee shall withdraw from the
Certificate Account an amount equal to the related Guarantee Payment for such
Remittance Date received by it from Clayton pursuant to Section 6.05 and
distribute such amount to the Class B-2 Certificateholders.

     Section 6.02. Permitted Withdrawals from the Certificate Account. The
Servicer may, and in the case of clause (vii) below shall, from time to time
as provided herein, make or cause withdrawals from the Certificate Account of
amounts deposited therein pursuant to Section 5.05 for the following purposes:

          (i) to pay to Vanderbilt with respect to each Contract or property
     acquired in respect thereof that has been purchased or replaced pursuant
     to Section 3.05 all amounts received thereon that are specified in such
     Section to be property of Vanderbilt;

          (ii) to reimburse itself for the payment of taxes out of Liquidation
     Proceeds relating to a Contract (to the extent not previously retained
     from such Liquidation Proceeds prior to their deposit) or out of payments
     expressly made by the related Obligor to reimburse the Servicer for such
     taxes, as permitted by Section 5.06;

          (iii) if neither Vanderbilt nor a wholly owned subsidiary of
     Vanderbilt is the Servicer, to pay to itself the Monthly Servicing Fee;

          (iv) to reimburse itself or a previous Servicer out of Liquidation
     Proceeds (to the extent not previously retained from Liquidation Proceeds
     prior to their deposit in the Certificate Account) in respect of a
     Manufactured Home and out of payments by the related Obligor (to the
     extent of payments expressly made by the Obligor to reimburse the
     Servicer for insurance premiums) for expenses incurred by it in respect
     of such Manufactured Home that are specified as being reimbursable to it
     pursuant to Section 5.07, 5.09 or 5.13 or to a previous Servicer under
     Section 8.08;

          (v) to reimburse itself for any Nonrecoverable Advance or Monthly
     Advances with respect to the Contracts in accordance with Section 6.04(c)
     and for advances in respect of Liquidated Contracts in accordance with
     Section 6.04(c);

          (vi) to reimburse the Servicer for expenses incurred with respect to
     the Contracts and reimbursable to the Servicer pursuant to Section 8.06
     (such reimbursement to be made only from funds that would otherwise be
     distributed on the Class R Certificate pursuant to Section 6.01(a)A(xiii)
     or 6.01 (a)B(xiii));

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<PAGE>

          (vii) to withdraw any amount deposited in the Certificate Account
     that was not required to be deposited therein (including any collections
     on the Contracts that, pursuant to Section 2.01(a), are not part of the
     Trust Fund);

          (viii) withdraw all amounts on deposit in the Certificate Account
     which are to be deposited in the Distribution Account in respect of the
     Available Distribution Amount;

          (ix) withdraw amounts on deposit in the Certificate Account which
     are to be deposited in the Distribution Account in respect of the
     Interest Deficiency Withdrawal, if any; and

          (x) withdraw any amounts necessary to pay any Taxes pursuant to
     Section 5.17.

     Since, in connection with withdrawals pursuant to clauses (i), (ii) and
(iv), the Servicer's entitlement thereto is limited to collections or other
recoveries on the related Contract, the Servicer shall keep and maintain
separate accounting, on a Contract by Contract basis, for the purpose of
justifying any withdrawal from the Certificate Account pursuant to such
clauses.

     The Servicer shall report withdrawals with respect to each Due Period
pursuant to this Section 6.02 in the related Monthly Report.

          Section 6.03. [Reserved]

          Section 6.04. Monthly Advances by the Servicer.

     (a) By the close of business on each Determination Date the Servicer
shall deposit in the Certificate Account, out of its own funds, the related
Monthly Advance; provided, however, that any such deposit out of the
Servicer's own funds shall be made only to the extent necessary to cause the
Available Distribution Amount to be large enough to permit the distribution on
the related Remittance Date of the amounts computed as set forth in clauses
A(i) through (x) or B(i) through (x), inclusive, as applicable, of Section
6.01(a).

     (b) On each Remittance Date, the Servicer shall reimburse itself for the
Outstanding Amount Advanced to the extent of actual collections of late
scheduled payments on the related Contracts.

     (c) If the Servicer determines that any advance made pursuant to Section
6.04(a) has become a Nonrecoverable Advance and at the time of such
determination there exists an Outstanding Amount Advanced, then the Servicer
shall reimburse itself out of funds in the related Certificate Account for the
amount of such Nonrecoverable Advance, but only to the extent of such
Outstanding Amount Advanced.

     Section 6.05. Limited Guarantee.

     (a) No later than the third Business Day prior to each Remittance Date,
the Servicer (if other than Clayton) shall notify Clayton of the amount of any
Guarantee Payment for such Remittance Date. Not later than the Business Day
preceding each Remittance Date, Clayton

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<PAGE>

shall deposit any such Guarantee Payment for such Remittance Date into the
related Certificate Account.

     (b) The obligations of Clayton under this Agreement shall not terminate
upon or otherwise be affected by an Event of Default pursuant to Article IX of
this Agreement.

     (c) The obligation of Clayton to provide the Limited Guarantee under this
Agreement shall terminate on the Final Remittance Date.

     (d) The obligation of Clayton to make the Guarantee Payments described in
subsection (a) above shall be unconditional and irrevocable and shall
constitute an unsecured obligation of Clayton and will rank on a parity with
all other unsecured and unsubordinated indebtedness of Clayton. Clayton
acknowledges that its obligation to make the Guarantee Payments described in
subsection (a) above shall be deemed a guarantee by Clayton of indebtedness of
the Trust Fund for money borrowed from the Class B-2 Certificateholders, and
Clayton acknowledges and agrees that it has no right of reimbursement,
indemnity, exoneration, contribution or other similar right of recovery
arising from amounts expended pursuant to its obligations under this
Agreement, other than the right to receive distributions, to the extent
available, from the Trust Fund as provided in this Agreement. In no event
shall the amount paid on the Class B-2 Certificates in respect of principal
pursuant to the Limited Guarantee exceed the Original Class B-2 Principal
Balance.

     (e) If Clayton fails to make a Guarantee Payment in whole or in part,
Clayton shall promptly notify the Trustee in writing, and the Trustee shall
promptly notify the Rating Agencies. Clayton shall promptly notify the Rating
Agencies in the event of any termination of the Limited Guarantee or any
change of the Person providing the Limited Guarantee, including but not
limited to a change by merger.

     Section 6.06. Alternate Credit Enhancement. Clayton, at its option and
upon prior written notice to the Rating Agencies, may substitute an alternate
form of credit enhancement in place of the Limited Guarantee, provided that
(i) the Rating Agencies shall notify Clayton, Vanderbilt, the Servicer and the
Trustee in writing that such alternate form of credit enhancement shall not
result in a reduction in the then current ratings of the Certificates and (ii)
Clayton shall cause to be delivered to the Trustee an Opinion of Counsel to
the effect that such substitution of credit enhancement shall not adversely
affect the status of the Trust Fund as a REMIC. Such alternate form of credit
enhancement can be in the form of cash or securities deposited by Clayton or
any other Person in a segregated escrow, trust or collateral account or a
letter of credit, certificate insurance policy or surety bond provided by a
third party.

     Section 6.07. Calculation of the Remittance Rates with respect to the
Floating Rate Certificates. On the second LIBOR Business Day immediately
preceding each Remittance Date, the Trustee shall determine LIBOR for the
Interest Period commencing on such Remittance Date and inform the Servicer (at
the facsimile number given to the Trustee in writing) of such rates. On each
Determination Date, the Servicer shall determine the Class A-1V Remittance
Rate for the related Remittance Date.

                              [End of Article VI]

                                      79
<PAGE>

                                 Article VII

                                    REPORTS

     Section 7.01. Monthly Reports. Within two Business Days following each
Determination Date, the Servicer shall cause the Trustee to receive a report
(the "Monthly Report"), which shall include the following information with
respect to the immediately following Remittance Date:

          (a) the Class A-1F Distribution Amount, the Class A-1V Distribution
     Amount, the Class A-2 Distribution Amount, the Class A-3 Distribution
     Amount, the Class A-4 Distribution Amount, the Class A-5 Distribution
     Amount, the Class M-1 Distribution Amount, the Class B-1 Distribution
     Amount and the Class B-2 Distribution Amount for such Remittance Date;

          (b) the amount of principal to be distributed on each Class of the
     Class A-1F Certificates, Class A-1V Certificates, Class A-2 Certificates,
     Class A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates,
     Class M-1 Certificates, Class B-1 Certificates and Class B-2 Certificates
     on such Remittance Date, separately stating the amounts specified in
     clauses (a) through (f) of the Formula Principal Distribution Amount
     definition;

          (c) the amount of interest to be distributed on each Class of the
     Class A-1F Certificates, Class A-1V Certificates, Class A-2 Certificates,
     Class A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates,
     Class M-1 Certificates, Class B-1 Certificates and Class B-2 Certificates
     on such Remittance Date (separately identifying any Class A-1F Unpaid
     Interest Shortfall, Class A-1V Unpaid Interest Shortfall, Class A-2
     Unpaid Interest Shortfall, Class A-3 Unpaid Interest Shortfall, Class A-4
     Unpaid Interest Shortfall, Class A-5 Unpaid Interest Shortfall, Class M-1
     Unpaid Interest Shortfall, Class B-1 Unpaid Interest Shortfall and Class
     B-2 Unpaid Interest Shortfall included in such distribution) and the
     Remittance Rate for each such Class of Certificates for such Remittance
     Date;

          (d) the remaining Class A-1F Principal Balance, Class A-1V Principal
     Balance, Class A-2 Principal Balance, Class A-3 Principal Balance, Class
     A-4 Principal Balance, Class A-5 Principal Balance, Class M-1 Principal
     Balance, Class B-1 Principal Balance and Class B-2 Principal Balance
     after giving effect to the payment of principal to be made on such
     Remittance Date (on which interest will be calculated on the next
     succeeding Remittance Date);

          (e) the total amount of fees payable on such Remittance Date,
     separately identifying the Monthly Servicing Fee, any related
     reimbursement to Vanderbilt pursuant to Section 6.04, and any related
     Late Payment Fees, Extension Fees and assumption fees paid during the
     prior Due Period;

          (f) the number and aggregate unpaid principal balance of the
     Contracts with payments delinquent 31 to 59, 60 to 89, and 90 or more
     days, respectively;

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          (g) the number of Contracts that were repurchased by Vanderbilt in
     accordance with Section 3.05 during the prior Due Period, identifying
     such Contracts and the Repurchase Price of such Contracts;

          (h) the Pool Factor for the Class A-1F Certificates, Class A-1V
     Certificates, Class A-2 Certificates, Class A-3 Certificates, Class A-4
     Certificates, Class A-5 Certificates, Class M-1 Certificates, Class B-1
     Certificates and Class B-2 Certificates after giving effect to the
     payment of principal to be made on such Remittance Date;

          (i) the Class R Distribution Amount, if any, for such Remittance
     Date, separately stating any Repossession Profits;

          (j) the aggregate principal balances of all Contracts that are not
     Liquidated Contracts and in respect of which the related Manufactured
     Homes have been repossessed or foreclosed upon;

          (k) the Aggregate Net Liquidation Losses through the Due Period
     immediately preceding such Remittance Date;

          (l) the amount, if any, by which the Class B-2 Formula Distribution
     Amount exceeds the Remaining Amount Available for such Remittance Date;

          (m) the Class B-2 Principal Liquidation Loss Amount, if any, for
     such Remittance Date;

          (n) the Guarantee Payment with respect to the Class B-2
     Certificates, if any, for such Remittance Date;

          (o) the amount of any related unadvanced shortfalls for the prior
     Due Period;

          (p) the number and dollar amount of units repossessed during the
     prior Due Period;

          (q) the amount of any Principal Prepayments paid with respect to the
     Contracts during the prior Due Period;

          (r) the amount of any Scheduled Principal Payments to be made with
     respect to the Contracts on such Remittance Date;

          (s) the weighted average annual percentage rate of interest for the
     Contracts remaining in the Contract Pool on such Remittance Date;

          (t) the Interest Deficiency Amount and Interest Deficiency
     Withdrawal, if any, for each of the Class A-5, Class M-1 and Class B-1
     Certificates with respect to such Remittance Date; and

          (u) a summary of withdrawals from the Certificate Account pursuant
     to Section 6.02 of this Agreement.

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     The Trustee shall send copies of all Monthly Reports to the Rating
Agencies. The Trustee shall have no duty to recalculate or verify the
information provided to it by the Servicer.

     Section 7.02. Certificate of Servicing Officer. Each Monthly Report
pursuant to Section 7.01 shall be accompanied by a certificate of a Servicing
Officer substantially in the form of Exhibit G, certifying the accuracy of the
Monthly Report and that no Event of Default or event that with notice or lapse
of time or both would become an Event of Default has occurred, or if such
event has occurred and is continuing, specifying the event and its status.

     Section 7.03. Other Data and Consultation with the Trustee. The Servicer,
on request of the Trustee, shall furnish the Trustee such underlying data as
may reasonably be requested by the Trustee. In addition, upon reasonable
request of the Trustee, the Servicer shall consult with the Trustee and the
Servicer shall provide such additional written information and certifications
as may be reasonably requested by the Trustee (provided that such information
or certification are reasonably obtainable or certifiable and otherwise within
the realm of the Servicer's responsibilities under the Agreement) before
taking or suffering any action hereunder if the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking
or suffering any action in the administration of the provisions of this
Agreement.

     Section 7.04. Annual Statement as to Compliance. The Servicer will
deliver to Vanderbilt, the Trustee and the Rating Agencies on or before the
first day of the fifth month following the end of the Servicer's fiscal year,
initially November 1, 2003, an Officer's Certificate stating, as to each
signer thereof, that (i) a review of the activities of the Servicer during
such preceding fiscal year and of performance under this Agreement has been
made under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof. The Servicer
shall notify the Trustee in the event of a change in the Servicer's fiscal
year.

     Section 7.05. Annual Independent Public Accountants' Servicing Report. On
or before November 1 of each year, beginning with November 1, 2003, the
Servicer, at its expense, shall cause a firm of independent public accountants
which is a member of the American Institute of Certified Public Accountants to
furnish a statement to Vanderbilt, the Trustee and the Rating Agencies to the
effect that such firm has examined certain documents and records relating to
the servicing of the Contracts under this Agreement and, at the option of the
Servicer, manufactured housing installment sale contracts under pooling and
servicing agreements substantially similar to this Agreement with regard to
servicing procedures (such statement to have attached thereto a schedule
setting forth the pooling and servicing agreements covered thereby, including
this Agreement) and that, on the basis of such examination conducted
substantially in compliance with this Agreement or such agreements, as the
case may be, and generally accepted auditing standards, such servicing has
been conducted in compliance with this Agreement or such pooling and servicing
agreements, as the case may be, except for (i) such exceptions as such firm
believes to be immaterial and (ii) such other exceptions that, in the opinion
of such firm, generally accepted auditing standards require it to report. For
purposes of such statement, such firm may assume conclusively that all pooling
and servicing agreements among Vanderbilt, the Servicer and the Trustee
relating to certificates evidencing an interest in manufactured housing

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contracts are substantially similar to one another except for any such pooling
and servicing agreement which by its terms specifically states otherwise.

     Section 7.06. Statements to Certificateholders.

     (a) Concurrently with each distribution to Certificateholders pursuant to
Article VI, the Trustee shall mail, or cause the Paying Agent to mail, to the
Certificateholders, at the addresses appearing on the Certificate Register, a
statement as of the related Remittance Date prepared by the Servicer setting
forth:

          (1) the Class A-1F Distribution Amount, the Class A-1V Distribution
     Amount, the Class A-2 Distribution Amount, the Class A-3 Distribution
     Amount, the Class A-4 Distribution Amount, the Class A-5 Distribution
     Amount, the Class M-1 Distribution Amount, the Class B-1 Distribution
     Amount, the Class B-2 Distribution Amount and the Class R Distribution
     Amount for such Remittance Date;

          (2) the amount of principal to be distributed on each Class of the
     Class A-1F Certificates, Class A-1V Certificates, Class A-2 Certificates,
     Class A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates,
     Class M-1 Certificates, Class B-1 Certificates and Class B-2 Certificates
     on such Remittance Date, separately stating the amounts specified in
     clauses (a) through (f) of the Formula Principal Distribution Amount
     definition;

          (3) the amount of interest to be distributed on each Class of the
     Class A-1F Certificates, Class A-1V Certificates, Class A-2 Certificates,
     Class A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates,
     Class M-1 Certificates, Class B-1 Certificates and Class B-2 Certificates
     on such Remittance Date (separately identifying any Class A-1F Unpaid
     Interest Shortfall, Class A-1V Unpaid Interest Shortfall, Class A-2
     Unpaid Interest Shortfall, Class A-3 Unpaid Interest Shortfall, Class A-4
     Unpaid Interest Shortfall, Class A-5 Unpaid Interest Shortfall, Class M-1
     Unpaid Interest Shortfall, Class B-1 Unpaid Interest Shortfall or Class
     B-2 Unpaid Interest Shortfall included in such distribution) and the
     related Remittance Rate for each such Class for such Remittance Date;

          (4) the remaining Class A-1F Principal Balance, Class A-1V Principal
     Balance, Class A-2 Principal Balance, Class A-3 Principal Balance, Class
     A-4 Principal Balance, Class A-5 Principal Balance, Class M-1 Principal
     Balance, Class B-1 Principal Balance and Class B-2 Principal Balance
     after giving effect to the payment of principal to be made on such
     Remittance Date (on which interest will be calculated on the next
     succeeding Remittance Date);

          (5) the number and aggregate unpaid principal amount of Contracts
     that are delinquent 31 to 59 days, 60 to 89 days, and 90 or more days,
     respectively;

          (6) the total amount of fees payable out of the Trust Fund for such
     Due Period;

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<PAGE>

          (7) the Pool Factor for each Class of Certificates after giving
     effect to the distribution on such Remittance Date;

          (8) such other customary factual information available to the
     Servicer as the Servicer deems necessary and can obtain reasonably from
     its existing data base to enable the Certificateholders to prepare their
     tax returns;

          (9) the amount, if any, by which the Class B-2 Formula Distribution
     Amount exceeds the Remaining Amount Available for such Remittance Date;

          (10) the Class B-2 Principal Liquidation Loss Amount, if any, for
     such Remittance Date; and

          (11) the Guarantee Payment, if any, for such Remittance Date.

     In the case of information furnished pursuant to clauses (1) through (4)
above, the amounts shall be expressed as a dollar amount per Certificate with
a $1,000 denomination.

     Within a reasonable period of time after the end of each calendar year,
subject to the next sentence, but in no event later than 90 days after the end
of such year, the Servicer shall prepare and furnish to the Trustee, and the
Trustee, promptly upon receipt, shall furnish to each Person who at any time
during the calendar year was the Holder of a Certificate, a statement
containing the information set forth in clauses (2) and (3) above, aggregated
for such calendar year or applicable portion thereof during which such Person
was a Certificateholder. Such obligation of the Servicer shall be deemed to
have been satisfied to the extent that substantially comparable information
shall be provided by the Servicer pursuant to any requirements of the Code as
from time to time in force.

     On each Remittance Date, if the Servicer is not the Holder of the Class R
Certificate, the Servicer shall forward or cause to be forwarded by mail to
the Holder of the Class R Certificate a copy of the report forwarded to the
Holders of Certificates on such Remittance Date. If the Servicer is not the
Holder of the Class R Certificate, the Servicer shall also forward or cause to
be forwarded by mail to the Holder of the Class R Certificate a statement
setting forth the amount of the distribution to the Holder of the Class R
Certificate, together with such other information as the Servicer deems
necessary or appropriate.

     Within a reasonable period of time after the end of each calendar year,
the Servicer shall furnish or cause to be furnished to each Person who at any
time during the calendar year was the holder of the Residual Interest a
statement containing the applicable distribution information provided pursuant
to this Section aggregated for such calendar year or applicable portion
thereof during which such Person was the Holder of the Class R Certificate.
Such obligation of the Servicer shall be deemed to have been satisfied to the
extent that substantially comparable information shall be provided by the
Servicer pursuant to any requirements of the Code as from time to time
enforced.

     A Certificateholder holding Certificates of a Class representing in the
aggregate at least 5% of the Percentage Interest of such Class shall, upon
written request to the Trustee, be entitled to receive copies of all reports
provided to the Trustee.

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     The Servicer shall send copies of all reports provided to the Trustee for
the Certificateholders to each of the Underwriters.

                             [End of Article VII]

                                      85
<PAGE>

                                 Article VIII

                   INDEMNITIES; VANDERBILT AND THE SERVICER

     Section 8.01. Liabilities to Obligors. No liability to any Obligor under
any of the Contracts arising out of any act or omission to act of the Servicer
in servicing the Contracts prior to the Closing Date is intended to be assumed
by the Trustee or the Certificateholders under or as a result of this
Agreement and the transactions contemplated hereby and, to the maximum extent
permitted and valid under mandatory provisions of law, the Trustee and the
Certificateholders expressly disclaim such assumption.

     Section 8.02. Tax Indemnification. Vanderbilt agrees to pay, and to
indemnify, defend and hold harmless the Trust or any separate trustee, the
Trustee, the Certificate Registrar, each Paying Agent and the
Certificateholders from any taxes and related penalties which may at any time
be asserted with respect to, and as of the date of, the transfer of the
Contracts from Vanderbilt to the Trust or any separate trustee, including,
without limitation, any sales, gross receipts, general corporation, personal
property, privilege or license taxes (but not including any income or
franchise taxes or federal, state or other taxes arising out of the creation
of the Trust Fund and the issuance of the Certificates or distributions with
respect thereto) or tax due under Tenn. Code Ann. ss.67-4-409(b) or any
successor provision and, in each such case, costs, expenses and reasonable
counsel fees in defending against the same. The Servicer shall promptly notify
the Trustee and the Rating Agencies in writing, and the Trustee shall promptly
notify the Rating Agencies, in the event that either such party becomes aware
of the assertion of a claim or imposition of a lien by the Tennessee
Department of Revenue arising out of any characterization by such Department
of the transfer of the Contracts to the Trustee or any separate trustee as a
secured financing rather than a sale for purposes of the Tennessee
indebtedness tax.

     Section 8.03. Servicer's Indemnities. The Servicer shall defend and
indemnify the Trust Fund, the Trustee, the Certificate Registrar, each Paying
Agent, Vanderbilt and the Certificateholders and each of their officers,
directors, employees, representatives and agents from and against any and all
costs, expenses, losses, damages, claims and liabilities, including reasonable
fees and expenses of counsel and expenses of litigation, arising from third
party claims or actions in respect of any action taken or failed to be taken
by the Servicer or a prior owner of Acquired Contracts or servicer on behalf
of such owner with respect to any Contract or Manufactured Home and any
failure by the Servicer to perform its obligations in compliance with the
standard of care set forth in this Agreement. This indemnity shall survive any
Event of Default (but a Servicer's obligations under this Section 8.03 shall
not relate to any actions of any subsequent Servicer after an Event of
Default) and any payment of the amount owing under, or any repurchase by
Vanderbilt of, any such Contract.

     Section 8.04. Operation of Indemnities. Indemnification under this
Article shall include, without limitation, reasonable fees and expenses of
counsel and expenses of litigation. If Vanderbilt or the Servicer has made any
indemnity payments to the Trustee pursuant to this Article and the Trustee
thereafter collects any of such amounts from others, the Trustee will repay
such amounts collected to Vanderbilt or the Servicer, as the case may be,
together with any interest collected thereon, but reduced by interest on
amounts paid by the Trustee through the

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<PAGE>

date of reimbursement. The indemnities under this Article shall survive the
termination of this Agreement and any resignation or removal of the Trustee.

     Section 8.05. Merger or Consolidation of Vanderbilt or the Servicer.
Vanderbilt and the Servicer will each keep in full effect its existence,
rights and franchises as a corporation or association, as the case may be, and
will obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, the
Certificates or any of the Contracts and to perform its duties under this
Agreement.

     Any Person into which Vanderbilt or the Servicer may be merged or
consolidated, or any Person resulting from any merger, conversion or
consolidation to which Vanderbilt or the Servicer shall be a party, or any
Person succeeding to the business of Vanderbilt or the Servicer, shall be the
successor of Vanderbilt or the Servicer hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding; provided, however,
that the successor or surviving Person to the Servicer shall satisfy the
requirements of Section 8.08 with respect to the qualifications of a successor
to the Servicer. Each of Vanderbilt and the Servicer shall promptly notify the
Trustee and the Rating Agencies in writing of any such merger to which it is a
party.

     Section 8.06. Limitation on Liability of the Servicer and Others. Neither
the Servicer nor any of the directors, officers, employees or agents of the
Servicer shall be under any liability to the Trustee or the Certificateholders
for any action taken or for refraining from the taking of any action in good
faith pursuant to this Agreement, or for errors in judgment; provided,
however, that this provision shall not protect the Servicer or any such person
against any liability that would otherwise be imposed by reason of the failure
to perform its obligations in strict compliance with the standard of care set
forth in this Agreement. The Servicer and any director, officer, employee or
agent of the Servicer may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder. Except as may be required to comply with its standard of
care, the Servicer shall not be under any obligation to appear in, prosecute
or defend any legal action which arises under this Agreement and which in its
opinion may involve it in any expenses or liability; provided, however, that
the Servicer may in its discretion undertake any such action which it may deem
necessary or desirable in respect to this Agreement and the rights and duties
of the parties hereto. In such event, the legal expenses and costs of such
action and any liability resulting therefrom shall be expenses, costs and
liabilities payable from the related Certificate Account and the Servicer
shall be entitled to be reimbursed therefor out of such Certificate Account as
provided by Section 6.02; provided that such reimbursement shall be made, from
time to time on one or more Remittance Dates, only out of the Available
Distribution Amount for such Remittance Date that remains after the
distributions on the Class A Certificates, Class M-1 Certificates and Class B
Certificates for such Remittance Date have been made.

     Section 8.07. Assignment by Servicer. The Servicer may, with the prior
written consent of Vanderbilt, assign its rights and delegate its duties and
obligations under this Agreement; provided that the Person accepting such
assignment or delegation shall be a Person which executes and delivers to
Vanderbilt and the Trustee an agreement, in form and substance reasonably
satisfactory to Vanderbilt and the Trustee, which contains an assumption by
such

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<PAGE>

Person of the due and punctual performance and observance of each covenant and
condition to be performed or observed by the Servicer under this Agreement;
provided further that the Rating Agencies' rating of the Class A Certificates,
Class M-1 Certificates and Class B Certificates in effect immediately prior to
such assignment and delegation will not be withdrawn or reduced as a result of
such assignment and delegation, as evidenced by a letter addressed to the
Servicer and the Trustee from the Rating Agencies. In the case of any such
assignment and delegation, the Servicer shall be released from its obligations
under this Agreement, except that the Servicer shall remain liable for all
liabilities and obligations incurred by it as Servicer hereunder prior to the
satisfaction of the conditions to such assignment and delegation set forth in
the next preceding sentence.

     Section 8.08. Successor to the Servicer. In connection with the
termination of the Servicer's responsibilities and duties under this Agreement
pursuant to Section 9.01, the Trustee shall (i) succeed to and assume all of
the Servicer's responsibilities, rights, duties and obligations under this
Agreement (except the duty to pay and indemnify the Trustee pursuant to
Section 10.05 hereof, which duty shall remain the obligation of the initial
Servicer), or (ii) appoint a successor acceptable to Vanderbilt, which shall
have a net worth of not less than $10,000,000 and shall have serviced for at
least one year prior to such appointment a portfolio of not less than
$100,000,000 principal amount of manufactured housing installment sale
contracts or installment loans and which shall succeed to all rights and
assume all of the responsibilities, duties and liabilities of the Servicer
under this Agreement prior to the termination of the Servicer's
responsibilities, duties and liabilities under this Agreement (except that the
duty to pay and indemnify the Trustee pursuant to Section 10.05 hereof shall
be subject to negotiation at the time of such appointment). If the Trustee has
become the successor to the Servicer in accordance with this Section, the
Trustee may, if it shall be unwilling to continue to so act, or shall, if it
is unable to so act, appoint or petition a court of competent jurisdiction to
appoint, a successor satisfying the requirements set out in clause (ii) above.
In connection with any appointment of a successor Servicer, the Trustee may
make such arrangements for the compensation of such successor out of payments
on Contracts as it and such successor shall agree or such court shall
determine; provided, however, that no such compensation shall be in excess of
a monthly amount equal to 1/12 of the product of 1.25% and the Pool Scheduled
Principal Balance for the Remittance Date in respect of which such
compensation is being paid without the consent of all of the
Certificateholders and notice to the Rating Agencies. If the Servicer's
duties, responsibilities and liabilities under this Agreement should be
terminated pursuant to Sections 8.07 or 9.01, the Servicer shall discharge
such duties and responsibilities during the period from the date it acquires
knowledge of such termination until the effective date thereof with the same
degree of diligence and prudence which it is obligated to exercise under this
Agreement, shall cooperate with the Trustee and any successor Servicer in
effecting the termination of the Servicer's responsibilities and rights
hereunder, and shall take no action whatsoever that might impair or prejudice
the rights or financial condition of its successor. The assignment by a
Servicer pursuant to Section 8.07 or removal of Servicer pursuant to Section
9.01 shall not become effective until a successor shall be appointed pursuant
to this Section and shall in no event relieve Vanderbilt of liability pursuant
to Section 3.05 for breach of the representations and warranties made pursuant
to Section 3.02 or 3.03.

     Any successor appointed as provided herein shall execute, acknowledge and
deliver to the Servicer and to the Trustee an instrument accepting such
appointment, whereupon such

                                      88
<PAGE>

successor shall become fully vested with all the rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer, with like
effect as if originally named as a party to this Agreement and the
Certificates. Any assignment by or termination of the Servicer pursuant to
Section 8.07 or 9.01 or the termination of this Agreement pursuant to Section
11.01 shall not affect any claims that the Trustee may have against the
Servicer arising prior to any such termination or resignation.

     The Servicer shall, at its expense, timely deliver to the successor, or
shall cause such delivery of, the funds in the Certificate Account and all
Contract Files and related documents and statements held by it hereunder and
the Servicer shall account for all funds and shall execute and deliver such
instruments and do such other things as reasonably may be required to more
fully and definitely vest and confirm in the successor all such rights,
powers, duties, responsibilities, obligations and liabilities of the Servicer.
Without limitation, the Trustee is authorized and empowered to execute and
deliver on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments (including, without limitation, transfer
instruments in respect of certificates of title and financing statements
relating to the Manufactured Homes), and to do any and all acts or things
necessary or appropriate to effect the purposes of such notice of termination.

     Upon a successor's acceptance of appointment as such, the Trustee shall
notify in writing the Certificateholders of such appointment.

                             [End of Article VIII]

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<PAGE>

                                  Article IX

                                    DEFAULT

     Section 9.01. Events of Default. In case one or more of the following
Events of Default shall occur and be continuing:

          (a) any failure by the Servicer to make any deposit or payment, or
     to remit to the Trustee any payment, required to be made under the terms
     of this Agreement which continues unremedied for a period of five days
     after the date upon which written notice of such failure, requiring the
     same to be remedied, shall have been given to the Servicer by the Trustee
     or Vanderbilt (which shall also give such notice to the Trustee) or to
     the Servicer, the Trustee and Vanderbilt by the Holders of Certificates
     evidencing not less than 25% of the Trust Fund; or

          (b) failure on the part of the Servicer duly to observe or perform
     in any material respect any other of the covenants or agreements on the
     part of the Servicer set forth in this Agreement which continues
     unremedied for a period of 30 days after the date on which written notice
     of such failure, requiring the same to be remedied, shall have been given
     to the Servicer by the Trustee or Vanderbilt (which shall also give such
     notice to the Trustee), or to the Servicer, the Trustee and Vanderbilt by
     the Holders of Certificates evidencing not less than 25% of the Trust
     Fund; or

          (c) a decree or order of a court or agency or supervisory authority
     having jurisdiction in the premises in an involuntary case under any
     present or future federal or state bankruptcy, insolvency or similar law
     or appointing a conservator or receiver or liquidator in any insolvency,
     readjustment of debt, marshalling of assets and liabilities or similar
     proceedings, or for the winding-up or liquidation of its affairs, shall
     have been entered against the Servicer and such decree or order shall
     have remained in force undischarged or unstayed for a period of 60 days;
     or

          (d) the Servicer shall consent to the appointment of a conservator
     or receiver or liquidator in any insolvency, readjustment of debt,
     marshalling of assets and liabilities or similar proceedings of or
     relating to the Servicer or of or relating to all or substantially all of
     the Servicer's property; or

          (e) the Servicer shall admit in writing its inability to pay its
     debts generally as they become due, file a petition to take advantage of
     any applicable insolvency or reorganization statute, make an assignment
     for the benefit of its creditors, or voluntarily suspend payment of its
     obligations or take any corporate action in furtherance of the foregoing;

then, and in each and every such case, so long as such Event of Default shall
not have been remedied, the Trustee may, and at the written direction of the
Holders of the Certificates evidencing not less than 25% of the Trust Fund, by
notice in writing to the Servicer shall, terminate all the rights and
obligations of the Servicer under this Agreement and in and to the

                                      90
<PAGE>

Contracts and the proceeds thereof. The Trustee shall send a copy of any such
notice to the Rating Agencies. On or after the receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Contracts or otherwise, shall pass to and be
vested in the successor appointed pursuant to Section 8.08. Upon the
occurrence of an Event of Default which shall not have been remedied, the
Trustee may also pursue whatever rights it may have at law or in equity to
damages, including injunctive relief and specific performance. The Trustee
will have no obligation to take any action or institute, conduct or defend any
litigation under this Agreement at the request, order or direction of any of
the Holders of Certificates unless such Certificateholders have offered to the
Trustee security or indemnity satisfactory to it against the costs, expenses
and liabilities (financial or otherwise) which the Trustee may incur.

     Section 9.02. Waiver of Defaults. The Trustee may waive any default by
the Servicer in the performance of its obligations hereunder and its
consequences, except that a default in the making of any required remittance
to the Trustee for distribution on any of the Certificates may be waived only
by the affected Certificateholders. Upon any such waiver of a past default,
such default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been remedied for every purpose of this Agreement. No
such waiver shall extend to any subsequent or other default or impair any
right consequent thereon except to the extent expressly so waived.

     Section 9.03. Trustee to Act; Appointment of Successor. On and after the
time the Servicer receives a notice of termination pursuant to Section 9.01,
the Trustee or its appointed agent shall be the successor in all respects to
the Servicer as provided in Section 8.08 hereof.

     Section 9.04. Notification to Certificateholders.

     (a) Upon any such termination pursuant to Section 9.01, the Trustee shall
give prompt written notice thereof to Certificateholders at their respective
addresses appearing in the Certificate Register and to the Rating Agencies.

     (b) Within 60 days after the occurrence of any Event of Default known to
a Responsible Officer of the Trustee, the Trustee shall transmit by mail to
all Holders of Certificates, notice of each such Event of Default hereunder
known to the Trustee, unless such Event of Default shall have been cured or
waived.

     Section 9.05. Effect of Transfer.

     (a) After a transfer of servicing duties to a successor Servicer pursuant
to Section 8.05, 8.07, 8.08 or 9.01, the Trustee or new Servicer may notify
Obligors to make payments that are due under the Contracts after the effective
date of the transfer of servicing duties directly to the new Servicer.

     (b) After the transfer of servicing duties to a successor Servicer
pursuant to Section 8.05, 8.07, 8.08 or 9.01, the replaced Servicer shall have
no further obligations with respect to the management, administration,
servicing or collection of the Contracts, except to affect an orderly
transition of the servicing function, but in the case of a transfer pursuant
to Section 8.08 or 9.01

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<PAGE>

shall remain liable for any liability of the Servicer hereunder and shall
remain entitled to any compensation due the Servicer that had already accrued
prior to such transfer.

     (c) A transfer of servicing duties to a successor Servicer shall not
affect the rights and duties of the parties hereunder (including but not
limited to the indemnities of the Servicer pursuant to Article VIII) other
than those relating to the management, administration, servicing or collection
of the Contracts.

     Section 9.06. Transfer of the Accounts. Notwithstanding the provisions of
Section 9.01, if the Certificate Account shall be maintained with the Servicer
or an Affiliate of the Servicer and an Event of Default shall occur and be
continuing, the Servicer, after five days' written notice from the Trustee, or
in any event within ten days after the occurrence of the Event of Default,
shall establish a new account or accounts, which shall be Eligible Accounts,
conforming with the requirements of this Agreement at the trust department of
the Trustee or with a depository institution other than the Servicer or an
Affiliate of the Servicer and promptly transfer all funds in the Certificate
Account to such new Certificate Account, which shall thereafter be deemed the
Certificate Account for the purposes hereof.

                              [End of Article IX]

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                                  Article X

                            CONCERNING THE TRUSTEE

     Section 10.01. Duties of Trustee. The Trustee, prior to the occurrence of
an Event of Default and after the curing of all Events of Default which may
have occurred, undertakes to perform such duties and only such duties as are
set forth specifically in this Agreement. In case an Event of Default known to
the Trustee shall have occurred (which has not been cured or waived), the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement and use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.

     The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are required specifically to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform, on their faces, to the requirements of this Agreement.

     No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act
or its own misconduct; provided, however, that:

          (i) Prior to the occurrence of an Event of Default of which a
     Responsible Officer of the Trustee shall have actual knowledge, and after
     the curing or waiver of all such Events of Default which may have
     occurred, the duties and obligations of the Trustee shall be determined
     solely by the express provisions of this Agreement, the Trustee shall not
     be liable except for the performance of such duties and obligations as
     are specifically set forth in this Agreement, no implied covenants or
     obligations shall be read into this Agreement against the Trustee and, in
     the absence of bad faith on the part of the Trustee, the Trustee may rely
     conclusively, as to the truth of the statements and the correctness of
     the opinions expressed therein, upon any certificates or opinions
     furnished to the Trustee and, if specifically required to be furnished
     pursuant to any provision of this Agreement, conforming to the
     requirements of this Agreement;

          (ii) The Trustee shall not be liable personally for an error of
     judgment made in good faith by a Responsible Officer or Responsible
     Officers of the Trustee, unless it shall be proved that the Trustee was
     negligent in ascertaining the pertinent facts;

          (iii) The Trustee shall not be liable personally with respect to any
     action taken, suffered or omitted to be taken by it in good faith in
     accordance with the direction of Holders of Certificates evidencing not
     less than 25% of the Trust Fund as to the time, method and place of
     conducting any proceeding for any remedy available to the Trustee, or
     exercising any trust or power conferred upon the Trustee, under this
     Agreement; and

          (iv) The Trustee shall not be charged with knowledge of an Event of
     Default until such time as a Responsible Officer shall have actual
     knowledge or have received written notice thereof.

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<PAGE>

     None of the provisions contained in this Agreement shall require the
Trustee to perform, or be responsible for the manner of performance of, any of
the obligations of the Servicer under this Agreement, except during such time,
if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement.

     Section 10.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 10.01:

          (a) The Trustee may rely upon and shall be protected in acting or
     refraining from acting upon any resolution, Officers' Certificate,
     certificate of auditors or any other certificate, statement, instrument,
     opinion, report, notice, request, consent, order, appraisal, bond or
     other paper or document believed by it to be genuine and to have been
     signed or presented by the proper party or parties;

          (b) The Trustee may consult with counsel and any written advice or
     Opinion of Counsel shall be full and complete authorization and
     protection in respect of any action taken or suffered or omitted by it
     hereunder in good faith and in accordance with such written advice or
     Opinion of Counsel;

          (c) The Trustee shall be under no obligation to exercise any of the
     trusts or powers vested in it by this Agreement or to institute, conduct
     or defend any litigation hereunder or in relation hereto at the request,
     order or direction of any of the Certificateholders pursuant to the
     provisions of this Agreement, unless such Certificateholders shall have
     offered to the Trustee reasonable security or indemnity satisfactory to
     it against the costs, expenses and liabilities which may be incurred
     therein or thereby; nothing contained herein shall, however, relieve the
     Trustee of the obligation, upon the occurrence of an Event of Default
     (which has not been cured), to exercise such of the rights and powers
     vested in it by this Agreement, and to use the same degree of care and
     skill in their exercise as a prudent man would exercise or use under the
     circumstances in the conduct of his own affairs;

          (d) Neither the Trustee nor any of its officers, directors,
     employees or agents shall be liable personally for any action taken,
     suffered or omitted by them in good faith and believed by it to be
     authorized or within the discretion or rights or powers conferred upon it
     by this Agreement;

          (e) Prior to the occurrence of an Event of Default of which a
     Responsible Officer of the Trustee has actual knowledge hereunder and
     after the curing or waiver of all Events of Default which may have
     occurred, the Trustee shall not be bound to make any investigation into
     the facts or matters stated in any resolution, certificate, statement,
     instrument, opinion, report, notice, request, consent, order, approval,
     bond or other paper or document, unless requested in writing so to do by
     the Holders of Certificates evidencing Fractional Interests aggregating
     not less than 25%; provided, however, that if the payment within a
     reasonable time to the Trustee of the costs, expenses or liabilities
     likely to be incurred by it in the making of such investigation is, in
     the opinion of the Trustee, not reasonably assured to the Trustee by the
     security afforded to it by the terms

                                      94
<PAGE>

     of this Agreement, the Trustee may require reasonable indemnity against
     such expense or liability as a condition to such proceeding. The
     reasonable expense of every such examination shall be paid by the
     Servicer, if an Event of Default shall have occurred and is continuing,
     and otherwise by the Certificateholders requesting the investigation;

          (f) The Trustee may execute any of the trusts or powers hereunder or
     perform any duties hereunder either directly or by or through
     co-trustees, separate trustees, agents (including appointing a custodian
     to maintain custody of the Land-and-Home Contract Files and the Mortgage
     Loan Files) or attorneys and the Trustee shall not be liable or
     responsible for the misconduct or negligence of any such agent or
     attorney appointed with due care; provided, however, that any Affiliate
     of Vanderbilt may only perform ministerial or custodial duties hereunder
     as agent for the Trustee;

          (g) The right of the Trustee to perform any discretionary act
     enumerated in this Agreement shall not be construed as a duty, and the
     Trustee shall not be answerable for other than its negligence or willful
     misconduct in the performance of any such act;

          (h) The Trustee shall not be required to take any action at the
     request or direction of the Holders of the Certificates if the Trustee
     determines that such action conflicts with any rule of law or this
     Agreement;

          (i) None of the provisions of this Agreement shall require the
     Trustee to expend or risk its own funds or otherwise to incur any
     liability, financial or otherwise, in the performance of any of its
     duties hereunder, or in the exercise of any of its right or powers if it
     shall have reasonable grounds for believing that repayment of such funds
     or indemnity satisfactory to it against such risk or liability is not
     assured to it; and

          (j) The Trustee in issuing Certificates may use "CUSIP," "CINS" and
     "ISIN" numbers (if then generally in use), and the Trustee shall use
     CUSIP, CINS or ISIN numbers, as the case may be, in notices as a
     convenience to Holders and no representation shall be made as to the
     correctness of such numbers either as printed on the Certificates or as
     contained in any notice.

          (k) Funds in the Certificate Account and the Pre-Funding Account
     shall only be invested in accordance with Sections 5.05 and 5.19. Any
     losses incurred on such investment and reinvestment of funds in the
     Certificate Account or the Pre-Funding Account shall be debited against
     the Certificate Account or the Pre-Funding Account, respectively. In no
     event shall the Trustee be liable for the selection of investments,
     investment losses incurred thereon, losses incurred as a result of the
     liquidation of any investment prior to its stated maturity or the failure
     of the Servicer to provide timely written investment direction. It is
     agreed and understood that the entity serving as Trustee may earn fees
     associated with the investments outlined above in accordance with the
     terms of such investments. In no event shall the Trustee be deemed an
     investment manager or adviser in respect of any selection of investments
     hereunder.

     Section 10.03. Trustee Not Liable for Certificates or Contracts. The
recitals contained herein and in the Certificates (other than the
countersignature of the Certificates) shall be taken

                                      95
<PAGE>

as the statements of Vanderbilt or the Servicer, as the case may be, and the
Trustee assumes no responsibility for their correctness. The Trustee makes no
representations or warranties as to the validity or sufficiency of this
Agreement, of the Certificates (except that the Certificates shall be duly and
validly countersigned by it), of any Contract or related document or the
conveyance of the Contracts and any related Mortgages or documents. The
Trustee shall not be accountable for the use or application by Vanderbilt of
any of the Certificates or of the proceeds of such Certificates, or for the
use or application of any funds paid to Vanderbilt or the Servicer in respect
of the Contracts or deposited in or withdrawn from the Certificate Account by
Vanderbilt or the Servicer. The Trustee shall have no responsibility for
filing any financing or continuation statement in any public office at any
time or to otherwise perfect or maintain the perfection of any security
interest or lien granted to it hereunder (unless the Trustee shall have become
the successor Servicer) or to prepare or file any Securities and Exchange
Commission filing for the trust created hereby or to record this Agreement.

     Section 10.04. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of
Certificates, and may deal with Vanderbilt, Clayton and the Servicer in
banking transactions, with the same rights it would have if it were not
Trustee.

     Section 10.05. Servicer to Pay Fees and Expenses of Trustee. The Servicer
covenants and agrees to pay, from its own funds, to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation (which
shall not be limited by any provision of law in regard to the compensation of
a trustee of an express trust) for all services rendered by it in the
execution of the trust hereby created and in the exercise and performance of
any of the powers and duties hereunder of the Trustee. The Servicer will pay
(out of its own funds) or reimburse the Trustee, to the extent requested by
the Trustee, for all reasonable expenses, disbursements and advances incurred
or made by the Trustee, in accordance with any of the provisions of this
Agreement or incurred in connection with the administration of the Trustee's
duties hereinunder and the reasonable compensation and the expenses and
disbursements of its counsel and of all Persons not regularly in its employ
(including any custodian), and the expenses incurred by the Trustee in
connection with the appointment of an office or agency pursuant to Section
10.11 except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Servicer also covenants and agrees to indemnify
(out of its own funds) the Trustee for, and to hold it harmless against, any
loss, liability or expense arising out of or in connection with the acceptance
or administration of this trust and its duties hereunder, including the costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder,
except any such loss, liability or expense arising from any negligence or bad
faith on the part of the Trustee. The covenants in this Section 10.05 shall be
for the benefit of the Trustee in its capacities as Trustee, Paying Agent and
Certificate Registrar hereunder, and shall survive the termination of this
Agreement or the earlier resignation or removal of the Trustee. If the Trustee
renders services and incurs expenses following an Event of Default because of
either voluntary or involuntary bankruptcy of the Servicer, such expenses are
intended to be expenses of administration under any bankruptcy law.

     Section 10.06. Eligibility Requirements for Trustee. There shall at all
times be a Trustee hereunder which shall be either (a) JPMorgan Chase Bank or
any other Person into which JPMorgan Chase Bank is merged or consolidated or
to which substantially all of the properties

                                      96
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and assets of JPMorgan Chase Bank are transferred as an entirety, and
provided, further, that such entity is authorized to exercise corporate trust
powers under the laws of the United States of America, any state thereof or
the District of Columbia and has all necessary trust powers to perform its
obligations hereunder, or (b) a corporation or banking association organized
and doing business under the laws of the United States of America, any state
thereof or the District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or state
authority and with a long-term debt rating of at least Baa3 or a short-term
debt rating of at least Prime-3. If the corporation or banking association
referred to in clause (b) of the previous sentence publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation or banking association shall
be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter
specified in this Article.

     Section 10.07. Resignation and Removal of the Trustee. The Trustee at any
time may resign and be discharged from the trusts hereby created by giving
written notice thereof to Vanderbilt, the Servicer and the Rating Agencies.
Upon receiving such notice of resignation, Vanderbilt promptly shall appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.

     If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 10.06 and shall fail to resign after written request
therefor by Vanderbilt, or if at any time the Trustee shall become incapable
of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then Vanderbilt may
remove the Trustee and appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee.

     The Holders of Certificates evidencing more than 50% of the Trust Fund
may remove the Trustee at any time and appoint a successor trustee by written
instrument or instruments, in triplicate, signed by such Certificateholders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered to Vanderbilt, one complete set to the Trustee so removed
and one complete set to the successor so appointed.

     Any resignation or removal of the Trustee and appointment of a successor
trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided
in Section 10.08 and upon payment to the resigning Trustee all amounts due and
owing to it hereunder.

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     Section 10.08. Successor Trustee. Any successor trustee appointed as
provided in Section 10.07 shall execute, acknowledge and deliver to Vanderbilt
and to its predecessor trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall execute and deliver such instruments and
do such other things as reasonably may be required for more fully and
certainly vesting and confirming in the successor trustee all such rights,
powers, duties and obligations.

     No successor trustee shall accept appointment as provided in this Section
unless at the time of such acceptance such successor trustee shall be eligible
under the provisions of Section 10.06.

     Upon acceptance of appointment by a successor trustee as provided in this
Section, Vanderbilt shall mail notice of the succession of such trustee
hereunder to all Certificateholders at their addresses as shown in the
Certificate Register, to the Servicer and to the Rating Agencies. If
Vanderbilt fails to mail such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of Vanderbilt.

     Section 10.09. Merger or Consolidation of Trustee. Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the business of the Trustee, shall
be the successor of the Trustee hereunder, provided such corporation shall be
eligible under the provisions of Section 10.06, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding.

     Section 10.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the purpose of
(i) meeting any legal requirements of any jurisdiction in which any part of
the Trust Fund or property securing the same may be located at the time or
(ii) meeting any legal requirements with respect to the holding of the
Contracts, the Servicer and the Trustee acting jointly shall have the power
and shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity, such
title to the Trust Fund, or any part thereof, and, subject to the other
provisions of this Section 10.10, such powers, duties, obligations, rights and
trusts as the Servicer and the Trustee may consider necessary or desirable. If
the Servicer shall not have joined in such appointment within 15 days after
the receipt by it of a request so to do, or in case an Event of Default shall
have occurred and be continuing, the Trustee alone shall have the power to
make such appointment. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
10.06 hereunder and no notice to Certificateholders of the appointment of
co-trustee(s) or separate trustee(s) shall be required under Section 10.08
hereof. The Servicer shall

                                      98
<PAGE>

be responsible for the fees and expenses of any co-trustee or separate trustee
appointed hereunder to the extent and in the manner set forth for the Trustee
in Section 10.05.

     In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 10.10, all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed or any regulation applicable to
any of the Contracts (whether as Trustee hereunder or as successor to the
Servicer hereunder), the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Fund or any portion
thereof in any such jurisdiction) shall be exercised and performed by such
separate trustee or co-trustee at the direction of the Trustee.

     Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the
conditions of this Article X. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with the
Trustee.

     Any separate trustee or co-trustee may, at any time, appoint the Trustee
its agent or attorney-in-fact, with full power and authority, to the extent
not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.

     Nothing in this Section shall relieve the Trustee of its duties,
obligations or liabilities under this Agreement.

     Section 10.11. Appointment of Office or Agency. The Trustee will appoint
an office or agency in The City of New York where Certificates may be
surrendered for registration of transfer or exchange. The Trustee initially
designates its offices at 450 West 33rd Street, 14th Floor, New York, New York
10001 for such purposes. The Certificate Register may be kept in an electronic
form capable of printing out a hard copy of the Certificate Register. The
Trustee will maintain an office at the address stated in Section 12.10 hereof
where notices and demands to or upon the Trustee in respect of the
Certificates may be served. The Trustee will give prompt written notice to
Certificateholders of any change in the location of the Certificate Register
or any such office or agency.

     Section 10.12. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production

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thereof in any proceeding relating thereto. Any such proceeding instituted by
the Trustee shall be brought in its own name or in its capacity as Trustee.
Any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Certificateholders
in respect of which such judgment has been recovered.

     Section 10.13. Suits for Enforcement. In case an Event of Default or
other default by the Servicer or of Vanderbilt shall occur and be continuing,
the Trustee, in its discretion may proceed to protect and enforce its rights
and the rights of the Certificateholders under this Agreement by a suit,
action or proceeding in equity or at law or otherwise, whether for the
specific performance of any covenant or agreement contained in this Agreement
or in aid of the execution of any power granted in this Agreement or for the
enforcement of any other legal, equitable or other remedy, as the Trustee,
being advised by counsel, shall deem most effectual to protect and enforce any
of the rights of the Trustee or the Certificateholders.

     Section 10.14. Rights of Paying Agent and Certificate Register. So long
as the Trustee shall serve as Paying Agent and Certificate Register under this
Agreement, the Paying Agent and Certificate Register shall be afforded the
same rights, protections, immunities and indemnities afforded the Trustee
herein.

                              [End of Article X]

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                                  Article XI

                                  TERMINATION

     Section 11.01. Termination.

     (a) The respective obligations and responsibilities of Vanderbilt, the
Servicer (except as to Section 10.05) and the Trustee shall terminate upon:
(i) the later of the final payment or other liquidation (or any advance with
respect thereto) of the last Contract or the disposition of all property
acquired upon repossession of any Contract and the remittance of all funds due
hereunder; or (ii) at the option of Vanderbilt (if Vanderbilt is not the
Servicer) or the Servicer, on any Remittance Date after the first Remittance
Date on which the aggregate scheduled principal balances of the Contracts at
the end of the related Due Period are less than 10% of the Pool Original
Principal Balance, upon the purchase of the Contracts at a price equal to the
greater of (a) the sum of (x) 100% of the principal balance of each Contract
(other than any Contract as to which the related Manufactured Home has been
repossessed and not yet disposed of and whose fair market value is included
pursuant to clause (y) below) as of the final Remittance Date, and (y) the
fair market value of such acquired property (as determined by Vanderbilt or
the Servicer, as the case may be, as of the close of business on the third
Business Day next preceding the date upon which notice of any such termination
is furnished to Certificateholders pursuant to this Section), and (b) the
aggregate fair market value (as determined by Vanderbilt or the Servicer, as
the case may be, as of the close of business on such third Business Day) of
all of the assets of the Trust Fund, plus, in the case of both (a) and (b),
any Class A-1F Unpaid Interest Shortfall, Class A-1V Unpaid Interest
Shortfall, any Class A-2 Unpaid Interest Shortfall, any Class A-3 Unpaid
Interest Shortfall, any Class A-4 Unpaid Interest Shortfall, any Class A-5
Unpaid Interest Shortfall, any Class M-1 Unpaid Interest Shortfall, any Class
B-1 Unpaid Interest Shortfall and any Class B-2 Unpaid Interest Shortfall, as
well as one month's interest at the applicable APR on the Scheduled Principal
Balance of each Contract (including any Contract as to which the related
Manufactured Home has been repossessed or foreclosed upon and not yet disposed
of); provided, however, that in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late ambassador of the United
States to the Court of St. James's, living on the date hereof. Notwithstanding
the foregoing, the option specified in clause (ii) of this Section 11.01(a)
shall not be exercisable if there will not be distributed on the Class A-1F
Certificates, Class A-1V Certificates, Class A-2 Certificates, Class A-3
Certificates, Class A-4 Certificates, Class A-5 Certificates, Class M-1
Certificates, Class B-1 Certificates and Class B-2 Certificates an amount
equal to the Class A-1F Principal Balance, Class A-1V Principal Balance, Class
A-2 Principal Balance, Class A-3 Principal Balance, Class A-4 Principal
Balance, Class A-5 Principal Balance, Class M-1 Principal Balance, Class B-1
Principal Balance and Class B-2 Principal Balance, respectively, together with
the Class A-1F Unpaid Interest Shortfall, Class A-1V Unpaid Interest
Shortfall, Class A-2 Unpaid Interest Shortfall, Class A-3 Unpaid Interest
Shortfall, Class A-4 Unpaid Interest Shortfall, Class A-5 Unpaid Interest
Shortfall, Class M-1 Unpaid Interest Shortfall, Class B-1 Unpaid Interest
Shortfall and Class B-2 Unpaid Interest Shortfall, respectively, and interest
accrued during the related Interest Period on the Principal Balance of each
such Class of Certificates at the related Remittance Rate. If Vanderbilt and
the Servicer both desire to exercise the option in clause (ii) of this
paragraph on any Remittance Date after the

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first Remittance Date on which the Scheduled Principal Balance is less than
10% of the Original Principal Balance, the Servicer shall have the prior right
to exercise such option.

     (b) Notice of any termination, specifying the Remittance Date upon which
all Certificateholders may surrender their Certificates to the Trustee for
payment and cancellation, shall be given promptly by the Servicer (if
Vanderbilt is exercising the option given it in Section 11.01(a), upon
direction by Vanderbilt given 10 days prior to the date such notice is to be
mailed) by letter to Certificateholders, the Trustee and the Rating Agencies
mailed no later than the 15th day of the month preceding the month of such
final distribution specifying (i) the Remittance Date upon which final payment
on the Certificates will be made upon presentation and surrender of
Certificates at the office or agency of the Trustee therein designated, (ii)
the amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Remittance Date is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office or agency of
the Trustee therein specified. After giving such notice, the Trustee shall not
register the transfer of or exchange any Certificates. If such notice is given
in connection with Vanderbilt's or the Servicer's election to purchase,
Vanderbilt or the Servicer shall deposit in the Certificate Account on the
Business Day prior to the applicable Remittance Date the amount described in
Section 11.01(a)(ii). Upon presentation and surrender of the Class A
Certificates, Class M-1 Certificates and Class B Certificates, the Trustee
shall cause to be distributed to Certificateholders, from funds in the
Certificate Account, in proportion to such Certificateholders' respective
Percentage Interests, the following amounts (to the extent of available funds)
in the following order of priority: (i) to the Class A-1 Certificateholders,
pro rata, the Class A-1 Principal Balance plus the interest due thereon; (ii)
to the Class A-2 Certificateholders, the Class A-2 Principal Balance plus the
interest due thereon; (iii) to the Class A-3 Certificateholders, the Class A-3
Principal Balance plus the interest due thereon; (iv) to the Class A-4
Certificateholders, the Class A-4 Principal Balance plus the interest due
thereon; (v) to the Class A-5 Certificateholders, the Class A-5 Principal
Balance plus the interest due thereon; (vi) to the Class M-1
Certificateholders, the Class M-1 Principal Balance plus the interest due
thereon; (vii) to the Class B-1 Certificateholders, the Class B-1 Principal
Balance plus the interest due thereon; and (viii) to the Class B-2
Certificateholders, the Class B-2 Principal Balance plus the interest due
thereon; provided that if a Deficiency Event has occurred, the distribution
pursuant to clause (i) , (ii), (iii), (iv) and (v) shall be pro rata among
such Classes on the basis of the amounts specified in such clauses. Upon such
termination, any amounts remaining in the Certificate Account (other than
amounts retained to meet claims) shall be paid to the Holder of the Class R
Certificate. Following such final deposit, the Trustee shall execute all
assignments, endorsements and other instruments necessary to effectuate such
transfer. The distribution on the final Remittance Date shall be in lieu of
the distribution otherwise required to be made on such Remittance Date in
respect of the Certificates. Any amounts retained in the Certificate Account
that are owed to Certificateholders which have not surrendered their
Certificates as of the final Remittance Date shall be withdrawn from the
Certificate Account and held in an escrow account with the Trustee pending
distribution pursuant to Section 11.01(c).

     (c) If all of the Certificateholders shall not surrender their
Certificates for cancellation within three months after the time specified in
the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If
within two years after the second notice all the Certificates shall not have
been surrendered for cancellation,

                                     102
<PAGE>

the Trustee shall so notify Vanderbilt, deliver any amounts held by it to
Vanderbilt and Vanderbilt may take appropriate steps, or may appoint an agent
to take appropriate and reasonable steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of, and only to the extent of, the funds and other
assets which remain in trust hereunder.

     Upon any termination pursuant to the exercise of the purchase option
contained in Section 11.01(a)(ii) or otherwise, the Trust Fund shall be
terminated in accordance with the following additional requirements, unless
the Trustee has received an Opinion of Counsel to the effect that the failure
of the Trust Fund to comply with the requirements of this Section will not (i)
result in the imposition of taxes on "prohibited transactions" of the Trust
Fund as described in Section 860F of the Code, or (ii) cause the Trust Fund to
fail to qualify as a REMIC at any time that any Certificates are outstanding:

          (i) Within 90 days prior to the final Remittance Date set forth in
     the notice given by the Servicer or the Trustee under this Section, the
     Holder of the Class R Certificate shall adopt a plan of complete
     liquidation of the Trust Fund; and

          (ii) At or after the time of adoption of such a plan of complete
     liquidation and at or prior to the final Remittance Date, the Servicer
     shall sell all of the assets of the Trust Fund to Vanderbilt or the
     Servicer, as the case may be, for cash.

     By its acceptance of the Class R Certificate, the Holder thereof hereby
agrees to adopt such a plan of complete liquidation upon the written request
of the Servicer or Vanderbilt and to take such other action in connection
therewith as may be reasonably requested by Vanderbilt.

                              [End of Article XI]

                                     103
<PAGE>

                                 Article XII

                           MISCELLANEOUS PROVISIONS

     Section 12.01. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and in no way shall affect the validity
or enforceability of the other provisions of this Agreement.

     Section 12.02. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Fund, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust Fund, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.

     No Certificateholder shall have any right to vote (except as expressly
provided herein) or in any manner otherwise control the operation and
management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from
time to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision
hereof.

     No Certificateholder shall have any right by virtue of any provision of
this Agreement to institute any suit, action or proceeding in equity or at law
upon or under or with respect to this Agreement, unless such Holder previously
shall have given to the Trustee a written notice of default and of the
continuance thereof, as hereinbefore provided, and unless also the Holders of
Certificates evidencing not less than 25% of the Trust Fund shall have made
written request upon the Trustee to institute such action, suit or proceeding
in its own name as Trustee hereunder and shall have offered to the Trustee
such reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it
being understood and intended, and being covenanted expressly by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates shall have any right in any manner
whatever by virtue of any provision of this Agreement to affect, disturb or
prejudice the rights of the Holders of any other of such Certificates, or to
obtain or seek to obtain priority over or preference to any other such Holder,
or to enforce any right under this Agreement. For the protection and
enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.

     Section 12.03. Acts of Certificateholders.

     (a) Except as otherwise specifically provided herein, whenever
Certificateholder approval, authorization, direction, notice, consent, waiver
or other action is required hereunder,

                                     104
<PAGE>

such approval, authorization, direction, notice, consent, waiver or other
action shall be deemed to have been given or taken on behalf of, and shall be
binding upon, all Certificateholders if agreed to by Holders of Certificates
of the specified Class or Classes evidencing, as to each such Class,
Percentage Interests aggregating 51% or more.

     (b) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or
by agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where required, to the Servicer.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Agreement and conclusive in
favor of the Trustee, the Servicer and Vanderbilt if made in the manner
provided in this Section.

     (c) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.

     (d) The ownership of Certificates shall be proved by the Certificate
Register.

     (e) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind every Holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be
done by the Trustee or the Servicer in reliance thereon, whether or not
notation of such action is made upon such security.

     (f) The Trustee may require such additional proof of any matter referred
to in this Section as it shall deem necessary.

     Section 12.04. [Reserved]

     Section 12.05. Amendment. This Agreement may be amended from time to time
by Vanderbilt, the Servicer, and the Trustee, but without the consent of any
of the Certificateholders, (a) to cure any ambiguity, mistake or error or to
correct or supplement any provisions herein which may be inconsistent with any
other provisions herein, (b) to add to the duties or obligations of the
Servicer hereunder, (c) to obtain a rating by a nationally recognized rating
agency or to maintain or improve the rating of the Certificates then given by
a rating agency (it being understood that, after obtaining the rating of any
Certificates at the Closing Date, none of the Trustee, Vanderbilt or the
Servicer is obligated to obtain, maintain or improve any rating of the
Certificates), (d) to facilitate the operation of a guarantee of the Class B-2
Certificates by any Person (it being understood that the creation of any such
guarantee is solely at the option of Vanderbilt and that such guarantee will
not benefit in any way or result in any payments on any other Class of
Certificates) or (e) to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be materially
inconsistent with the provisions of this Agreement, including without
limitation provisions relating to the issuance of definitive Certificates to
Certificate Owners provided that book-entry registration of the Certificates
is no longer permitted; provided, however, that such action shall not, as
evidenced

                                     105
<PAGE>

by an Opinion of Counsel, adversely affect in any material respect the
interests of any Certificateholder (including, without limitation, the
maintenance of the status of the Trust Fund as a REMIC under the Code).

     This Agreement may also be amended from time to time by Vanderbilt, the
Servicer and the Trustee, without consent of the Certificateholders, to
modify, eliminate or add to the provisions of this Agreement to such extent as
shall be necessary to (i) maintain the qualification of the Trust Fund as a
REMIC under the Code or avoid, or minimize the risk of, the imposition of any
tax on the Trust Fund under the Code that would be a claim against the Trust
Fund's assets, provided that there shall have been delivered an Opinion of
Counsel addressed to the Trustee to the effect that (a) such action is
necessary or appropriate to maintain such qualification or avoid any such tax
or minimize the risk of its imposition, and (b) such amendment shall not
adversely affect in any material respect the interests of any
Certificateholder or (ii) prevent the Trust Fund from entering into any
"prohibited transaction" as defined in Section 860F of the Code provided that
there shall have been delivered an Opinion of Counsel addressed to the Trustee
to the effect that (a) such action is necessary or appropriate to prevent the
Trust Fund from entering into such prohibited transaction, and (b) such
amendment shall not adversely affect in any material respect the interests of
any Certificateholder.

     This Agreement also may be amended from time to time by Vanderbilt, the
Servicer and the Trustee, with the consent of the Holders of Certificates
evidencing not less than 51% of the Trust Fund, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Holders of
Certificates; provided, however, that no such amendment shall (i) reduce in
any manner the amount of, or delay the timing of, distributions which are
required to be made on any Certificate without the consent of the Holder of
such Certificate; (ii) reduce the aforesaid percentage of Certificates, the
Holders of which are required to consent to any such amendment, without the
consent of the Holders of all such Certificates then outstanding or (iii)
adversely affect the status of the Trust Fund as a REMIC or cause a tax to be
imposed on the Trust Fund under the REMIC Provisions.

     Promptly after the execution of any such amendment the Trustee shall
furnish written notification of the substance of such amendment to each
Certificateholder and the Rating Agencies.

     It shall not be necessary for the consent of Certificateholders under
this Section 12.05 to approve the particular form of any proposed amendment
but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject
to such reasonable regulations as the Trustee may prescribe.

     Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Officer's Certificate and
Opinion of Counsel stating that the execution of such amendment is authorized
or permitted by this Agreement and that all conditions precedent to such
execution and delivery have been satisfied. The Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Trustee's own
rights, duties or immunities under this Agreement.

                                     106
<PAGE>

     Section 12.06. Recordation of Agreement. To the extent permitted by
applicable law, this Agreement is subject to recordation in all appropriate
public offices for real property records in all the counties or other
comparable jurisdictions in which any or all of the properties subject to the
Contracts are situated, and in any other appropriate public recording office
or elsewhere, such recordation to be effected by the Servicer at the
Servicer's expense accompanied by an Opinion of Counsel to the effect that
such recordation materially and beneficially affects the interests of the
Certificateholders or is necessary for the administration or servicing of the
Contracts.

     For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one
and the same instrument.

     Section 12.07. Contribution of Assets. Except as provided in Section
3.05(b) and so much of Section 3.05(a) as does not relate to a deposit in lieu
of repurchase of a Contract the principal balance of which is incorrectly set
forth on the Contract Schedule, following the Closing Date, the Trustee shall
not accept any contribution of additional assets to the Trust Fund unless
Vanderbilt has delivered an Opinion of Counsel addressed to the Trustee to the
effect that (i) the contribution of such assets into the Trust Fund will not
cause the Trust Fund to fail to qualify as a REMIC so long as any Certificate
is outstanding and (ii) such contribution will not cause the imposition of tax
on contributions to the Trust Fund after the "start-up day" (as defined in
Section 860G of the Code) with respect thereto.

     Section 12.08. Duration of Agreement. This Agreement shall continue in
existence and effect until terminated as herein provided.

     Section 12.09. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.

     Section 12.10. Notices. All demands, notices and communications hereunder
shall be in writing and (a) shall be deemed to have been duly given if
personally delivered at, or telecopied (with transmission confirmed by
telephone) to, or (b) shall be deemed to have been given when received if sent
by overnight courier to or mailed by first class or registered mail, postage
prepaid, to (i) in the case of Vanderbilt, 500 Alcoa Trail, Maryville, TN
37804, Attention: President; (ii) in the case of the Trustee, JPMorgan Chase
Bank, 450 West 33rd Street, 14th Floor, New York, New York 10001, Attention:
Structured Finance Surveillance Group (MBS); (iii) in the case of Moody's, 99
Church Street, New York, New York 10007, Attention: Mortgage Backed Securities
Unit; or (iv) in the case of S&P, 55 Water Street, New York, New York 10041,
Attention: Residential Mortgage-Backed Securities Group.

     Section 12.11. Merger and Integration of Documents. Except as
specifically stated otherwise herein, this Agreement sets forth the entire
understanding of the parties relating to the subject matter hereof, and all
prior understandings, written or oral, are superseded by this Agreement. This
Agreement may not be modified, amended, waived, or supplemented except as
provided herein.

                                     107
<PAGE>

     Section 12.12. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.

     Section 12.13. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be an original, but all of which
together shall constitute one and the same instrument.

                             [End of Article XII]

                                     108
<PAGE>

     IN WITNESS WHEREOF, Vanderbilt, as Seller and Servicer, Clayton and the
Trustee have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the day and year first above written.

                                    VANDERBILT MORTGAGE AND FINANCE,INC., as
                                    Seller and Servicer

                                    By: /s/ David Jordan
                                       -----------------------------------
                                    Name:  David Jordan
                                    Title: Secretary

                                    JPMORGAN CHASE BANK,
                                    as Trustee

                                    By: /s/ Patricia A. Russo
                                       -----------------------------------
                                    Name:  Patricia A. Russo
                                    Title: Vice President

                                    CLAYTON HOMES, INC., as Provider
                                    of the Limited Guarantee

                                    By: /s/ John Kalec
                                       -----------------------------------
                                    Name:  John Kalec
                                    Title: Senior Vice President

<PAGE>

STATE OF TENNESSEE      )
                        )    ss.:
COUNTY OF BLOUNT        )

     On the 23rd day of August, 2002, before me, a notary public in and for
said State, personally appeared David Jordan, known to me to be the Secretary
of Vanderbilt Mortgage and Finance, Inc., one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

     IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                                    --------------------------------------
                                                 Notary Public

[Notarial Seal]

<PAGE>

STATE OF TENNESSEE      )
                        )    ss.:
COUNTY OF BLOUNT        )

     On the 23rd day of August, 2002 before me, a notary public in and for
said State, personally appeared John Kalec, known to me to be the Senior Vice
President of Clayton Homes, Inc., one of the corporations that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.

     IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                                    --------------------------------------
                                                Notary Public

[Notarial Seal]

<PAGE>

STATE OF NEW YORK       )
                        )    ss.:
COUNTY OF NEW YORK      )

     On the 23rd day of August, 2002 before me, a notary public in and for
said State, personally appeared Patricia A. Russo, known to me to be a
Vice President of JPMorgan Chase Bank, a New York banking corporation that
executed the within instrument, and also known to be the person who executed
it on behalf of said banking corporation and acknowledged to me that such
banking corporation executed the within instrument.

     IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                                    --------------------------------------
                                                Notary Public

[Notarial Seal]

<PAGE>

                                  EXHIBIT A-1

                               CONTRACT SCHEDULE

         (On file with the Trustee and Sidley Austin Brown & Wood llp)

                                     A1-1
<PAGE>

                                  EXHIBIT A-2

                          FORM OF CUSTODIAL AGREEMENT

                          Dated as of August 23, 2002

     JPMORGAN CHASE BANK, a New York banking corporation, as trustee (the
"Trustee"), SOUTHTRUST BANK, NATIONAL ASSOCIATION, a national banking
association, or its successors in interest (the "Custodian" or "SouthTrust"),
and VANDERBILT MORTGAGE AND FINANCE, INC., a Tennessee corporation, or its
successors in interest, individually and as Servicer (individually,
"Vanderbilt" or, in its capacity as servicer, the "Servicer"), agree as
follows:

     WHEREAS, the Trustee, Vanderbilt and Clayton Homes, Inc. have entered
into a Pooling and Servicing Agreement, dated as of July 25, 2002 (the
"Pooling Agreement"; terms used but not defined herein shall have the meanings
assigned to them in Section 1.01 of the Pooling Agreement attached hereto at
Appendix A) relating to the Manufactured Housing Contract Senior/Subordinate
Pass-Through Certificates, Series 2002-B (the "Certificates");

     WHEREAS, pursuant to Section 2.04 and 5.20 of the Pooling Agreement,
Vanderbilt shall deliver each Delivered Land-and-Home Contract File and each
Delivered Mortgage Loan File, if any, to the Trustee or a custodian on its
behalf and the Trustee may appoint a custodian with respect to such Delivered
Land-and-Home Contract Files and the Delivered Mortgage Loan Files, if any
(collectively, the "Files");

     WHEREAS, the Trustee wishes to appoint SouthTrust as custodian with
respect to the Files; and

     WHEREAS, SouthTrust is willing to act as custodian of the Files and
perform its services in accordance with the terms and conditions hereof;

     WITNESSETH THAT:

     In consideration of the premises and of the mutual agreements herein
contained, the Trustee, the Custodian and Vanderbilt agree as follows:

     1. Appointment as the Custodian. Subject to the terms and conditions
herein, the Trustee hereby appoints the Custodian, and the Custodian hereby
accepts such appointment, to maintain custody of the Files relating to the
Land-and-Home Contracts and Mortgage Loans, if any, listed on Schedule I
hereto (the "Schedule"). The Custodian shall have no duties or obligations
except those expressly stated in this Agreement, and such duties or
obligations shall be determined solely by the express provisions of this
Agreement.

     2. Charges and Expenses. The Custodian will charge for its services under
this Agreement as set forth in a separate agreement between the Custodian and
Vanderbilt, the payment of which shall be the obligation of Vanderbilt. The
Trustee shall not be responsible for the fees or expenses of the Custodian.

                                     A2-1
<PAGE>

     3. Initial Delivery of Files. Within 30 days of the applicable Transfer
Date, the Servicer shall deliver the following items to the Custodian:

     (1) with respect to each Land-and-Home Contract,

          (a) the original of the Land-and-Home Contract, and, in the case of
     each Bi-weekly Contract, the original of the bi-weekly rider for such
     Contract, and, in the case of each Equity Builder Contract, the original
     of the graduated payment rider for such Contract;

          (b) the original related Mortgage with evidence of recording thereon
     and any title document for the related Manufactured Home;

          (c) with respect to any Land-and-Home Contract not originated by
     Vanderbilt, the assignment of the Land-and-Home Contract from the
     originator to Vanderbilt with evidence of recording thereon;

          (d) with respect to any Land-and-Home Contract originated by
     Vanderbilt, an endorsement of such Land-and-Home Contract by Vanderbilt
     without recourse;

          (e) with respect to the Land-and-Home Contracts located in the ten
     states with the highest concentration of Land-and-Home Contracts (listed
     on Exhibit D hereto), an Opinion of Counsel to the effect that Vanderbilt
     need not cause to be recorded any assignment which relates to
     Land-and-Home Contracts in such states to protect the Trustee's and the
     Certificateholders' interest in such Land-and-Home Contracts; provided,
     however, if Vanderbilt fails to deliver such an Opinion of Counsel for
     any of the states listed on Exhibit D, with respect to the Land-and-Home
     Contracts located in those states, Vanderbilt shall provide an original
     executed assignment of the Mortgage, with evidence of recording thereon,
     showing the assignment from Vanderbilt to the Trustee or to the separate
     trustee, as applicable; and

          (f) any extension, waiver or modification agreement(s) for each
     Land-and-Home Contract on the Schedule; and

     (2) with respect to each Mortgage Loan, if any,

          (a) the original related Mortgage, with evidence of recording
     indicated thereon, and the original related mortgage note, if any;

          (b) the original assignment and any intervening assignments of the
     Mortgage, with evidence of recording thereon, showing a complete chain of
     assignment of the Mortgage Loan from origination of the Mortgage Loan to
     Vanderbilt;

          (c) an original assignment, with evidence of recording thereon,
     showing the assignment from Vanderbilt to the Trustee or to the separate
     trustee, as applicable; and

          (d) any extension, modification or waiver agreement(s) for each
     Mortgage Loan on the Schedule.

                                     A2-2
<PAGE>

     In lieu of the items to be recorded and delivered pursuant to Sections
3(1)(b), 3(1)(c), 3(1)(e), 3(2)(a), 3(2)(b) and 3(2)(c) above (the "Recorded
Documents"), if the original Mortgage or assignment has not been returned by
the applicable recording office or is not otherwise available, Vanderbilt
shall provide the Custodian with a copy thereof together with an Officer's
Certificate (which may be a blanket Officer's Certificate of Vanderbilt
covering all such Mortgages and assignments) certifying that the copy is a
true and correct copy of the original Mortgage or original assignment, as
applicable, submitted for recording, which will be (1) replaced by the
original Mortgage or original assignment when it is so returned or (2) if the
recording office in the applicable jurisdiction retains the original Mortgage
or original assignment or the original Mortgage or original assignment has
been lost, a copy of such item certified by the applicable recording office.

     All of the items with respect to a Land-and-Home Contract which are
delivered to and held by the Custodian are referred to herein as the
"Delivered Land-and-Home Contract File." All of the items with respect to a
Mortgage Loan which are delivered to and held by the Custodian are referred to
herein as the "Delivered Mortgage Loan File."

     Such delivery shall be accompanied by a Certificate of Delivery (the
"Certificate of Delivery") of Vanderbilt substantially in the form of Exhibit
A hereto.

     4. Subsequent Delivery of Documents. Vanderbilt shall deliver each
Recorded Document (or if the recording office in the applicable jurisdiction
retains the original Mortgage or original assignment or the original Mortgage
or original assignment has been lost, a copy of such item certified by the
applicable recording office) to the Custodian no later than the earlier of (1)
five Business Days after receipt thereof and (ii) within 180 days of the
Transfer Date. In addition, within that same time period, Vanderbilt shall
deliver to the Custodian any other original documents constituting a part of
the Files.

     5. Maintenance of Office. The Custodian agrees to maintain the Delivered
Land-and-Home Contract Files for each Land-and-Home Contract and the Delivered
Mortgage Loan Files for each Mortgage Loan, if any, identified in the Schedule
at the office of the Custodian located at 110 Office Park Drive, Birmingham,
Alabama or at such other offices of the Custodian in the State of Alabama as
the Custodian shall designate from time to time after giving the Servicer and
the Trustee at least 10 days' prior written notice.

     6. Standard of Care and Limitation on Liability of the Custodian. The
Custodian shall not be subject to liability for any loss with respect to the
Files; provided, however, that the Custodian shall use its best judgment and
perform its duties under this Agreement in good faith and in accordance with
customary standards for such custody; and provided, however, that the
provisions of this paragraph shall not be construed to relieve the Custodian
from liability from its own gross negligence, or its own willful misconduct or
any breach by the Custodian of any of its obligations hereunder.

     7. Duties of the Custodian. The Custodian shall have the following rights
and obligations and shall perform the following duties with respect to the
Files in its possession:

                                     A2-3
<PAGE>

     (a) Safekeeping. To segregate the Files from all other mortgages and
mortgage notes and similar records in its possession, to maintain the Files in
secure, fireproof facilities, to identify the Files as being held and to hold
the Files for and on behalf of the Trustee for the benefit of all present and
future Certificateholders, and to conduct periodic physical inspections of the
Files held by it under this Agreement in such a manner as shall enable the
Custodian to verify the physical possession thereof. The Custodian will
promptly report to the Servicer and the Trustee any failure on its part to
hold the Files as herein provided and promptly take appropriate action to
remedy any such failure.

     (b) Certification as to File Contents.

          (i) Within 45 days after the Custodian has received from (or on
     behalf of) the Servicer actual possession of each File, the Custodian
     shall (a) verify that, with respect to each File, all documents listed on
     the Certificate of Delivery have been executed, received and recorded, if
     applicable, except as noted on the list of exceptions attached thereto,
     and (b) deliver to the Servicer and the Trustee an Initial Certificate of
     Receipt, substantially in the form of Exhibit B-1 attached hereto, which
     ascertains that all required documents have been executed, received and
     recorded, if applicable. After the delivery of the Initial Certificate of
     Receipt, the Custodian shall provide to Vanderbilt and the Trustee, no
     less frequently than quarterly, updated certifications, in the form of
     Exhibit B-2, indicating the current status of exceptions until all such
     exceptions have been eliminated.

          (ii) In making such a review, the Custodian makes no representation
     and has no responsibilities as to the authenticity of such documents or
     their compliance with applicable law, including but not limited to their
     compliance with the requirements for recordation, the correctness of the
     legal description contained in any document or the collectibility of any
     of the loan amounts from any borrower. In making such verification, the
     Custodian may rely conclusively on the Schedule attached hereto and the
     Certificate of Delivery, and the Custodian shall have no obligation to
     independently verify the correctness of the Schedule or the Certificate
     of Delivery.

          (iii) If (a) any discrepancy exists between the Files in the
     possession of the Custodian and the Schedule or (b) any document or
     documents constituting a part of a File (the contents of which are
     indicated in the Certificate of Delivery) has been omitted or is
     defective in any material respect, the Custodian shall promptly notify
     the Servicer and the Trustee and deliver an exceptions report (the
     "Exceptions Report") as promptly as possible but in any event within 45
     days of the date of receipt of the Files. Except as specifically provided
     above, the Custodian shall be under no duty to review, inspect or examine
     such documents to determine that any of them are enforceable or
     appropriate for their prescribed purpose.

     (c) Administration; Reports. The Custodian shall, at the expense of the
Servicer and any subservicer, assist the Servicer and any subservicer (as may
be reasonably requested in writing) generally in the preparation of reports to
Certificateholders or to regulatory bodies to the extent necessitated by the
Custodian's custody of the Files.

                                     A2-4
<PAGE>

     (d) Release of Documents. Upon receipt of a Request for Release (a
"Request for Release") (substantially in the form attached hereto as Exhibit
C), to release all or a portion of any File to the Servicer, the Trustee, or
the designee of either the Servicer or the Trustee, in accordance with the
instructions furnished by the Servicer, and to cooperate on behalf of the
Trustee in such release of Files. All documents so released to the Servicer,
the Trustee or their respective designees shall be held by such entity in
trust for the benefit of the Certificateholders. Unless such Land-and-Home
Contract or Mortgage Loan has been liquidated, the Servicer, the Trustee or
their respective designees shall return to the Custodian such released
documents when such documents are no longer needed for the purpose set forth
in the Request for Release.

     8. Access to Records. The Custodian shall permit the Trustee, Chase
Manhattan Bank USA, National Association (the "Separate Trustee"), the
Servicer and any subservicer appointed by the Servicer and identified by the
Trustee to the Custodian, or their duly authorized representatives, attorneys
or auditors to inspect the Files and the books and records maintained by the
Custodian at such time as the Trustee, the Separate Trustee, the Servicer or
any subservicer may reasonably request, subject only to compliance by the
Trustee, the Separate Trustee, the Servicer or any subservicer with the
security procedures of the Custodian applied by the Custodian to its own
employees having access to these and similar records.

     9. Instructions; Authority to Act. The Custodian shall be deemed to have
received proper instructions with respect to the Files upon receipt of written
notice, request, consent, certificate, order, affidavit, letter, telegram or
other document reasonably believed by it to be genuine and to have been signed
or sent by the proper party or parties and may be considered as in full force
and effect until receipt of written notice to the contrary by the Custodian
from the Trustee, the Separate Trustee, the Servicer or any subservicer;
provided, however, that the provision of this paragraph shall not be construed
to relieve the Custodian, its officers, directors, employees, agents or other
representatives from liability from its own gross negligence or its own
willful misconduct.

     10. Indemnification of the Custodian. Vanderbilt agrees to indemnify the
Custodian for any and all liabilities, obligations, losses, damages, payments,
costs or expenses of any kind whatsoever (including reasonable attorneys fees)
which may be imposed on, incurred or asserted against the Custodian as the
result of any act or omission in any way relating to the maintenance and
custody by the Custodian of the Files; provided, however, that Vanderbilt
shall not be liable for any portion of any such amount resulting from the
gross negligence or willful misconduct of the Custodian.

     11. Indemnification of the Trustee. Vanderbilt agrees to indemnify,
defend, and hold harmless the Trustee and its officers, directors, employees
and agents for any and all liabilities, obligations, losses, damages,
payments, costs or expenses of any kind whatsoever (including reasonable
attorneys fees) which may be imposed on, incurred or asserted against the
Trustee as the result of any act or omission in any way relating to or arising
out of the maintenance and custody by the Custodian of the Files or the
performance by the Custodian, Vanderbilt or any Servicer of their respective
duties hereunder; provided, however, that Vanderbilt shall not be liable for
any portion of any such amount resulting from the gross negligence or willful
misconduct of the Trustee.

                                     A2-5
<PAGE>

     12. Advice of Counsel. The Custodian shall be entitled to rely and act
upon written advice of counsel with respect to its performance hereunder as
custodian and shall be without liability for any action reasonably taken
pursuant to such advice, provided that such action is not in violation of
applicable Federal or State law and Vanderbilt shall reimburse the Custodian
for the reasonable attorneys' fees of the Custodian.

     13. SouthTrust Not to Resign. SouthTrust shall not resign from its
obligations and duties as Custodian hereby imposed on it except (a) upon
determination that the performance of its obligations or duties hereunder are
no longer permissible under applicable law or are in material conflict by
reason of applicable law with any other activities carried on by it or its
subsidiaries or affiliates, the other activities of SouthTrust so causing such
a conflict being of a type and nature carried on by SouthTrust or its
subsidiaries or affiliates at the date of this Agreement or (b) upon
satisfaction of the following conditions: (i) SouthTrust has proposed a
successor custodian to the Trustee and the Servicer in writing and such
proposed successor is reasonably acceptable to the Servicer and is not an
affiliate of or under the control of Vanderbilt; and (ii) Moody's Investors
Service, Inc. ("Moody's") or its successor in interest and Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P") or its
successor in interest shall have delivered a letter to the Trustee prior to
the appointment of the successor stating that the proposed appointment of such
successor of SouthTrust hereunder will not result in the reduction or
withdrawal of the then current rating of the Certificates; provided, however,
that no such resignation by SouthTrust shall become effective until its
successor or, in the case of (a) above, a custodian appointed by the Trustee
and acceptable to Moody's and S&P shall have assumed SouthTrust's
responsibilities and obligations hereunder. Any such determination permitting
the resignation of SouthTrust pursuant to clause (a) above shall be evidenced
by an opinion of counsel to such effect reasonably satisfactory to the Trustee
and delivered to Vanderbilt and the Trustee concurrently with the delivery of
any notice of resignation.

     14. Effective Period, Termination and Amendment. This Agreement shall
become effective as of the date hereof and shall continue in full force and
effect until terminated as hereinafter provided, and may be amended at any
time by mutual agreement of the parties hereto. This Agreement may be
terminated by the Trustee with or without cause in a writing delivered or
mailed, postage prepaid, to the other parties, such termination to take effect
no sooner than sixty (60) days after the date of such delivery or mailing.
Concurrently with, or as soon as practicable after, the termination of this
Agreement, the Custodian shall redeliver the Files to a person designated by
the Trustee at such place as the Trustee or the person designated by the
Trustee may reasonably designate.

     15. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.

     16. Notices. All demands, notices and communications hereunder shall be
in writing and shall be delivered or mailed, postage prepaid, to the Trustee
at 450 West 33rd Street, 14th Floor, New York, New York 10001 Attention:
Structured Finance Services (MBS); to the Custodian at P.O. Box 2554,
Birmingham, Alabama 35290, Attention: Sandy Jefferson, Document Custody; to
the Servicer or Vanderbilt at 500 Alcoa Trail, Maryville, TN 37804, Attention:
President; or to such other address as the Trustee, the Custodian, the
Servicer or

                                     A2-6
<PAGE>

Vanderbilt may hereafter specify in writing. Notices or other writings shall
be effective only upon actual receipt by the parties.

     17. Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the Trustee, the Custodian, Vanderbilt, in its individual
capacity, the Servicer and their respective successors and assigns.
Concurrently with the appointment of a successor trustee as provided in the
Pooling Agreement, the parties hereto shall amend this Agreement to make said
successor trustee the successor to the Trustee hereunder.

     18. Counterparts. This Agreement may be signed in any number of
counterparts each of which will be deemed an original, which taken together
shall constitute one and the same instrument.

     19. Obligations of the Trustee. Nothing in this Agreement shall be deemed
to release the Trustee from any of its obligations under the Pooling
Agreement. The Trustee shall not be responsible for any willful misconduct or
negligence on the part of the Custodian and shall be afforded the same rights,
protections and immunities set forth in the Pooling Agreement with respect to
the Trustee's responsibilities under this Agreement.

     20. Definitions. Terms capitalized herein and not defined herein shall
have their respective meanings as set forth in the Pooling Agreement.

                                     A2-7
<PAGE>

     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by a duly authorized officer as
of the day and year first above written.

                                    JPMORGAN CHASE BANK,
                                    as Trustee

                                    By:  ____________________________
                                    Name:
                                    Title:

                                    SOUTHTRUST BANK, NATIONAL ASSOCIATION,
                                    as Custodian

                                    By:  _____________________________
                                    Name:
                                    Title:

                                    VANDERBILT MORTGAGE AND
                                    FINANCE, INC.
                                    individually and as Servicer

                                    By:  _____________________________
                                    Name:
                                    Title:

                                     A2-8
<PAGE>

                                  APPENDIX A

                (Series 2002-B Pooling and Servicing Agreement)

                                     A2-9
<PAGE>

                                  SCHEDULE I

           (Schedule of Land-and-Home Contracts and Mortgage Loans)

                                    A2-10
<PAGE>

                                   EXHIBIT A

                            CERTIFICATE OF DELIVERY

     The undersigned hereby certifies that the documents listed below, except
as noted on the list of exceptions attached hereto, are included in the
Delivered Land-and-Home Contract Files and the Delivered Mortgage Loan Files,
if any, delivered to the Custodian pursuant to the terms of the Custodial
Agreement, dated as of August 23, 2002 (the "Custodial Agreement"), among
JPMorgan Chase Bank, as trustee (the "Trustee"), SouthTrust Bank, National
Association, as custodian (the "Custodian") and Vanderbilt Mortgage and
Finance, Inc. ("Vanderbilt") for each contract on the Schedule:

(1)     with respect to each Land-and-Home Contract,

     (a) the original of the Land-and-Home Contract, and, in the case of each
Bi-weekly Contract, the original of the bi-weekly rider for such Contract,
and, in the case of each Equity Builder Contract, the original of the
graduated payment rider for such Contract;

     (b) the original related Mortgage with evidence of recording thereon and
any title document for the related Manufactured Home;

     (c) with respect to any Land-and-Home Contract not originated by
Vanderbilt, the assignment of the Land-and-Home Contract from the originator
to Vanderbilt with evidence of recording thereon;

     (d) with respect to any Land-and-Home Contract originated by Vanderbilt,
an endorsement of such Land-and-Home Contract by Vanderbilt without recourse;

     (e) with respect to the Land-and-Home Contracts located in the ten states
listed on Exhibit D to the Custodial Agreement, the Opinion of Counsel
specified in Section 3(1)(e) of the Custodial Agreement; provided, however, if
Vanderbilt failed to deliver such an Opinion of Counsel for any of the states
listed on Exhibit D to the Custodial Agreement, with respect to the
Land-and-Home Contracts located in those states, the original executed
assignment of the Mortgage, with evidence of recording thereon, showing the
assignment from Vanderbilt to the Trustee or to the separate trustee, as
applicable; and

     (f) any extension, waiver or modification agreement(s) for each
Land-and-Home Contract on the Schedule.

(2)     with respect to each Mortgage Loan, if any,

     (a) the original related Mortgage, with evidence of recording indicated
thereon or the original related mortgage note, if any;

     (b) the original assignment and any intervening assignments of the
Mortgage, with evidence of recording thereon, showing a complete chain of
assignment of the Mortgage Loan from origination of the Mortgage Loan to
Vanderbilt;

                                    A2-11
<PAGE>

     (c) the original assignment, with evidence of recording thereon, showing
the assignment from Vanderbilt to the Trustee or to the separate trustee, as
applicable; and

     (d) any extension, modification or waiver agreement(s) for each Mortgage
Loan on the Schedule.

In lieu of the items to be recorded and delivered pursuant to Sections (1)(b),
(1)(c), (1)(e), (2)(a), (2)(b) and (2)(c) above (the "Recorded Documents"), if
the original Mortgage or assignment has not been returned by the applicable
recording office or is not otherwise available, Vanderbilt has provided the
Custodian with a copy thereof together with an Officer's Certificate (which
may be a blanket Officer's Certificate of Vanderbilt covering all such
Mortgages and assignments) certifying that the copy is a true and correct copy
of the original Mortgage or original assignment, as applicable, submitted for
recording, which will be (1) replaced by the original Mortgage or original
assignment when it is so returned or (2) if the recording office in the
applicable jurisdiction retains the original Mortgage or original assignment
or the original Mortgage or original assignment has been lost, a copy of such
item certified by the applicable recording office.

     In accordance with Section 4 of the Custodial Agreement, Vanderbilt shall
deliver to the Custodian any additional items required pursuant to Custodial
Agreement within the time period specified therein.

     Capitalized terms not otherwise defined herein shall have the meaning set
forth in the Custodial Agreement.

Dated:                              VANDERBILT MORTGAGE AND FINANCE, INC.,
                                        as Servicer

                                    By:__________________________________
                                        Name:
                                        Title:

                                    A2-12
<PAGE>

                    EXHIBIT B-1 TO THE CUSTODIAL AGREEMENT

                        INITIAL CERTIFICATE OF RECEIPT

JPMorgan Chase Bank,
  as Trustee
450 West 33rd Street
New York, New York  10001
Attention:  Structured Finance Services (MBS)

Vanderbilt Mortgage and Finance, Inc.
500 Alcoa Trail
Maryville, TN  37802

         Re:  Custodial Agreement, dated as of August 23, 2002, among
              JPMorgan Chase Bank, SouthTrust Bank, National Association
              and Vanderbilt Mortgage and Finance, Inc.
              ----------------------------------------------------------

Ladies and Gentlemen:

     The undersigned hereby acknowledges receipt on this ___ day of __________
2002 of the Certificate of Delivery and the Delivered Land-and-Home Contract
Files and the Delivered Mortgage Loan Files, if any. Subject to the Custodial
Agreement, dated as of August 23, 2002, among JPMorgan Chase Bank, as trustee
(the "Trustee"), SouthTrust Bank, National Association, as custodian (the
"Custodian") and Vanderbilt Mortgage and Finance, Inc. ("Vanderbilt" or in its
capacity as servicer, the " Servicer") (the "Custodial Agreement"), the
undersigned hereby certifies that it has reviewed each of the Files listed on
the Schedule and that it is holding, on behalf of the Trustee and for the
benefit of the Certificateholders, the following items (except as noted on the
list of exceptions attached hereto):

(1) with respect to each Land-and-Home Contract,

     (a) the original of the Land-and-Home Contract, and, in the case of each
     Bi-weekly Contract, the original of the bi-weekly rider for such
     Contract, and, in the case of each Equity Builder Contract, the original
     of the graduated payment rider for such Contract;

     (b) the original related Mortgage with evidence of recording thereon and
     any title document for the related Manufactured Home;

     (c) with respect to any Land-and-Home Contract not originated by
     Vanderbilt, the assignment of the Land-and-Home Contract from the
     originator to Vanderbilt with evidence of recording thereon;

     (d) with respect to any Land-and-Home Contract originated by Vanderbilt,
     an endorsement of such Land-and-Home Contract by Vanderbilt without
     recourse;

     (e) (1) with respect to the Land-and-Home Contracts located in the ten
     states with the highest concentration of Land-and-Home Contracts (listed
     on Exhibit D to the

                                    A2-13
<PAGE>

     Custodial Agreement), an Opinion of Counsel to the effect that Vanderbilt
     need not cause to be recorded any assignment which relates to
     Land-and-Home Contracts in such states to protect the Trustee's and the
     Certificateholders' interest in such Land-and-Home Contracts; or

          (2) if the above-referenced Opinion of Counsel is not delivered with
     respect to any of the ten states listed on Exhibit D to the Custodial
     Agreement, with respect to the Land-and-Home Contracts located in those
     states, an original executed assignment of the Mortgage, with evidence of
     recording thereon, showing the assignment from Vanderbilt to the Trustee
     or to the Separate Trustee, as applicable; and

     (f) any extension, waiver or modification agreement(s) of which the
     Custodian is aware for each Land-and-Home Contract on the Schedule.

(2) with respect to each Mortgage Loan, if any,

     (a) the original related Mortgage, with evidence of recording indicated
     thereon, and the original related mortgage, if any;

     (b) the original assignment and any intervening assignments of the
     Mortgage, with evidence of recording thereon, showing a complete chain of
     assignment of the Mortgage Loan from origination of the Mortgage Loan to
     Vanderbilt;

     (c) the original assignment, with evidence of recording thereon, showing
     the assignment from Vanderbilt to the Trustee or to the Separate Trustee,
     as applicable; and

     (d) any extension, modification or waiver agreement(s) of which the
     Custodian is aware for each Mortgage Loan on the Schedule.

     In lieu of the items to be recorded and delivered pursuant to Sections
(1)(b), (1)(c), (1)(e), (2)(a), (2)(b) and (2)(c) above (the "Recorded
Documents"), if the original Mortgage or assignment has not been returned by
the applicable recording office or is not otherwise available, the Custodian
has received a copy thereof together with an Officer's Certificate certifying
that the copy is a true and correct copy of the original Mortgage or original
assignment, as applicable, submitted for recording, which will be (1) replaced
by the original Mortgage or original assignment when it is so returned or (2)
if the recording office in the applicable jurisdiction retains the original
Mortgage or original assignment or the original Mortgage or original
assignment has been lost, a copy of such item certified by the applicable
recording office.

     Pursuant to Section 7(b) of the Custodial Agreement, the Custodian will
provide an updated certification to Vanderbilt and the Trustee, no less
frequently than quarterly, indicating the current status of exceptions until
all such exceptions have been eliminated.

                                    A2-14
<PAGE>

     The undersigned agrees to hold the Files strictly in accordance with the
Custodial Agreement and shall perform its duties as explicitly set forth
thereunder, and shall have no other duties thereunder. Terms not otherwise
defined herein shall have the meaning set forth in the Custodial Agreement.

                                    SOUTHTRUST BANK, NATIONAL ASSOCIATION

                                    By:____________________________________
                                          Name:
                                          Title:

                                    A2-15
<PAGE>

                    EXHIBIT B-2 TO THE CUSTODIAL AGREEMENT

                         FORM OF UPDATED CERTIFICATION

JPMorgan Chase Bank,
  as Trustee
450 West 33rd Street
8th Floor
New York, New York  10001
Attention: Structured Finance Services (MBS)

Vanderbilt Mortgage and Finance, Inc.
500 Alcoa Trail
Maryville, TN  37804

     Re:  Custodial Agreement, dated as of August 23, 2002, among
          JPMorgan Chase Bank, SouthTrust Bank, National
          Association and Vanderbilt Mortgage and Finance, Inc.
          -------------------------------------------------------

Ladies and Gentlemen:

     In accordance with Section 7 of the above-referenced Custodial Agreement,
the undersigned, as Custodian, hereby sets forth an updated exception report
from the previous Custodian's Certificate issued [INSERT DATE].

     The undersigned agrees to hold the Files strictly in accordance with the
Custodial Agreement and shall perform its duties as explicitly set forth
thereunder, and shall have no other duties thereunder. Terms not otherwise
defined herein shall have the meaning set forth in the Custodial Agreement.

                                  SOUTHTRUST BANK, NATIONAL ASSOCIATION

                                  By:________________________________________
                                     Name:
                                     Title:

                                    A2-16
<PAGE>

                     EXHIBIT C TO THE CUSTODIAL AGREEMENT

                       REQUEST FOR RELEASE OF DOCUMENTS

TO:    SOUTHTRUST BANK, NATIONAL ASSOCIATION                    DATE:
       ------------------------------
       ------------------------------
       ------------------------------
       ------------------------------

FROM:  ------------------------------
       ------------------------------
       ------------------------------
       ------------------------------

       RE:  Custodial Agreement, dated as of August 23, 2002 (the
            "Custodial Agreement"), among JPMorgan Chase Bank, as
            trustee, SouthTrust Bank, National Association, as
            custodian and Vanderbilt Mortgage and Finance, Inc.,
            individually and as Servicer.
            -----------------------------------------------------

------------------------------------------------------------------------------
IN CONNECTION WITH THE ADMINISTRATION OF THE FILES HELD BY YOU IN CUSTODY FOR
JPMORGAN CHASE BANK AND PURSUANT TO THE CUSTODIAL AGREEMENT, THE UNDERSIGNED
REQUESTS THE RELEASE OF THE DOCUMENTS DESCRIBED BELOW FOR THE REASON
INDICATED.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
OBLIGOR'S NAME, ADDRESS AND ZIP CODE     LOAN NO.
                              POOL ID

------------------------------------------------------------------------------
------------------------------------------------------------------------------

ORIGINAL CONTRACT AMOUNT............................    $___________
DATE OF ORIGINAL CONTRACT...........................    ____________

---------------
PAID THROUGH DATE...................................    ____________
------------------------------------------------------- ----------------------

REASON FOR REQUESTING DOCUMENTS              AMOUNT        SETTLEMENT DATE

[  ] CONTRACT PAID IN FULL                 $________     ____________________
[  ] FORECLOSURE                           $________     ____________________
[  ] EXHIBITS ATTACHED FOR SUBSTITUTION    $________     ____________________
[  ] OTHER (explain) ___________________   $________     ____________________

WE CERTIFY THAT ALL AMOUNTS RECEIVED OR TO BE RECEIVED IN CONNECTION WITH SUCH
PAYMENT WHICH ARE REQUIRED TO BE CREDITED TO THE PROTECTED ACCOUNT OR
DEPOSITED TO THE CERTIFICATE ACCOUNT HAVE

                                    A2-17
<PAGE>

BEEN OR, WITHIN TWO BUSINESS DAYS, RECEIPT OF SUCH PAYMENT WILL BE CREDITED OR
DEPOSITED.

----------------------------------------     ---------------------------------
SIGNATURE                                    DATE

------------------------------------------------------------------------------
PARTICIPANT AUTHORIZED SIGNATURE

------------------------------------------------------------------------------
[CUSTODIAN'S] RELEASE AUTHORIZATION

---------------------------- ------------------------------ ---------------
NAME AND TITLE SIGNATURE DATE
------------------------------------------------------------------------------
TO CUSTODIAN: PLEASE ACKNOWLEDGE BELOW BY YOUR SIGNATURE THE EXECUTION OF THE
ABOVE REQUEST. YOU MUST RETAIN THIS FORM FOR YOUR FILES.

DOCUMENT RETURNED TO CUSTODY:

-----------------------------          ----------------------
SIGNATURE                              DATE

                                    A2-18
<PAGE>

                     EXHIBIT D TO THE CUSTODIAL AGREEMENT

                 LIST OF TEN STATES WITH HIGHEST CONCENTRATION
                        OF LAND-AND-HOME CONTRACT FILES

                                    A2-19
<PAGE>

                                 EXHIBIT B-1

                 FORM OF FACE OF CLASS [A-1F][A-1V][A-2][A-3]
                            [A-4][A-5] CERTIFICATE

               SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS
               CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL
               ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
               ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND
               860D OF THE INTERNAL REVENUE CODE.

               UNLESS THIS CERTIFICATE IS PRESENTED BY AN
               AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
               COMPANY TO THE TRUSTEE OR ITS AGENT FOR
               REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
               ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
               OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY
               AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
               TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
               CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
               VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
               SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
               AN INTEREST HEREIN.

               [FOR CLASS A-5 ONLY: THIS CERTIFICATE IS
               SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1
               CERTIFICATES, CLASS A-2 CERTIFICATES, CLASS A-3
               CERTIFICATES AND CLASS A-4 CERTIFICATES AS
               DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
               REFERRED TO HEREIN.]

Number___________

Date of Pooling and                     Original Denomination
Servicing Agreement and                 $__________________
Cut-off Date:
July 25, 2002                           Original Class [A-1-F][A-1V[A-2]
                                        [A-3][A-4][A-5]
                                        Principal Balance:
Class [A-1F][A-1V][A-2][A-3]            $[__________]
[A-4][A-5]                              $[__________]
Remittance Rate: As specified           $[__________]
in the Pooling and Servicing            $[__________]
Agreement referred to herein            $[__________]
                                        $[__________]

                                     B1-1
<PAGE>

                                        Remittance Date after
                                        Latest Due Date:  ____ __, ____
First Remittance Date:                  CUSIP _______________
September 9, 2002

                                     B1-2
<PAGE>

               MANUFACTURED HOUSING CONTRACT SENIOR/SUBORDINATE
                           PASS-THROUGH CERTIFICATE
             SERIES 2002-B, CLASS [A-1F][A-1V][A-2][A-3][A-4][A-5]
                           [(SENIOR)][(SUBORDINATE)]

               evidencing a percentage interest in any distributions
               allocable to the Class [A-1F] [A-1V] [A-2] [A-3] [A-4]
               [A-5] Certificates with respect to a pool of fixed and
               adjustable rate conventional manufactured housing
               contracts formed and sold by

                     VANDERBILT MORTGAGE AND FINANCE, INC.

which manufactured housing contracts either were originated or acquired by
Vanderbilt Mortgage and Finance, Inc. (hereinafter called the "Company," which
term includes any successor entity under the Agreement referred to below) and
are initially serviced by Vanderbilt Mortgage and Finance, Inc. (in such
capacity, the "Servicer", which term includes any entity under the Agreement
referred to below).

     This Certificate does not represent an obligation of or interest in
Vanderbilt, the Servicer or the Trustee referred to below or any of their
Affiliates. Neither this Certificate nor the underlying manufactured housing
contracts are guaranteed or insured by Vanderbilt Mortgage and Finance, Inc.,
the Servicer or by any governmental agency or instrumentality.

     THE PORTION OF THE ORIGINAL CLASS [A-1F] [A-1V] [A-2] [A-3] [A-4] [A-5]
PRINCIPAL BALANCE EVIDENCED BY THIS CERTIFICATE ("CERTIFICATE BALANCE") WILL
BE REDUCED BY DISTRIBUTIONS ON THIS CERTIFICATE THAT ARE ALLOCABLE TO
PRINCIPAL. ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES,
THE CERTIFICATE BALANCE OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE
ORIGINAL DENOMINATION SHOWN ABOVE. ANYONE ACQUIRING THIS CERTIFICATE MAY
ASCERTAIN ITS CURRENT CERTIFICATE BALANCE BY INQUIRY OF THE PAYING AGENT. On
the date of the initial issuance of the Certificates, the Paying Agent is the
Trustee.

     This certifies that CEDE & CO. is the registered owner of an undivided
interest in certain monthly distributions with respect to a pool (the
"Contract Pool") of conventional manufactured housing installment sales
contracts, installment loan agreements and mortgage loans (collectively, the
"Contracts") formed and sold by Vanderbilt and certain other property
(collectively, the "Trust Fund"). The Contracts either were originated or
acquired by and are serviced by the Servicer and are secured by Manufactured
Homes or Mortgage Properties, as applicable. The Trust Fund was created
pursuant to a Pooling and Servicing Agreement dated as specified above (the
"Agreement"), by and among Vanderbilt, as seller and servicer, Clayton Homes,
Inc., as provider of the Limited Guarantee and JPMorgan Chase Bank, as trustee
(the "Trustee"), a summary of certain of the pertinent provisions of which is
set forth hereafter. To the extent not defined herein, the capitalized terms
used herein have the meanings assigned in the Agreement.

                                     B1-3
<PAGE>

     This Certificate is one of a duly authorized issue of Certificates,
designated as Manufactured Housing Contract Senior/Subordinate Pass-Through
Certificates, Series 2002-B (the "Certificates"), and is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.

     On each Remittance Date, the Trustee will cause to be distributed from
funds in the Certificate Account to each Class [A-1F] [A-1V] [A-2] [A-3] [A-4]
[A-5] Certificateholder an amount equal to the product of the Percentage
Interest evidenced by such Class [A-1F] [A-1V] [A-2] [A-3] [A-4] [A-5]
Certificateholder's Certificate and the Class [A-1F] [A-1V] [A-2] [A-3] [A-4]
[A-5] Distribution Amount.

     Distributions on this Certificate will be made by check mailed to the
address of the Person entitled thereto, as such name and address shall appear
on the Certificate Register or by wire transfer to Holders of Class [A-1F]
[A-1V] [A-2] [A-3] [A-4] [A-5] Certificates with original denominations
aggregating at least $5 million who have given the Trustee written
instructions at least five Business Days prior to the related Record Date.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or
agency appointed by the Trustee for that purpose and specified in such notice
of final distribution.

     Reference is hereby made to the further provisions of this Certificate
set forth hereafter, which further provisions shall for all purposes have the
same effect as if set forth at this place.

     Unless this Certificate has been countersigned by or on behalf of the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                     B1-4
<PAGE>

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                    JPMORGAN CHASE BANK,
                                    as Trustee

                                    By____________________________________
                                           Authorized Officer

[Form of Certificate of
Countersignature]

This is one of the Certificates
referred to in the within-
mentioned Agreement.

By___________________________________    By__________________________________,

                                      OR

         Authenticating Agent                           Trustee

-------------------------------------     ------------------------------------
Authorized Signatory                      Authorized Signatory

[Signature page to Class [A-1F] [A-1V] [A-2] [A-3] [A-4] [A-5] Certificate,
Manufactured Housing Contract Senior/Subordinate Pass-Through Certificates,
Series 2002-B]

                                     B1-5
<PAGE>

                                  EXHIBIT B-2

                     FORM OF FACE OF CLASS M-1 CERTIFICATE

               SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS
               CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL
               ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
               ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND
               860D OF THE INTERNAL REVENUE CODE.

               UNLESS THIS CERTIFICATE IS PRESENTED BY AN
               AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
               COMPANY TO THE TRUSTEE OR ITS AGENT FOR
               REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
               ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
               OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY
               AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
               TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
               CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
               VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
               SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
               AN INTEREST HEREIN.

               THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF
               PAYMENT TO THE CLASS A CERTIFICATES AS DESCRIBED
               IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
               HEREIN.

Number___________
Date of Pooling and                     Original Denomination
Servicing Agreement and                 $__________________
Cut-off Date:
July 25, 2002
                                        Original Class M-1
                                        Principal Balance:
Class M-1                               $[__________]
Remittance Rate: As specified
in the Pooling and Servicing
Agreement referred to herein
                                        Remittance Date after
                                        Latest Due Date:  ____ __, ____

First Remittance Date:                  CUSIP _______________
September 9, 2002

                                     B2-1
<PAGE>

               MANUFACTURED HOUSING CONTRACT SENIOR/SUBORDINATE
                           PASS-THROUGH CERTIFICATE
                           SERIES 2002-B, CLASS M-1
                                 (SUBORDINATE)

        evidencing a percentage interest in any distributions allocable
        to the Class M-1 Certificates with respect to a pool of fixed
        and adjustable rate conventional manufactured housing contracts
        formed and sold by

                     VANDERBILT MORTGAGE AND FINANCE, INC.

which manufactured housing contracts either were originated or acquired by
Vanderbilt Mortgage and Finance, Inc. (hereinafter called the "Company," which
term includes any successor entity under the Agreement referred to below) and
are initially serviced by Vanderbilt Mortgage and Finance, Inc. (in such
capacity, the "Servicer", which term includes any entity under the Agreement
referred to below).

     This Certificate does not represent an obligation of or interest in
Vanderbilt, the Servicer or the Trustee referred to below or any of their
Affiliates. Neither this Certificate nor the underlying manufactured housing
contracts are guaranteed or insured by Vanderbilt Mortgage and Finance, Inc.,
the Servicer or by any governmental agency or instrumentality.

     THE PORTION OF THE ORIGINAL CLASS M-1 PRINCIPAL BALANCE EVIDENCED BY THIS
CERTIFICATE ("CERTIFICATE BALANCE") WILL BE REDUCED BY DISTRIBUTIONS ON THIS
CERTIFICATE THAT ARE ALLOCABLE TO PRINCIPAL. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE BALANCE OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN ABOVE.
ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT CERTIFICATE
BALANCE BY INQUIRY OF THE PAYING AGENT. On the date of the initial issuance of
the Certificates, the Paying Agent is the Trustee.

     This certifies that CEDE & CO. is the registered owner of an undivided
interest in certain monthly distributions with respect to a pool (the
"Contract Pool") of conventional manufactured housing installment sales
contracts, installment loan agreements and mortgage loans (collectively, the
"Contracts") formed and sold by Vanderbilt and certain other property
(collectively, the "Trust Fund"). The Contracts either were originated or
acquired by and are serviced by the Servicer and are secured by Manufactured
Homes. The Trust Fund was created pursuant to a Pooling and Servicing
Agreement dated as specified above (the "Agreement"), by and among Vanderbilt,
as seller and servicer, Clayton Homes, Inc., as provider of the Limited
Guarantee and JPMorgan Chase Bank, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, the capitalized terms used herein have the meanings
assigned in the Agreement.

     This Certificate is one of a duly authorized issue of Certificates,
designated as Manufactured Housing Contract Senior/Subordinate Pass-Through
Certificates, Series 2002-B

                                     B2-2
<PAGE>

(the "Certificates"), and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.

     On each Remittance Date, the Trustee will cause to be distributed from
funds in the Certificate Account to each Class M-1 Certificateholder an amount
equal to the product of (i) the Percentage Interest evidenced by such Class
M-1 Certificateholder's Certificate and (ii) subject to the prior rights of
Holders of Class A Certificates as specified in the Agreement, the Class M-1
Distribution Amount.

     Distributions on this Certificate will be made by check mailed to the
address of the Person entitled thereto, as such name and address shall appear
on the Certificate Register or by wire transfer to Holders of Class M-1
Certificates with original denominations aggregating at least $5 million who
have given the Trustee written instructions at least five Business Days prior
to the related Record Date. Notwithstanding the above, the final distribution
on this Certificate will be made after due notice by the Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that purpose
and specified in such notice of final distribution.

     Reference is hereby made to the further provisions of this Certificate
set forth hereafter, which further provisions shall for all purposes have the
same effect as if set forth at this place.

     Unless this Certificate has been countersigned by or on behalf of the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

                                    JPMORGAN CHASE BANK,
                                    as Trustee

                                    By____________________________________
                                           Authorized Officer

[Form of Certificate of
Countersignature]

This is one of the Certificates
referred to in the within-
mentioned Agreement.

By___________________________________    By__________________________________,

                                      OR

         Authenticating Agent                           Trustee

                                     B2-3
<PAGE>

-------------------------------------     ------------------------------------
Authorized Signatory                      Authorized Signatory

[Signature page to Class M-1 Certificate, Manufactured Housing Contract
Senior/Subordinate Pass-Through Certificates, Series 2002-B]

                                     B2-4
<PAGE>

                                   EXHIBIT C

                 FORM OF FACE OF CLASS [B-1][B-2] CERTIFICATE

               SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS
               CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL
               ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
               ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND
               860D OF THE INTERNAL REVENUE CODE.

               UNLESS THIS CERTIFICATE IS PRESENTED BY AN
               AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
               COMPANY TO THE TRUSTEE OR ITS AGENT FOR
               REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
               ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
               OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY
               AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
               TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
               CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
               VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
               SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
               AN INTEREST HEREIN.

               [FOR CLASS B-1 CERTIFICATES ONLY] THIS CERTIFICATE
               IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
               AND CLASS M-1 CERTIFICATES AS DESCRIBED IN THE
               POOLING AND SERVICING AGREEMENT REFERRED TO
               HEREIN.

               [FOR CLASS B-2 CERTIFICATES ONLY] THIS CERTIFICATE
               IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
               CERTIFICATES, CLASS M-1 CERTIFICATES AND CLASS B-1
               CERTIFICATES AS DESCRIBED IN THE POOLING AND
               SERVICING AGREEMENT REFERRED TO HEREIN.

               [FOR CLASS B-2 CERTIFICATES ONLY: TO THE LIMITED
               EXTENT DESCRIBED IN THE POOLING AND SERVICING
               AGREEMENT THIS CERTIFICATE IS ENTITLED TO THE
               BENEFITS OF THE LIMITED GUARANTEE OF CLAYTON
               HOMES, INC. AS SET FORTH IN SECTION 6.05 THEREOF.]

                               C-1
<PAGE>

Number___________
Date of Pooling and                    Original Denomination
Servicing Agreement and                $__________________
Cut-off Date:
July 25, 2002
                                       Original Class [B-1][B-2]
                                       Principal Balance:
Class [B-1][B-2]
Remittance Rate: As specified          $[__________] $[__________]
in the Pooling and Servicing
Agreement referred to herein
                                       Remittance Date after
                                       Latest Due Date:  ____ __, ____

First Remittance Date:                                  CUSIP _______________
September 9, 2002

               MANUFACTURED HOUSING CONTRACT SENIOR/SUBORDINATE
                           PASS-THROUGH CERTIFICATE
                 Series 2002-B CLASS [B-1][B-2] (SUBORDINATE)

        evidencing a percentage interest in any distributions allocable
        to the Class [B-1][B-2] Certificates with respect to a pool of
        fixed and adjustable rate conventional manufactured housing
        contracts formed and sold by

                     VANDERBILT MORTGAGE AND FINANCE, INC.

which manufactured housing contracts either were originated or acquired by
Vanderbilt Mortgage and Finance, Inc. (hereinafter called the "Company," which
term includes any successor entity under the Agreement referred to below) and
are initially serviced by Vanderbilt Mortgage and Finance, Inc. (in such
capacity, the "Servicer", which term includes any entity under the Agreement
referred to below).

     Except as set forth in the Pooling and Servicing Agreement, this
Certificate does not represent an obligation of or interest in Vanderbilt, the
Servicer or the Trustee referred to below or any of their Affiliates. Neither
this Certificate nor the underlying manufactured housing contracts are
guaranteed or insured by Vanderbilt Mortgage and Finance, Inc., the Servicer
or by any governmental agency or instrumentality.

     THE PORTION OF THE ORIGINAL CLASS [B-1][B-2] PRINCIPAL BALANCE EVIDENCED
BY THIS CERTIFICATE ("CERTIFICATE BALANCE") WILL BE REDUCED BY DISTRIBUTIONS
ON THIS CERTIFICATE THAT ARE ALLOCABLE TO PRINCIPAL. ACCORDINGLY, FOLLOWING
THE INITIAL ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE BALANCE OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN ABOVE.
ANYONE ACQUIRING THIS

                                     C-2
<PAGE>

CERTIFICATE MAY ASCERTAIN ITS CURRENT CERTIFICATE BALANCE BY INQUIRY OF THE
PAYING AGENT. On the date of the initial issuance of the Certificates, the
Paying Agent is the Trustee.

     This certifies that CEDE & CO. is the registered owner of an undivided
interest in certain monthly distributions with respect to a pool (the
"Contract Pool") of conventional manufactured housing installment sales
contracts, installment loan agreements and mortgage loans (collectively, the
"Contracts") formed and sold by Vanderbilt and certain other property
(collectively, the "Trust Fund"). The Contracts either were originated or
acquired by and are serviced by the Servicer and are secured by Manufactured
Homes. The Trust Fund was created pursuant to a Pooling and Servicing
Agreement dated as specified above (the "Agreement"), by and among Vanderbilt,
as seller and servicer, Clayton Homes, Inc., as provider of the Limited
Guarantee, and JPMorgan Chase Bank, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, the capitalized terms used herein have the meanings
assigned in the Agreement.

     This Certificate is one of a duly authorized issue of Certificates,
designated as Manufactured Housing Contract Senior/Subordinate Pass-Through
Certificates, Series 2002-B (the "Certificates"), and is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.

     On each Remittance Date, the Trustee will cause to be distributed to each
Class [B-1] [B-2] Certificateholder an amount equal to the product of (i) the
Percentage Interest evidenced by such Class [B-1][B-2] Certificateholder's
Certificate and (ii) subject to the prior rights of Holders of Class A, Class
M-1 [and Class B-1] Certificates as specified in the Agreement, the Class
[B-1][B-2] Distribution Amount.

     Distributions on this Certificate will be made by check mailed to the
address of the Person entitled thereto, as such name and address shall appear
on the Certificate Register or by wire transfer to Holders of Class [B-1]
[B-2] Certificates with original denominations aggregating at least $5 million
who have given the Trustee written instructions at least five Business Days
prior to the related Record Date. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee
of the pendency of such distribution and only upon presentation and surrender
of this Certificate at the office or agency appointed by the Trustee for that
purpose and specified in such notice of final distribution.

     Reference is hereby made to the further provisions of this Certificate
set forth hereafter, which further provisions shall for all purposes have the
same effect as if set forth at this place.

     Unless this Certificate has been countersigned by or on behalf of the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                     C-3
<PAGE>

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                    JPMORGAN CHASE BANK,
                                    as Trustee

                                    By____________________________________
                                           Authorized Officer

[Form of Certificate of
Countersignature]

This is one of the Certificates
referred to in the within-
mentioned Agreement.

By___________________________________    By__________________________________,

                                      OR

         Authenticating Agent                           Trustee

-------------------------------------     ------------------------------------
Authorized Signatory                      Authorized Signatory

[Signature page to Class [B-1][B-2]
Certificate, Manufactured Housing
Contract Senior/Subordinate
Pass-Through Certificates,
Series 2002-B]

                                     C-4
<PAGE>

                                   EXHIBIT D

                      FORM OF FACE OF CLASS R CERTIFICATE

               THIS CLASS R CERTIFICATE HAS NOT BEEN REGISTERED
               UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
               THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
               RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
               PURSUANT TO SUCH ACT OR LAWS OR IS SOLD OR
               TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
               REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE
               STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
               THE PROVISIONS OF SECTION 4.02 AND SECTION 4.08 OF
               THE AGREEMENT REFERRED TO HEREIN.

               THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF
               PAYMENT TO THE CLASS A, CLASS M-1 AND CLASS B
               CERTIFICATES AS DESCRIBED IN THE POOLING AND
               SERVICING AGREEMENT REFERRED TO HEREIN.

               SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS
               CERTIFICATE IS A "RESIDUAL INTEREST" IN A "REAL
               ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
               ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND
               860D OF THE INTERNAL REVENUE CODE.

               NEITHER THIS CERTIFICATE NOR ANY BENEFICIAL
               INTEREST HEREIN MAY BE, DIRECTLY OR INDIRECTLY,
               TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR
               OTHERWISE ASSIGNED WITHOUT THE EXPRESS WRITTEN
               CONSENT OF THE SERVICER, ACTING ON BEHALF OF THE
               TRUST FUND, AND ANY TRANSFER IN VIOLATION OF THIS
               RESTRICTION SHALL BE ABSOLUTELY NULL AND VOID AND
               SHALL VEST NO RIGHTS IN ANY PURPORTED TRANSFEREE,
               AND SHALL SUBJECT THE HOLDER HEREOF TO LIABILITY
               FOR ANY TAX IMPOSED (AND RELATED EXPENSES, IF ANY)
               WITH RESPECT TO SUCH ATTEMPTED TRANSFER.

Number  _______________              Percentage Interest: 100%
Date of Pooling and
Servicing Agreement and
Cut-off Date:
July 25, 2002

                               D-1
<PAGE>

                                     Remittance Date after
                                     Latest Due Date:  ____ __, ____
First Remittance Date:
September 9, 2002

               MANUFACTURED HOUSING CONTRACT SENIOR/SUBORDINATE
                           PASS-THROUGH CERTIFICATE
                      Series 2002-B Class R (SUBORDINATE)

        evidencing the entire percentage interest in any distributions
        allocable to the Class R Certificate with respect to a pool of
        fixed rate and a pool of adjustable rate conventional
        manufactured housing contracts, in each case formed and sold by

                     VANDERBILT MORTGAGE AND FINANCE, INC.

which manufactured housing contracts either were originated or acquired by
Vanderbilt Mortgage and Finance, Inc. (hereinafter called the "Company," which
term includes any successor entity under the Agreement referred to below) and
are initially serviced by Vanderbilt Mortgage and Finance, Inc. (in such
capacity, the "Servicer", which term includes any entity under the Agreement
referred to below).

     This Certificate does not represent an obligation of or interest in
Vanderbilt, the Servicer or the Trustee referred to below or any of their
Affiliates. Neither this Certificate nor the underlying manufactured housing
contracts are guaranteed or insured by Vanderbilt Mortgage and Finance, Inc.
or the Servicer or by any governmental agency or instrumentality.

     This certifies that Vanderbilt SPC, Inc. is the registered owner of an
undivided interest in certain monthly distributions with respect to a pool
(the "Contract Pool") of conventional manufactured housing installment sales
contracts, installment loan agreements and mortgage loans (collectively, the
"Contracts") formed and sold by Vanderbilt and certain other property
(collectively, the "Trust Fund"). The Contracts either were originated or
acquired by and are serviced by Vanderbilt Mortgage and Finance, Inc. (the
"Servicer") and are secured by Manufactured Homes. The Trust Fund was created
pursuant to a Pooling and Servicing Agreement dated as specified above (the
"Agreement"), by and among Vanderbilt, as seller and servicer, Clayton Homes,
Inc., as provider of the Limited Guarantee, and JPMorgan Chase Bank, as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the
capitalized terms used herein have the meanings assigned in the Agreement.

     This Certificate is one of a duly authorized issue of Certificates,
designated as Manufactured Housing Contract Senior/Subordinate Pass-Through
Certificates, Series 2002-B (the "Certificates"), and is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.

                                     D-2
<PAGE>

     On each Remittance Date, the Trustee will cause to be distributed to the
Class R Certificateholder an amount equal to the Class R Distribution Amount.

     Distributions on this Certificate will be made by check mailed to the
address of the Person entitled thereto, as such name and address shall appear
on the Certificate Register or by wire transfer if the Holder has given the
Trustee written instructions at least five Business Days prior to the related
Record Date. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this Certificate
at the office or agency appointed by the Trustee for that purpose and
specified in such notice of final distribution.

     No transfer of the Class R Certificate will be made unless such transfer
is exempt from the registration requirements of the Securities Act of 1933, as
amended, and any applicable state securities laws or is made pursuant to an
effective registration statement under said Act or laws. The Trustee or
Vanderbilt may require an Opinion of Counsel acceptable to and in form and
substance satisfactory to Vanderbilt that such transfer is exempt (describing
the applicable exemption and the basis therefor) from the registration
requirements of the Securities Act of 1933, as amended, and from any
applicable securities statute of any state, and the transferee shall execute
an investment letter in the form described by the Agreement.

     Reference is hereby made to the further provisions of this Certificate
set forth hereafter, which further provisions shall for all purposes have the
same effect as if set forth at this place.

     Unless this Certificate has been countersigned by or on behalf of the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                     D-3
<PAGE>

     IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                    JPMORGAN CHASE BANK,
                                    as Trustee

                                    By____________________________________
                                           Authorized Officer

[Form of Certificate of
Countersignature]

This is one of the Certificates
referred to in the within-
mentioned Agreement.

By___________________________________    By__________________________________,

                                      OR

         Authenticating Agent                           Trustee

-------------------------------------     ------------------------------------
Authorized Signatory                      Authorized Signatory

[Signature page to Class R Certificate,
Manufactured Housing Contract
Senior/Subordinate Pass-Through
Certificates, Series 2002-B]

                                     D-4
<PAGE>

                                   EXHIBIT E

       [FORM OF REVERSE OF CLASS A CERTIFICATES, CLASS M-1 CERTIFICATES,
                 CLASS B CERTIFICATES AND CLASS R CERTIFICATE]

     As provided in the Agreement, deductions and withdrawals from the
Certificate Account will be made from time to time for purposes other than
distributions to Certificateholders, such purposes including payment of the
Monthly Servicing Fee, reimbursement to the Servicer for certain expenses
incurred by it, and reimbursement to the Servicer for previous advances with
respect to delinquent payments on the Contracts.

     The duties and responsibilities of the Trustee are limited to those set
forth in the Agreement. The Agreement provides that the recitals contained in
the Agreement and this Certificate (other than the countersignature on the
face hereof) shall be taken as the statements of Vanderbilt or the Servicer,
as the case may be, and the Trustee assumes no responsibility for their
correctness. The Agreement also provides that the Trustee makes no
representations or warranties as to the validity or sufficiency of the
Agreement, of this Certificate (except that this Certificate has been duly and
validly countersigned by it), of any Contract or related document or the
conveyance of the Contracts and any related Mortgages or documents. The
Agreement further provides that the Trustee shall not be accountable for the
use or application by Vanderbilt of any of the Certificates or of the proceeds
of such Certificates, or for the use or application of any funds paid to
Vanderbilt or the Servicer in respect of the Contracts or deposited in or
withdrawn from the Certificate Account by Vanderbilt or the Servicer.

     The Trustee will cause to be kept at its Corporate Trust Office in New
York City, or at the office of its designated agent, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Trustee
will provide for the registration of Certificates and of transfers and
exchanges of Certificates. Upon surrender for registration of transfer of any
Certificate at any office or agency of the Trustee maintained for such
purpose, the Trustee will, subject to the limitations set forth in the
Agreement, countersign and deliver, in the name of the designated transferee
or transferees, a Certificate dated the date of countersignature by the
Trustee.

     No service charge will be made to the Holder for any registration of
transfer or exchange of this Certificate, but the Trustee may require payment
of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any registration of transfer or exchange of the
Certificate. Prior to due presentation of a Certificate for registration of
transfer, Vanderbilt, the Servicer and the Trustee may treat the Person in
whose name any Certificate is registered as the owner of such Certificate and
the Percentage Interest in the Trust Fund evidenced thereby for the purpose of
receiving distributions pursuant to the Agreement and for all other purposes
whatsoever, and neither Vanderbilt, the Servicer nor the Trustee will be
affected by notice to the contrary.

     The Agreement may be amended from time to time by Vanderbilt, the
Servicer and the Trustee, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, error or mistake or to correct
or supplement any provisions therein which may be inconsistent with any other
provisions therein, (ii) to add to the duties or obligations of the Servicer
under the

                                     E-1
<PAGE>

Agreement, (iii) to obtain a rating by a nationally recognized rating agency
or to maintain or improve the rating of the Certificates then given by a
rating agency (it being understood that, after obtaining the rating of any
Certificates at the Closing Date, none of the Trustee, Vanderbilt or the
Servicer is obligated to obtain, maintain or improve any rating of the
Certificates), (iv) to facilitate the operation of a guarantee of the Class
B-2 Certificates by any Person (it being understood that the creation of any
such guarantee is solely at the option of Vanderbilt and that such guarantee
will not benefit in any way or result in any payments on any other Class of
Certificates) or (v) to make any other provisions with respect to matters or
questions arising under the Agreement which are not materially inconsistent
with the provisions of the Agreement, including without limitation provisions
relating to the issuance of definitive Certificates to Certificate Owners
provided that book-entry registration of the Certificates is no longer
permitted, provided that such action does not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder (including, without limitation, the maintenance of the
status of the Trust Fund as a REMIC under the Code). The Agreement may also be
amended from time to time by Vanderbilt, the Servicer and the Trustee, without
consent of the Certificateholders, to modify, eliminate or add to the
provisions of the Agreement to such extent as shall be necessary to maintain
the qualification of the Trust Fund as a REMIC under the Code or avoid, or
minimize the risk of, the imposition of any tax on the Trust Fund or to
prevent the Trust Fund from entering into certain prohibited transactions
under the Code, provided that such amendment shall not adversely affect in any
material respect the interests of any Certificateholder and there shall have
been delivered to the Trustee an Opinion of Counsel to the effect that such
action is necessary or appropriate for such purposes.

     The Agreement may also be amended from time to time by Vanderbilt, the
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing not less than 51% of the Trust Fund, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of the Agreement or of modifying in any manner the rights of the Holders of
Certificates; provided, however, that no such amendment may (i) reduce in any
manner the amount of, or delay the timing of, distributions which are required
to be made on any Certificate without the consent of the Holder of such
Certificate or (ii) reduce the aforesaid percentage of Certificates, the
Holders of which are required to consent to any such amendment, without the
consent of the Holders of all Certificates of such Class then outstanding or
(iii) adversely affect the status of the Trust Fund as a REMIC or cause a tax
to be imposed on the Trust Fund under the REMIC provisions.

     The respective obligations and responsibilities of Vanderbilt, the
Servicer and the Trustee under the Agreement will terminate upon: (i) the
later of the final payment or other liquidation (or any advance with respect
thereto) of the last Contract or the disposition of all property acquired upon
repossession of any Contract and the remittance of all funds due thereunder;
or (ii) at the option of Vanderbilt or the Servicer, on any Remittance Date
after the first Remittance Date on which the sum of the Pool Scheduled
Principal Balances is less than 10% of the sum of the Pool Original Principal
Balances, so long as Vanderbilt or the Servicer, as the case may be, deposits
in the Certificate Accounts the repurchase price specified in the Agreement.

                                     E-2
<PAGE>

                             [FORM OF ASSIGNMENT]

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto

     (PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF
ASSIGNEE) (*This information, which is voluntary, is being requested to ensure
that the assignee will not be subject to backup withholding under Section 3406
of the Code.)

------------------
------------------

------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address of Assignee)

------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint

----------------------------------------------------------------  Attorney
to transfer the within Certificate on the books kept for the registration
thereof, with full power of substitution in the premises.

Dated:

                                       ------------------------------------
(Signature guaranty)                   NOTICE: The signature to this
                                       assignment must correspond with
                                       the name as it appears upon the face
                                       of the within Certificate in every
                                       particular, without alteration or
                                       enlargement or any change whatever.

                                     E-3
<PAGE>

                                   EXHIBIT F

                                  [SERVICER]

                CERTIFICATE REGARDING SUBSTITUTION OF ELIGIBLE

                              SUBSTITUTE CONTRACT

     The undersigned certify that they are [title] and [title], respectively,
of Vanderbilt Mortgage and Finance, Inc. ("Vanderbilt"), and that as such they
are duly authorized to execute and deliver this certificate on behalf of
Vanderbilt pursuant to Section 3.05(b) of the Pooling and Servicing Agreement
(the "Agreement"), dated as of July 25, 2002, among Vanderbilt, as Seller and
Servicer, and JPMorgan Chase Bank, as Trustee (all capitalized terms used
herein without definition having the respective meanings specified in the
Agreement), and further certify that:

     1. The Contracts on the attached schedule are to be substituted on the
date hereof pursuant to Section 3.05(b) of the Agreement and each such
Contract is an Eligible Substitute Contract [description, as to each Contract,
as to how it satisfies the definition of "Eligible Substitute Contract"].

     2. The Contract File for each such Contract being substituted for a
Replaced Contract is in the custody of the Servicer and each such Contract has
been stamped in accordance with Section 3.02(y) of the Agreement.

     3. The UCC-1 financing statement in respect of the Contracts to be
substituted, in the form required by Section 3.05(b)(ii) of the Agreement, has
been filed with the appropriate office in Tennessee.

     4. There has been deposited in the appropriate Certificate Account the
amounts listed on the schedule attached hereto as the amount by which the
Scheduled Principal Balance of each Replaced Contract exceeds the Scheduled
Principal Balance of each Contract being substituted therefor.

     IN WITNESS WHEREOF, I have affixed hereunto my signature this ____ day of
________, 20__.

                                    [SERVICER]

                                    By__________________________________
                                    [Name]
                                    [Title]

                                     F-1
<PAGE>

                                   EXHIBIT G

                                  [SERVICER]

                       CERTIFICATE OF SERVICING OFFICER

     The undersigned certifies that he is a [title] of [Servicer], a [ ]
corporation (the "Servicer"), and that as such he is duly authorized to
execute and deliver this certificate on behalf of the Servicer pursuant to
Section 7.02 of the Pooling and Servicing Agreement (the "Agreement"), dated
as of July 25, 2002, by and among Vanderbilt Mortgage and Finance, Inc., as
Seller and Servicer, Clayton Homes, Inc., as provider of the Limited
Guarantee, and JPMorgan Chase Bank, as trustee (all capitalized terms used
herein without definition having the respective meanings specified in the
Agreement), and further certifies that:

          1. The Monthly Report for the period from ____________ to
     ___________ attached to this certificate is complete and accurate in
     accordance with the requirements of Sections 7.01 and 7.02 of the
     Agreement; and

          2. As of the date hereof, no Event of Default or event that with
     notice or lapse of time or both would become an Event of Default has
     occurred.

     IN WITNESS WHEREOF, I have affixed hereunto my signature this __ day of
_________, ____.

                                    [SERVICER]

                                    By______________________________
                                            [Name]
                                            [Title]

                                     G-1
<PAGE>

                                   EXHIBIT H

                              TRANSFER AFFIDAVIT

STATE OF         )
                 )   ss:
COUNTY OF        )

     The undersigned, being first duly sworn, deposes and says as follows:

     1. The undersigned is an officer of ___________________ ________________,
a corporation duly organized and existing under the laws of the State of
_________, the proposed transferee (the "Transferee") of the Class R
Certificate from the Manufactured Housing Contract Senior/Subordinate
Pass-Through Certificates, Series 2002-B, issued pursuant to the Pooling and
Servicing Agreement, dated as of July 25, 2002 (the "Agreement"), by and among
Vanderbilt Mortgage and Finance, Inc., as seller and servicer, Clayton Homes,
Inc., as provider of the Limited Guarantee and JPMorgan Chase Bank, as
trustee. Capitalized terms used, but not defined herein or in Exhibit 1
hereto, shall have the meanings ascribed to such terms in the Agreement. The
Transferee has authorized the undersigned to make this affidavit on behalf of
the Transferee.

     2. The Transferee is, as of the date hereof, and will be, as of the date
of the Transfer, a Permitted Transferee. The Transferee is acquiring the Class
R Certificate for its own account.

     3. The Transferee has been advised and understands that (i) a tax shall
be imposed on Transfers of the Class R Certificate to Persons that are not
Permitted Transferees; (ii) such tax is imposed on the transferor; and (iii)
the Person otherwise liable for the tax shall be relieved of liability for the
tax if the subsequent Transferee furnished to such Person an affidavit that
such subsequent Transferee is a Permitted Transferee and, at the time of
Transfer, such Person does not have actual knowledge that the affidavit is
false.

     4. The Transferee has been advised of, and understands that a tax shall
be imposed on a "pass-through entity" holding the Class R Certificate if at
any time during the taxable year of the pass-through entity a Person that is
not a Permitted Transferee is the record holder of an interest in such entity.
The Transferee understands that no tax will be imposed for any period for
which the record holder furnishes to the pass-through entity an affidavit
stating that the record holder is a Permitted Transferee and the pass-through
entity does not have actual knowledge that such affidavit is false. (For this
purpose, a "pass-through entity" includes a regulated investment company, a
real estate investment trust or common trust fund, a partnership, trust or
estate, and certain cooperatives and, except as may be provided in Treasury
Regulations, persons holding interests in pass-through entities as a nominee
for another Person.)

     5. Transferee has reviewed the provisions of Section 4.08 of the
Agreement (attached hereto as Exhibit 1 and incorporated herein by reference)
and understands the legal consequences of the acquisition of the Class R
Certificate, including, without limitation, the restrictions on subsequent
Transfers and the provisions regarding voiding the Transfer and

                                     H-1
<PAGE>

mandatory sales. The Transferee expressly agrees to be bound by and to abide
by the provisions of Sections 4.02 and 4.08 of the Agreement. The Transferee
understands and agrees that any breach of any of the representations included
herein shall render the Transfer to the Transferee contemplated hereby null
and void.

     6. The Transferee agrees to require a Transfer Affidavit from any Person
to whom the Transferee attempts to Transfer the Class R Certificate and the
Transferee will not Transfer the Class R Certificate or cause the Class R
Certificate to be Transferred to any Person that the Transferee knows is not a
Permitted Transferee.

     7. The Transferee's taxpayer identification number is __________________.

     8. The Purchaser (i) is not a Non-U.S. Person or (ii) is a Non-U.S.
Person that holds the Class R Certificate in connection with the conduct of a
trade or business in the United States and has furnished the transferor and
the Trustee with an effective Internal Revenue Service Form W-8EC1 or
successor form at the time and in the manner required by the Code or (iii) is
a Non-U.S. Person that has delivered to both the transferor and the Trustee an
opinion of a nationally recognized tax counsel to the effect that the transfer
of the Class R Certificate to it is in accordance with the requirements of the
Code and the regulations promulgated thereunder and that such transfer of the
Class R Certificate will not be disregarded for federal income tax purposes.
"Non-U.S. Person" means an individual, corporation, partnership or other
person which is not a U.S. Person. A "U.S. Person" means (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
treated as a corporation or partnership for United States federal income tax
purposes organized in or under the laws of the United States or any state
thereof or the District of Columbia (other than a partnership that is not
treated as a United States person under any applicable Treasury regulations)
or (iii) an estate the income of which is includible in gross income for
United States tax purposes, regardless of its source, or (iv) a trust if a
court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States persons have
authority to control all substantial decisions of the trust. Notwithstanding
the preceding sentence, to the extent provided in regulations, certain trusts
in existence on August 20, 1996 and treated as United States persons prior to
such date that elect to continue to be treated as United States persons shall
be considered United States persons as well.

     9. The Purchaser does not have the intention to impede the assessment or
collection of any federal, state or local taxes legally required to be paid
with respect to such Class R Certificate, and the Purchaser hereby
acknowledges that the Class R Certificate may generate tax liabilities in
excess of the cash flow associated with the Class R Certificate and intends to
pay such taxes associated with the Class R Certificate when they become due.

     10. The Transferee has provided financial statements or other financial
information requested by the Seller of the Class R Certificates (the
"Transferor") in connection with the transfer of the Class R Certificates to
permit the Transferor to access the financial capacity of the Transferee to
pay such taxes.

     12. Transferee is not a foreign permanent establishment or fixed base
(within the meaning of an applicable income tax treaty) of a U.S. taxpayer.

                                     H-2
<PAGE>

     13. The Transferee will not transfer the Class R Certificates, directly
or indirectly, to a foreign permanent establishment or fixed base (within the
meaning of an applicable income tax treaty) of the Transferee or another U.S.
taxpayer.

     14. The Transferee will not cause income from the Class R Certificates to
be attributable to a foreign permanent establishment or fixed base (within the
meaning of an applicable income tax treaty) of the Transferee or another U.S.
taxpayer.

                                     H-3
<PAGE>

     IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by
its duly authorized officer and its corporate seal to be hereunto affixed,
duly attested, this ___ day of __________, 200_.

                                    [Name of transferee]

                                    By:_________________________________
                                            Name:
                                            Title:

[Corporate Seal]

ATTEST:

---------------------------
[Assistant] Secretary

     Personally appeared before me the above-named __________________, known
or proved to me to be the same person who executed the foregoing instrument
and to be the President of the Transferee, and acknowledged that he executed
the same as his free act and deed and the free act and deed of the Transferee.

     Subscribed and sworn before me this ____ day of ______, 2002.

                                    ----------------------------------
                                    NOTARY PUBLIC

                                    My commission expires the __
                                    day of _______________, 20__.

                                     H-4
<PAGE>

                                   EXHIBIT I

                         FORM OF INVESTMENT LETTER OF

                           CLASS R CERTIFICATEHOLDER

Representations of Purchaser.
----------------------------

     1. The Purchaser is acquiring a Class R Certificate as principal for its
own account for the purpose of investment [neither the Underwriters nor any of
their Affiliates need represent that it is acquiring for purposes of
investment] and not with a view to or for sale in connection with any
distribution thereof, subject nevertheless to any requirement of law that the
disposition of the Purchaser's property shall at all times be and remain
within its control.

     2. The Purchaser has knowledge and experience in financial and business
matters and is capable of evaluating the merits and risks of its investment in
a Class R Certificate and is able to bear the economic risk of such
investment. The Purchaser is an "accredited investor" within the meaning of
Rule 501(a) under the rules and regulations of the Securities and Exchange
Commission under the Securities Act of 1933, as amended. The Purchaser has
been given such information concerning the Class R Certificate, the underlying
Contracts and the Servicer as it has requested.

     3. The Purchaser will comply with all applicable federal and state
securities laws in connection with any subsequent resale by the Purchaser of
the Class R Certificate.

     4. The Purchaser understands that the Class R Certificate has not been
and will not be registered under the Securities Act of 1933, as amended, or
any state securities laws and may be resold (which resale is not currently
contemplated) only if an exemption from registration is available, that
neither Vanderbilt, the Servicer nor the Trustee is required to register the
Class R Certificate and that any transfer must comply with Sections 4.02 and
4.08 of the Pooling and Servicing Agreement. In connection with any resale of
the Class R Certificate, the Purchaser shall not make any general solicitation
or advertisement.

     5. The Purchaser represents that it is not an employee benefit plan
subject to Section 406 of the Employee Retirement Income Security Act of 1974,
as amended, or Section 4975 of the Internal Revenue Code of 1986, as amended,
or a person acting on behalf of such a plan or using the assets of such a plan
to acquire the Class R Certificate.

     6. The Purchaser agrees that it will obtain from any purchaser of the
Class R Certificate from it the same representations, warranties and
agreements contained in the foregoing paragraphs 1 through 5 and in this
paragraph 6.

                                     I-1
<PAGE>

     7. The Purchaser hereby directs the Trustee to register the Class R
Certificate acquired by the Purchaser in the name of its nominee as follows:
_____________.

                                    Very truly yours,

                                    --------------------------------
                                    NAME OF PURCHASER

                                    By:_____________________________
                                    Name:___________________________
                                    Title:__________________________

                                     I-2
<PAGE>

                                   EXHIBIT J

             List of Sellers and Originators of Acquired Contracts

         (On file with the Trustee and Sidley Austin Brown & Wood LLP)

                                     J-1
<PAGE>

                                   EXHIBIT K

                           FORM OF POWER OF ATTORNEY

     Vanderbilt Mortgage and Finance, Inc. as Seller and Servicer (the
"Seller") under the Pooling and Servicing Agreement dated as of July 25, 2002
(the "Agreement"), between Vanderbilt Mortgage and Finance, Inc. and JPMorgan
Chase Bank, as Trustee (the "Trustee"), hereby irrevocably constitutes and
appoints the Trustee its true and lawful attorney-in-fact and agent, to
execute, acknowledge, verify, swear to, deliver, record and file, in its name,
place and stead, all instruments, documents and certificates which may from
time to time be required in connection with the Agreement, including, without
limitation, to execute any documents required to be executed or recorded by
the Trustee pursuant to Section 2.02(a) of the Agreement. If required, the
Seller shall execute and deliver to the Trustee upon request therefor, such
further designations, powers of attorney or other instruments as the Trustee
shall reasonably deem necessary for its purposes hereof.

     Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Agreement.

                                    VANDERBILT MORTGAGE AND FINANCE, INC.

                                    By:__________________________________
                                    Name:
                                    Title:

                                     K-1
<PAGE>

                                   EXHIBIT L

                       FORM OF LIMITED POWER OF ATTORNEY

     THIS LIMITED POWER OF ATTORNEY, dated as of this ____ day of _______,
_____, is granted, for the purposes set forth herein, to Vanderbilt Mortgage
and Finance, Inc., whose address is 500 Alcoa Trail, Maryville, Tennessee (the
"Vanderbilt"), by JPMORGAN CHASE BANK, as principal (in such capacity, the
"Principal"), a bank organized and existing under the laws of the State of New
York, whose address is 450 West 33rd Street, 14th Floor, New York, New York
10001, Attention: Structured Finance Services, acting in its capacity as
trustee (in such capacity, the "Trustee") under that certain Pooling and
Servicing Agreement dated as of July 25, 2002 between the Trustee and the
Attorney-in-Fact (the "Pooling and Servicing Agreement"). Capitalized terms
used and not otherwise defined herein shall have the meanings set forth in the
Pooling and Servicing Agreement.

     In accordance with section 5.01 of the Pooling and Servicing Agreement,
the Trustee hereby appoints the Vanderbilt, acting by and through its officers
and employees, as attorney-in-fact for the Trustee (in such capacity, the
"Attorney-in-Fact"), with full authority and power to execute and deliver on
behalf of the Trustee, with respect to the Deeds of Trust, assignments of
mortgage or deed of trust from the Trustee to the Attorney-in-Fact for
recordation.

     This Limited Power of Attorney shall not be deemed to be revoked as to
any particular deed of trust unless and until an instrument containing the
revocation is recorded in the office where the deed of trust is recorded.

     IN WITNESS WHEREOF, the Principal has caused this Limited Power of
Attorney to be executed as of the date first written above.

                                    JPMORGAN CHASE BANK,
                                        as Trustee

                                    By:___________________________
                                    Name:
                                    Title:

                                     L-1
<PAGE>

STATE OF NEW YORK       )
                        )    ss:
COUNTY OF NEW YORK      )

     On _________ __, 2002, before me, ____________________, a Notary Public
in and for said County and State. ____________________, known to me to be the
person who executed the foregoing instrument, bearing the date of ___________,
2002, as a _______________ of JPMorgan Chase Bank, acknowledged this Limited
Power of Attorney to be the act and deed of JPMorgan Chase Bank and that she
delivered the same as such before me in my jurisdiction aforesaid.

     WITNESS my hand and official seal.

     -------------------------------
     Notary Public
                                                                     [SEAL]

My Commission Expires: ____________________

<PAGE>

                                   EXHIBIT M

                     FORM OF SUBSEQUENT TRANSFER AGREEMENT

     Vanderbilt Mortgage and Finance, Inc., as seller (the "Seller") and
JPMorgan Chase Bank, as trustee (the "Trustee"), pursuant to the Pooling and
Servicing Agreement dated as of July 25, 2002 among Vanderbilt Mortgage and
Finance, Inc., Clayton Homes, Inc. and JPMorgan Chase Bank, as Trustee (the
"Pooling and Servicing Agreement"), hereby confirm their understanding with
respect to the sale by the Seller and the purchase by the Trustee of those
Contracts (the "Subsequent Contracts") listed on the attached Contract
Schedule.

     Conveyance of Subsequent Contracts. As of _____________, 2002 (the
"Subsequent Cut-off Date"), the Seller does hereby irrevocably transfer,
assign, setover and otherwise convey to the Trustee, as trustee, without
recourse (except as otherwise explicitly provided for herein) all right, title
and interest in and to any and all benefits accruing from the Subsequent
Contracts (other than any principal and interest payments received thereon on
or prior to the Subsequent Cut-off Date) which are delivered to the Trustee
herewith, together with the related Subsequent Contracts and the interest in
any property which secured a Subsequent Contract, and all payments thereon and
proceeds of the conversion, voluntary or involuntary, of the foregoing; and
proceeds of all the foregoing (including, but not by way of limitation, all
proceeds of any insurance policy relating to the Subsequent Contracts, cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, rights to payment of any and every kind, and
other forms of obligations and receivables which at any time constitute all or
part of or are included in the proceeds of any of the foregoing). The Seller
shall deliver the original Contract or assignment with evidence of recording
thereon (except as otherwise provided by the Pooling and Servicing Agreement)
and other required documentation in accordance with the terms set forth in
Section 5.20 of the Pooling and Servicing Agreement.

     The costs relating to the delivery of the documents specified in this
Subsequent Transfer Agreement and the Pooling and Servicing Agreement shall be
borne by the Seller.

     Additional terms of the sale are attached hereto as Attachment A.

     The Seller hereby affirms the representations and warranties set forth in
the Pooling and Servicing Agreement that relate to the Seller and the
Subsequent Contracts as of the date hereof. The Seller hereby delivers notice
and confirms that each of the conditions set forth in Section 5.20(b) to the
Pooling and Servicing Agreement are satisfied as of the date hereof.

     All terms and conditions of the Pooling and Servicing Agreement are
hereby ratified, confirmed and incorporated herein.

                                     M-1
<PAGE>

     Terms capitalized herein and not defined herein shall have their
respective meanings as set forth in the Pooling and Servicing Agreement.

                                    VANDERBILT MORTGAGE AND FINANCE, INC.,
                                    as Seller

                                    By:____________________________________
                                    Name:__________________________________
                                    Title:_________________________________

                                    JPMORGAN CHASE BANK,
                                    as Trustee for Vanderbilt Mortgage and
                                    Finance, Inc., Series 2001-B

                                    By:____________________________________
                                    Name:__________________________________
                                    Title:_________________________________

                                     M-2CREDIT AGREEMENT

 

CREDIT AGREEMENT

Dated as of August 30, 2002

among

Green Mountain 

Coffee Roasters, Inc.

and

Green Mountain Coffee Roasters Franchising Corporation

as Borrowers,

THE LENDERS SIGNATORY HERETO

FROM TIME TO TIME,

as Lenders,

and

FLEET NATIONAL BANK

as Agent and Lender

 

TABLE OF CONTENTS

RECITALS*

1.  AMOUNT AND TERMS OF CREDIT *
1.1  CREDIT FACILITIES*

1.2  PREPAYMENTS*

1.3  USE OF PROCEEDS*

1.4  INTEREST AND APPLICABLE MARGINS*

1.5  ELIGIBLE ACCOUNTS*

1.6  ELIGIBLE INVENTORY*

1.7  CASH MANAGEMENT SYSTEMS*

1.8  FEES*

1.9  RECEIPT OF PAYMENTS*

1.10  APPLICATION AND ALLOCATION OF PAYMENTS*

1.11  LOAN ACCOUNT AND ACCOUNTING*

1.12  INDEMNITY*

1.13  ACCESS*

1.14  TAXES*

1.15  CAPITAL ADEQUACY; INCREASED COSTS: ILLEGALLY*

1.16  SINGLE LOAN*

1.17  LETTERS OF CREDT*

1.17.1  LETTERS OF CREDT*

1.17.2  ISSUING A LETTER OF CREDIT*

1.17.3  LETTER OF CREDIT PARTICIPATIONS*

1.17.4  REIMBURSEMENT AND OTHER PAYMENTS*

1.17.5  OBLIGATIONS ABSOLUTE*

1.17.6  THE UNIFORM CUSTOMS AND PRACTICE*

1.17.7  MODIFICATION, CONSENT, ETC.*

1.17.8  LIABILITY OF THE AGENT AND THE LENDERS*

2.  CONDITIONS PRECEDENT *
2.1  CONDITIONS TO THE INITIAL LOANS*

2.2  FURTHER CONDITIONS TO EACH LOAN*

2.3  CONDITIONS SUBSEQUENT*

3.  REPRESENTATIONS AND WARRANTIES *
3.1  CORPORATE EXISTENCE; COMPLIANCE WITH LAW*

3.2  EXECUTIVE OFFICES; FEIN*

3.3  CORPORATE POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS*

3.4  FINANCIAL STATEMENTS AND PROJECTIONS*

3.5  MATERIAL ADVERSE EFFECT*

3.6  OWNERSHIP OF PROPERTY: LIENS*

3.7  LABOR MATTERS*

3.8  VENTURES, SUBSIDIARIES AND AFFILIATES: OUTSTANDING STOCK AND INDEBTEDNESS*

3.9  GOVERNMENTAL REGULATION*

3.10  MARGIN REGULATIONS*

3.11  TAXES*

3.12  ERISA*

3.13  NO LITIGATION*

3.14  BROKERS*

3.15  INTELLECTUAL PROPERTY*

3.16  FULL DISCLOSURE*

3.17  ENVIRONMENTAL MATTERS*

3.18  INSURANCE*

3.19  DEPOSIT AND DISBURSEMENT ACCOUNTS*

3.20  GOVERNMENT CONTRACTS*

3.21  CUSTOMER AND TRADE RELATIONS*

3.22  AGREEMENTS AND OTHER DOCUMENTS*

3.23  SOLVENCY*

4.  FINANCIAL SATEMENTS AND INFORMATION *
4.1  REPORTS AND NOTICES*

4.2  COMMUNICATION WITH ACCOUNTANTS*

5.  AFFIRMATIVE COVENANTS *
5.1  MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS*

5.2  PAYMENT OF OBLIGATIONS*

5.3  BOOKS AND RECORDS*

5.4  INSURANCE: DAMAGE TO OR DESTRUCTION OF COLLATERAL*

5.5  COMPLIANCE WITH LAWS*

5.6  SUPPLEMENTAL DISCLOSURE*

5.7 INTELLECTUAL PROPERTY*

5.8  ENVIRONMENTAL MATTERS*

5.9  LANDLORDS' AGREEMENTS, MORTGAGEE AGREEMENTS AND BAILEE LETTERS*

5.10  OPERATING ACCOUNTS*

5.11  FURTHER ASSURANCES*

6.  NEGATIVE COVENANTS *
6.1  MERGERS, SUBSIDIARIES, ETC.*

6.2  INVESTMENTS: LOANS AND ADVANCES*

6.3  INDEBTEDNESS*

6.4  EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS*

6.5  CAPITAL STRUCTURE AND BUSINESS*

6.6  GUARANTEED INDEBTEDNESS*

6.7  LIENS*

6.8  SALE OF STOCK AND ASSETS*

6.9  ERISA*

6.10  FINANCIAL COVENANTS*

6.11 HAZARDOUS MATERIALS*

6.12  SALE-LEASEBACKS*

6.13 CANCELLATION OF INDEBTEDNESS*

6.14  RESTRICTED PAYMENTS*

6.15  CHANGE OF CORPORATE NAME OR LOCATION; CHANGE OF FISCAL YEAR*

6.16  NO IMPAIRMENT OF INTERCOMPANY TRANSFERS*

6.17  NO SPECULATIVE TRANSACTIONS*

6.18  LEASES*

7  TERM *
7.1  TERMINATION*

7.2  SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING ARRANGEMENTS*

8.  EVENTS OF DEFAULT: RIGHTS AND REMEDIES *
8.1  EVENTS OF DEFAULT*

8.2  REMEDIES*

8.3  WAIVERS BY BORROWERS*

9  ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT *
9.1  ASSIGNMENT AND PARTICIPATIONS*

9.2  APPOINTMENT OF AGENT*

9.3  AGENT'S RELANCE, ETC.*

9.4  FLEET BANK - NH AND AFFILIATES*

9.5  LENDER CREDIT DECISION*

9.6  INDEMNIFICATION*

9.7  SUCCESSOR AGENT*

9.8  SETOFF AND SHARING OF PAYMENTS*

9.9  ADVANCES; PAYMENTS; NON-FUNDING LENDERS; INFORMATION; ACTIONS IN CONCERT*

10  SUCCESSORS AND ASSIGNS *
10.1  SUCCESSORS AND ASSIGNS*

11  MISCELLANEOUS *
11.1  COMPLETE AGREEMENT: MODIFICATION OF AGREEMENT*

11.2  AMENDMENTS AND WAIVERS*

11.3  FEES AND EXPENSES*

11.4  NO WAIVER*

11.5  REMEDIES*

11.6  SEVERABILITY*

11.7  CONFLICT OF TERMS*

11.8  CONFIDENTIALITY*

11.9  GOVERNING LAW*

11.10  NOTICES*

11.11  SECTION TITLES*

11.12  COUNTERPARTS*

11.13  WAIVER OF JURY TRIAL*

11.14  REINSTATEMENT*

11.15 ADVICE OF COUNSEL*

11.16  NO STRICT CONSTRUCTION*

11.17. JOINT AND SEVERAL OBLIGATIONS*

12.  Interest Rate Hedging *

 

THIS CREDIT AGREEMENT, dated as of August 30, 2002, is by and among GREEN MOUNTAIN COFFEE ROASTERS, INC., a Vermont corporation ("GMCR"), and its wholly owned subsidiary GREEN MOUNTAIN COFFEE ROASTERS FRANCHISING CORPORATION, a Delaware corporation (the "Subsidiary"), each such corporation having their chief executive offices at 33 Coffee Lane, Waterbury, Vermont 05676 (the GMCR and the Subsidiary are hereinafter referred to individually as a "Borrower" and collectively as the "Borrowers"), and FLEET NATIONAL BANK (successor by merger to Fleet Bank - NH), a national banking association organized under the laws of the United States of America with an address of Mail Stop NH DE 01102A, 1155 Elm Street, Manchester, New Hampshire 03101, for itself, as Lender, and as Agent for Lenders, and the other Lenders signatory hereto from time to time. 

RECITALS

WHEREAS, the Borrowers and Agent are parties to a certain Fleet Bank - NH Seventh Amendment and First Restatement of Commercial Loan Agreement dated April 12, 1996, as amended to date (collectively, as amended to date, the "Current Credit Agreement") pursuant to which the Agent provided to the Borrowers a revolving loan commitment of $15,000,000 and a term loan of $5,000,000 (the "Current Credit Facilities"); 

WHEREAS, the Borrowers desire that the Current Credit Facilities be replaced and superseded by the Commitments set forth herein; 

WHEREAS, (a) the Borrowers desire that the Lenders extend (i) a revolving credit  facility to Borrowers of up to $12,500,000 to refinance borrowings under the revolving line of credit included in the Current Credit Facilities and to continue to provide working capital financing to the Borrowers, (ii) a term loan in the amount of $15,000,000 to refinance the existing term loan and a portion of borrowings under the existing revolving credit facility included in the Current Credit Facilities, and (iii) an equipment line of credit loan in the amount of up $5,000,000 to fund the acquisition of new equipment, and (b) Lenders are willing to make certain loans and other extensions of credit to Borrowers of up to such amounts upon the terms and conditions set forth herein; 

WHEREAS, Borrowers desire to secure all of their obligations under the Loan Documents by (a) granting to Agent, for the benefit of Agent and Lenders, a security interest in and mortgage or other lien upon all of their existing and after-acquired assets (including real estate), and (b) pledge to the Agent, for the benefit of the Agent and Lenders, all of the capital stock of Keurig, Incorporated. now or hereafter owned by the Borrowers; and

WHEREAS, capitalized terms used in this Agreement shall have the meanings ascribed to them in Annex A.  All Annexes, Disclosure Schedules, Exhibits and other attachments (collectively, "Appendices") hereto, or expressly identified to this Agreement, are incorporated herein by reference, and taken together, shall constitute but a single agreement.  These Recitals shall be construed as part of the Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows:

1.AMOUNT AND TERMS OF CREDIT

1.1. Credit Facilities.

(a)  Revolving Credit Facility.  (i) Subject to the terms and conditions hereof, each Revolving Lender agrees to make available from time to time until the Commitment Termination Date its Pro Rata Share of advances (each, a "Revolving Credit Advance").   Revolving Credit Advances hereunder shall include advances made by Agent under the Revolving Loan to fund Banker's Acceptances issued by Agent in favor of the Borrowers provided that that aggregate face amount of all such outstanding Banker's Acceptances shall not at any time exceed the lesser of (a) the Borrowing Base or (b) $9,000,000.  The Pro Rata Share of the Revolving Loan of any Revolving Lender shall not at any time exceed its separate Revolving Loan Commitment.  The obligations of each Revolving Lender hereunder shall be several and not joint.  The aggregate amount of Revolving Credit Advances outstanding shall not exceed at any time the lesser of (A) the Maximum Amount and (B) the Borrowing Base, in each case less the amount of the Swing Line Loan outstanding at such time ("Borrowing Availability"). Borrowers shall make payments of principal from time to time under the Revolving Loan so that the aggregate amount of Revolving Advances does not at any time exceed the then Borrowing Availability.  Until the Commitment Termination Date, Borrowers may from time to time borrow, repay and reborrow under this Section 1.1 (a).  Each Revolving Credit Advance shall be made either pursuant (a) to the Agent's Cash Management System (Prime Rate Loans only) or (b) on notice by Borrower Representative on behalf of the Borrowers to the representative of Agent identified on Schedule 1.1 at the address specified thereon. Notices by Borrower Representative must be given no later than (1) 12:00 p.m. (Manchester, New Hampshire time) on the Business Day of the proposed Revolving Credit Advance, in the case of a Prime Rate Loan, or (2) 11:00 a.m. (Manchester, New Hampshire time) on the date which is two (2) Business Days prior to the proposed Revolving Credit Advance, in the case of a LIBOR Loan or a BAR Loan. Each such notice (a "Notice of Revolving Credit Advance") must be given in writing (by telecopy or overnight courier) and shall be in such form and shall include such information as may be required by Agent. If any Borrower desires to have the Revolving Credit Advances bear interest by reference to a LIBOR Rate, Borrower Representative must comply with Section 1.4(e).  If any Borrower desires to have a Revolving Credit Advance made for purposes of issuance of a Banker's Acceptance and to bear interest by reference to a Banker's Acceptance Rate, Borrower Representative must comply with Section 1.4(f).

(ii) The Borrowers shall execute and deliver to each Revolving Lender a note to evidence the Revolving Loan Commitment of that Revolving Lender. Each note shall be in the principal amount of the Revolving Loan Commitment of the applicable Revolving Lender, dated the Closing Date and substantially in the form of Exhibit l.l(a)(ii) (each a "Revolving Note" and, collectively, the "Revolving Notes"). Each Revolving Note shall represent the joint and several obligation of each Borrower to pay the amount of each Revolving Lender's Revolving Loan Commitment or, if less, the applicable Revolving Lender's Pro Rata Share of the aggregate unpaid principal amount of all Revolving Credit Advances to such Borrower together with interest thereon as prescribed in Section 1.4.  The entire unpaid balance of the aggregate Revolving Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date.

(b)  Equipment Line Facility.  (i) Subject to the terms and conditions hereof, each Equipment Line Lender agrees to make available from time to time until the Commitment Termination Date (which date is subject to the discretion of the Agent provided that in no event shall it extend beyond March 31, 2005)  its Pro Rata Share of advances (each, an "Equipment Line Advance"). The Pro Rata Share of the Equipment Line of any Equipment Line Lender shall not at any time exceed its separate Equipment Line Commitment.  The obligations of each Equipment Line Lender hereunder shall be several and not joint.  Through and until the Commitment Termination Date, Borrower Representative may request advances under the Equipment Line to pay up to 80% of the cost (as evidenced by invoices but excluding any so-called "soft" costs) of new Equipment purchased by Borrowers in the ordinary course of business and in amounts such that the aggregate principal amount advanced thereunder (including amounts previously advanced and repaid) does not exceed $5,000,000.  Each Equipment Line Advance shall be evidenced by the Equipment Line Notes of each Equipment Lender.  Each Equipment Line Advance shall be in a minimum amount of $500,000 and shall be repaid commencing one (1) month from the date thereof, or at such other time as may be mutually agreeable, in equal monthly installments of principal in an amount sufficient to fully amortize such Equipment Line Advance over a term agreed to by Agent and Borrower Representative not to exceed four (4) years form the date of the Equipment Line Advance.  Each payment of principal with respect to an Equipment Line Advance shall be paid to Agent for the ratable benefit of each Equipment Line Lender making or holding the Equipment Line Advance, ratably in proportion to each such Equipment Line Lender's respective Equipment Line Commitment.  Borrower shall pay Agent an administrative fee of $500.00 with respect to each Equipment Line Advance, said fee due and payable at the time of each such Advance.  The aggregate amount of all Equipment Line Advances outstanding shall not exceed at any time $5,000,000.  Each request for an Equipment Line Advance must be given no later than (1) 12:00 p.m. (Manchester, New Hampshire time) on the Business Day of the proposed Equipment Line Advance, in the case of a Prime Rate Loan, or (2) 11:00 a.m. (Manchester, New Hampshire time) on the date which is two (2) Business Days prior to the proposed Equipment Line Advance, in the case of a LIBOR Loan.  Each such notice (a "Notice of Equipment Line Advance") must be given in writing (by telecopy or overnight courier) and shall be in such form and shall include such information as may be required by Agent.  If Borrower desires to have the Equipment Line Advance bear interest by reference to a LIBOR Rate, Borrower Representative must comply with Section 1.4(e).

(ii) Equipment Line Notes.  The Borrowers shall execute and deliver to each Equipment Line Lender a note to evidence the Equipment Line Commitment of that Equipment Line Lender. Each note shall be in the principal amount of the Equipment Line Commitment of the applicable Equipment Line Lender, dated the Closing Date and substantially in the form of Exhibit l.l(b)(ii) (each an "Equipment Line Note" and, collectively, the "Equipment Line Notes"). Each Equipment Line Note shall represent the joint and several obligation of each Borrower to pay the amount of each Equipment Line Lender's Revolving Loan Commitment or, if less, the applicable Equipment Line Lender's Pro Rata Share of the aggregate unpaid principal amount of all Equipment Line Advances to such Borrower together with interest thereon as prescribed in Section 1.4. 

(c) Term Loan. (i) Subject to the terms and conditions hereof, each Term Lender agrees to make a term loan on the Closing Date to the Borrowers in the original principal amount of its Term Loan Commitment (the "Term Loan"). The obligations of each Term Lender hereunder shall be several and not joint.  The Term Loan shall be evidenced by promissory notes substantially in the form of Exhibit 1.1 (c)(i) (each a "Term Note" and collectively the "Term Notes"), and the Borrowers shall execute and deliver a separate Term Note to each Term Lender in the original amount of each Lender's Term Loan Commitment. Each Term Note shall represent the joint and several obligation of the Borrowers to pay the applicable Term Lender's Term Loan Commitment, together with interest thereon as prescribed in Section 1.4.  Notwithstanding the foregoing, the Term Loan shall constitute a re-finance of the existing term loan to the Borrowers under the Current Credit Facilities, and the Term Lenders shall only be required to advance additional funds in respect of the Term Loan Commitment in the aggregate amount of $15,000,000.

(ii)   The Borrowers shall repay the principal amount of the Term Loan in twenty (20) consecutive quarterly installments due on the first business day of January, April, July and October of each year, commencing October 1, 2002, each in the amount of $750,000.00.

(iii) Notwithstanding the foregoing clause (ii), the aggregate outstanding principal balance of the Term Loan shall be due and payable in full in immediately available funds on the Commitment Termination Date, if not sooner paid in full.

(iv)  Each payment of principal with respect to the Term Loan shall be paid to Agent for the ratable benefit of each Term Lender making or holding the Term Loan, ratably in proportion to each such Term Lender's respective Term Loan Commitment. 

(d)  Swing Line Facility. (i) Agent shall notify the Swing Line Lender upon Agent's receipt of any Notice of Revolving Credit Advance.  Subject to the terms and conditions hereof, the Swing Line Lender may, in its discretion, make available from time to time until the Commitment Termination Date advances (each, a "Swing Line Advance") in accordance with any such notice or pursuant to Agent's Cash Management System.  The aggregate amount of Swing Line Advances outstanding shall not exceed the lesser of (A) the Swing Line Commitment and (B) the Borrowing Base less the outstanding balance of the Revolving Loan at such time ("Swing Line Availability"). Until the Commitment Termination Date, Borrowers may from time to time borrow, repay and reborrow under this Section 1.1 (d).  Each Swing Line Advance shall be made either pursuant (a) to the Agent's Cash Management System or (b) to a Notice of Revolving Credit Advance delivered to Agent by Borrower Representative on behalf of the applicable Borrower in accordance with Section 1.1 (a).  A Notice of Revolving Credit Advance must be given no later than 12:00 p.m. (Manchester, New Hampshire time) on the Business Day of the proposed Swing Line Advance.  Notwithstanding any other provision of this Agreement or the other Loan Documents, the Swing Line Loan shall constitute a Prime Rate Loan. Borrowers shall repay the aggregate outstanding principal amount of the Swing Line Loan upon demand therefor by Agent.

(ii) Swing Line Note.  The Borrowers shall execute and deliver to the Swing Line Lender a promissory note to evidence the Swing Line Commitment. Such note shall be in the principal amount of the Swing Line Commitment of the Swing Line Lender, dated the Closing Date and substantially in the form of Exhibit 1.1 (d)(ii) (the "Swing Line Note"). The Swing Line Note shall represent the joint and several obligation of the Borrowers to pay the amount of the Swing Line Commitment or, if less, the aggregate unpaid principal amount of all Swing Line Advances together with interest thereon as prescribed in Section 1.4. The entire unpaid balance of the Swing Line Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date if not sooner paid in full.

(iii) Refunding of Swing Line Loans.  The Swing Line Lender, at any time and from time to time in its sole and absolute discretion, shall on behalf of the Borrowers (and each Borrower hereby irrevocably authorizes the Swing Line Lender to so act on its behalf) request each Revolving Lender (including the Swing Line Lender) to make a Revolving Credit Advance to the Borrowers (which shall be a Prime Rate Loan) in an amount equal to such Revolving Lender's Pro Rata Share of the principal amount of the Swing Line Loan (the "Refunded Swing Line Loan") outstanding on the date such notice is given. Unless any of the events described in Sections 8.1 (h) or 8.1 (i) shall have occurred (in which event the procedures of Section 1.1 (d)(iv) shall apply), and regardless of whether the conditions precedent set forth in this Agreement to the making of a Revolving Credit Advance are then satisfied, each Revolving Lender shall disburse directly to Agent, such Revolving Lender's Pro Rata Share of a Revolving Credit Advance on behalf of the Swing Line Lender, prior to 3:00 p.m. (Manchester, New Hampshire time), in immediately available funds on the same Business Day on which such notice is given. The proceeds of such Revolving Credit Advances shall be immediately paid to the Swing Line Lender and applied to repay the Refunded Swing Line Loan of the applicable Borrower.

(iv) Participation in Swing Line Loans.  If, prior to refunding a Swing Line Loan with a Revolving Credit Advance pursuant to Section l.l(d)(iii), one of the events described in Sections 8.1(h) or 8.1(i) shall have occurred, then, subject to the provisions of Section 1.1 (d)(v) below, each Revolving Lender will, on the date such Revolving Credit Advance was to have been made, purchase from the Swing Line Lender an undivided participation interest in the Swing Line Loan in an amount equal to its Pro Rata Share of such Swing Line Loan. Upon request, each Revolving Lender will promptly transfer to the Swing Line Lender, in immediately available funds, the amount of its participation and upon receipt thereof the Swing Line Lender will deliver to such Revolving Lender a certificate evidencing such participation, dated the date of receipt of such funds and in such amount.

(v) Revolving Lenders' Obligations Unconditional.  Each Revolving Lender's obligation to make Revolving Credit Advances in accordance with Section 1.1 (d)(iii) and to purchase participating interests in accordance with Section 1.1 (d)(iv) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Revolving Lender may have against the Swing Line Lender, any Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of any Default or Event of Default; (C) any inability of any Borrower to satisfy the conditions precedent to borrowing set forth in this Agreement on the date upon which such participating interest is to be purchased, or (D) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If any Revolving Lender does not make available to Agent or the Swing Line Lender, as applicable, the amount required pursuant to Section 1.1 (d)(iii) or 1.1 (d)(iv), as the case may be, the Swing Line Lender shall be entitled to recover such amount on demand from such Revolving Lender, together with interest thereon for each day from the date of nonpayment until such amount is paid in full at the Federal Funds Rate for the first two (2) Business Days and at the Prime Rate thereafter.

(e) Reliance on Notices: Appointment of Borrower Representative.  Agent shall be entitled to rely upon, and shall be fully protected in relying upon, any Notice of Revolving Credit Advance, Notice of Equipment Line Advance, Notice of Conversion/Continuation or similar notice believed by Agent to be genuine. Agent may assume that each Person executing and delivering such a notice was duly authorized, unless the responsible individual acting thereon for Agent has actual knowledge to the contrary. Each Borrower hereby designates GMCR as its representative and agent on its behalf for the purposes of issuing Notices of Revolving Credit Advances,  Notices of Equipment Line Advances, and Notices of  Conversion/Continuation, giving instructions with respect to the disbursement of the proceeds of the Loans, selecting interest rate options, giving and receiving all other notices and consents hereunder or under any of the other Loan Documents and taking all other actions (including in respect of compliance with covenants) on behalf of any Borrower or Borrowers under the Loan Documents. Borrower Representative hereby accepts such appointment. Agent and each Lender may regard any notice or other communication pursuant to any Loan Document from Borrower Representative as a notice or communication from all Borrowers, and may give any notice or communication required or permitted to be given to any Borrower or Borrowers hereunder to Borrower Representative on behalf of such Borrower or Borrowers. Each Borrower agrees that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by Borrower Representative 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.

1.2. Prepayments.

(a) Voluntary Prepayments. Borrowers may at any time on at least five (5) days' prior written notice by Borrower Representative to Agent voluntarily prepay all or part of any Equipment Line Advance or the Term Loan; provided that any such prepayments or reductions shall be in a minimum amount of $50,000. In addition, Borrowers may at any time on at least ten (10) days' prior written notice by Borrower Representative to Agent terminate the Revolving Loan Commitment; provided that upon such termination, all Loans and other Obligations shall be immediately due and payable in full. Any such voluntary prepayment of either an Equipment Line Advance or the Term Loan, and any such termination of the Revolving Loan Commitment, must be accompanied by the payment of any LIBOR Loan funding breakage costs in accordance with Section 1.12(b).  Upon any such prepayment and termination of the Revolving Loan Commitment, each Borrower's right to request Revolving Credit Advances and Equipment Line Advances, or request Swing Line Advances, shall simultaneously be terminated. Any partial prepayments of an Equipment Line Advance or the Term Loan shall be applied to prepay the scheduled installments of the Equipment Line Advance or the Term Loan, as the case may be, ratably, in inverse order of maturity. 

(b) Mandatory Prepayments.  (i) If at any time the outstanding balance of the aggregate Revolving Loan exceeds the lesser of (A) the Maximum Amount and (B) the Borrowing Base, less, in each case, the aggregate outstanding Swing Line Loan at such time, Borrowers shall immediately repay the aggregate outstanding Revolving Credit Advances to the extent required to eliminate such excess. 

(ii) Immediately upon receipt by any Borrower of proceeds of any asset disposition (including condemnation proceeds, but excluding proceeds of asset dispositions permitted by Section 6.8 (a), (b), and (c)), Borrowers shall prepay the Loans within three (3) Business Days of receipt of such proceeds in an amount equal to such proceeds, net of (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrowers in connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, and (D) an appropriate reserve for income taxes in accordance with GAAP in connection therewith. Any such prepayment shall be applied in accordance with clause (c) below.

(iii) If Parent or any Borrower issues Stock , no later than the Business Day following the date of receipt of proceeds thereof, Borrowersshall apply an amount equal to the proceeds thereof to the payment of the Loans, net of underwriting discounts and commissions and other reasonable costs, fees and expenses paid to Non-Affiliates in connection therewith, but only to the extent such net proceeds, together with the proceeds from any other issuances of Stock during the then current Fiscal Year, exceed $1,000,000.

(c) Application of Certain Mandatory Prepayments. Any prepayments made by Borrowers pursuant to clauses (b)(ii) or (b)(iii), above shall be applied as follows: first, to Fees and reimbursable expenses of Agent then due and payable pursuant to any of the Loan Documents; second, to interest then due and payable on Equipment Advances and the Term Loan; third, to prepay the scheduled installments of the Borrowers' Equipment Advances and Term Loan, ratably in inverse order of maturity, until such Equipment Advances and Term Loan shall have been prepaid in full; fourth, to interest then due and payable on such Borrower's Swing Line Loan; fifth, to the principal balance of the Swing Line Loan outstanding to such Borrower until the same shall have been repaid in full; sixth, to interest then due and payable on Revolving Credit Advances made to such Borrower; and seventh, to the principal balance of Revolving Credit Advances outstanding to such Borrower until the same shall have been paid in full.  Neither the Revolving Loan Commitment nor the Swing Line Commitment shall be permanently reduced by the amount of any such prepayment.

(d) Application of Prepayments from Insurance Proceeds. Prepayments from insurance proceeds in accordance with Section 5.4(c) shall be applied as follows: insurance proceeds from casualties or losses to cash or Inventory shall be applied first to the Swing Line Loans and second to the Revolving Credit Advances; insurance proceeds from casualties or losses to Equipment, Fixtures and Real Estate shall be applied ratably to scheduled installments of the Equipment Advances and the Term Loan in inverse order of maturity. Neither the Revolving Loan Commitment nor the Swing Line Loan Commitment shall be permanently reduced by the amount of any such prepayments. If the precise amount of insurance proceeds allocable to Inventory as compared to Equipment, Fixtures and Real Estate are not otherwise determined, the allocation and application of those proceeds shall be determined by Agent, subject to the approval of Requisite Lenders.

(e) No Consent.  Nothing in this Section 1.2 shall be construed to constitute Agent's or any Lender's consent to any transaction referred to in clauses (b)(ii) and (b)(iii) above which is not permitted by other provisions of this Agreement or the other Loan Documents.

1.3. Use of Proceeds.

Borrowers shall utilize the proceeds of Equipment Advances and the Term Loan, the Revolving Loan and the Swing Line Advances solely to refinance the Current Credit Facilities, for equipment purchases as specifically permitted under Section 1.1(b)(i) and for the financing of Borrowers' ordinary working capital needs and future acquisitions permitted under this Agreement (but excluding in any event the making of any Restricted Payment not specifically permitted by Section 6. 14). 

1.4. Interest and Applicable Margins.

(a) Borrowers shall pay interest to Agent, for the ratable benefit of Lenders in accordance with the various Loans being made by each Lender, in arrears on each applicable Interest Payment Date, at the following rates: (i) with respect to the Revolving Credit Advances, the Prime Rate per annum or, at the election of Borrower Representative, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum, or with respect to any BAR Loan the applicable Banker's Acceptance Rate plus the Applicable Revolver BAR Margin per annum, based on the aggregate Revolving Credit Advances outstanding from time to time; (ii) with respect to Term Loan, the Prime Rate plus the Applicable Term Loan Prime Margin per annum or, at the election of Borrower Representative, the applicable LIBOR Rate plus the Applicable Term Loan LIBOR Margin per annum based on the aggregate principal amount of the Term Loan outstanding from time to time; (iii) with respect to the Equipment Line Advances , the Prime Rate plus the Applicable Equipment Line Prime Margin per annum or, at the election of Borrower Representative, the applicable LIBOR Rate plus the Applicable Equipment Line LIBOR Margin based on the aggregate Equipment Line Advances outstanding from time to time; and (iv) with respect to the Swing Line Loan, the Prime Rate per annum, based on the aggregate principal amount of the Swing Line Loan outstanding from time to time.

As of the Closing Date, the Applicable Margins shall be as follows:

Applicable Revolver LIBOR Margin1.50%

Applicable Revolver BAR Margin1.35%

Applicable Term Loan Prime Margin  .25%

Applicable Term Loan LIBOR Margin1.75%

Applicable Equipment Line Prime Margin  .25%

Applicable Equipment Line LIBOR Margin1.75%

Applicable Unused Line Fee Margin0.20%

The Applicable Margins will be adjusted (up or down) prospectively on a Fiscal Quarterly basis as determined by Borrowers' Ratio of Funded Debt to Cash Flow for the four Fiscal Quarters then ending.  The initial adjustment of the Applicable Margins shall be effective, commencing with the first day of the first calendar month that occurs more than five (5) days after delivery of Borrowers' unaudited Financial Statements to Lenders for the Fiscal Quarter ending September 28, 2002.  Adjustments in Applicable Margins will be determined by reference to the following grids:

 

	
If Funded Debt to Cash Flow Ratio is:
	
Level of 

Applicable Margins:

	
     3
 2.0
	
     Level I

	
     3
 1.5, but < 2.0
	
     Level II

	
     3
 1.0, but < 1.5
	
     Level III

	
     < 1.0
	
     Level IV

 

	 	
Applicable Margins

	 	
Level I
	
Level II
	
Level III
	
Level IV

	
Applicable Revolver LIBOR Margin
	
2.00%
	
1.75%
	
1.5%
	
1.25%

	
Applicable Revolver BAR Margin
	
1.85%
	
1.60%
	
1.35%
	
1.10%

	
Applicable Term Loan Prime Margin
	
0.25%
	
0.25%
	
0.25%
	
0.25%

	
Applicable Term Loan LIBOR Margin
	
2.25%
	
2.0%
	
1.75%
	
1.50%

	
Applicable Equipment Line Prime Margin
	
0.25%
	
0.25%
	
0.25%
	
0.25%

	
Applicable Equipment Line LIBOR Margin
	
2.25%
	
2.0%
	
1.75%
	
1.5%

	
Applicable Unused Line Fee Margin
	
0.20%
	
0.20%
	
0.20%
	
0.20%

 

All adjustments in the Applicable Margins after the Fiscal Quarter ending September 28, 2002, will be implemented with respect to each Fiscal Quarter on a prospective basis, for each calendar month commencing at least five (5) days after the date of delivery to Lenders of the quarterly unaudited or annual audited (as applicable) Financial Statements of Borrowers evidencing the need for an adjustment.  Concurrently with the delivery of those Financial Statements, Borrower Representative shall deliver to Agent and Lenders a certificate, signed by its chief financial officer, setting forth in reasonable detail the basis for the continuance of, or any change in, the Applicable Margins.  Failure to timely deliver such 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 shall have occurred or be continuing at the time any reduction in the Applicable Margins is to be implemented, that reduction shall be deferred until the first day of the first calendar month following the date on which such Default or Event of Default is waived or cured.

(b) If any payment on any Loan becomes due and payable on a day other than a Business Day, the maturity thereof will be extended to the next succeeding Business Day (except as set forth in the definition of LIBOR Period) and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

(c) All computations of Fees calculated on a per annum basis and interest shall be made by Agent on the basis of a three hundred sixty (360) day year for the actual number of days occurring in the period for which such interest and Fees are payable. The Prime Rate shall be determined each day based upon the Prime Rate as in effect each day. Each determination by Agent of an interest rate hereunder shall be conclusive, absent manifest error.

(d) So long as any Event of Default shall have occurred and be continuing, and at the election of Agent (or upon the written request of Requisite Lenders) confirmed by written notice from Agent to Borrower Representative, the interest rates applicable to the Loans shall be increased by four percentage points (4%) per annum above the rates of interest or the rate of such Fees otherwise applicable hereunder ("Default Rate"), and all outstanding Obligations shall bear interest at the Default Rate applicable to such Obligations. Interest at the Default Rate shall accrue from the initial date of such Event of Default until that Event of Default is cured or waived and shall be payable upon demand.  Borrowers shall pay, upon billing therefor, a "Late Charge" equal to five percent (5%) of the amount of any payment of principal, other than principal due at the Commitment Termination Date, interest, or both, which is not paid within ten (10) days of the due date thereof.  Late charges are:  (i) payable in addition to, and not in limitation of, the Default Rate, (ii) intended to compensate Lenders for administrative and processing costs incident to late payments, (iii) are not interest, and (iv) shall not be subject to refund or rebate or credited against any other amount due.

(e) So long as no Default or Event of Default shall have occurred and be continuing, and subject to the additional conditions precedent set forth in Section 2.2, Borrower Representative shall have the option to (i) request that any Revolving Credit Advances or Equipment Line Advance be made as a LIBOR Loan, (ii) convert at any time all of the Term Loan or any Equipment Advance, or all or any part of outstanding Revolving Credit Advances from Prime Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to a Prime Rate Loan, subject to payment of LIBOR breakage costs in accordance with Section 1.12(b) if such conversion is made prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue all of the Term Loan or any Equipment Advance or all or any portion of any Revolving Credit Advance as a LIBOR Loan upon the expiration of the applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan shall commence on the last day of the LIBOR Period of the Loan to be continued. Any Loan to be made or continued as, or converted into, a LIBOR Loan must be in a minimum amount of $500,000 and, with respect to Revolving Credit Advances, integral multiples of $50,000 in excess of such amount. Any such election must be made by 11:00 a.m. (Manchester, New Hampshire time) on the second (2nd) Business Day prior to (1) the date of any proposed Advance which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period with respect to any LIBOR Loans to be continued as such, or (3) the date on which Borrower Representative wishes to convert any Prime Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower Representative in such election.  If no election is received with respect to a LIBOR Loan by 11:00 a.m. (Manchester, New Hampshire time) on the second (2nd) Business Day prior to the end of the LIBOR Period with respect thereto (or if a Default or an Event of Default shall have occurred and be continuing or if the additional conditions precedent set forth in Section 2.2 shall not have been satisfied), that LIBOR Loan shall be converted to a Prime Rate Loan at the end of its LIBOR Period. Borrower Representative must make such election by notice to Agent in writing, by telecopy or overnight courier. In the case of any conversion or continuation, such election must be made pursuant to a written notice (a "Notice of Conversion/Continuation") in the form of Exhibit 1.4(e). 

(f)  So long as no Default or Event of Default shall have occurred and be continuing, and subject to the additional conditions precedent set forth in Section 2.2, Borrower Representative shall have the option to  request that any Revolving Credit Advance be made as a BAR Loan to fund the issuance of a Banker's Acceptance. Any Revolving Credit Advance to be made as a BAR Loan must be in a minimum amount of $1,000,000 and integral multiples of $100,000 in excess of such amount.  Any such election must be made by 11:00 a.m. (Manchester, New Hampshire time) on the second (2nd) Business Day prior to  the date of any proposed BAR Loan.  If no election is received with respect to a BAR Loan by 11:00 a.m. (Manchester, New Hampshire time) on the second (2nd) Business Day prior to the end of the BAR Period with respect thereto (or if a Default or an Event of Default shall have occurred and be continuing or if the additional conditions precedent set forth in Section 2.2 shall not have been satisfied), that BAR Loan shall be converted to a Prime Rate Loan at the end of its BAR Period.  Borrower Representative must make such election by notice to Agent in writing, by telecopy or overnight courier.

(g) Notwithstanding anything to the contrary set forth in this Section 1.4, if a court of competent jurisdiction determines in a final order that the rate of interest payable hereunder exceeds the highest rate of interest permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Agent, on behalf of Lenders, is equal to the total interest which would have been received had the interest rate payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of interest and in the manner provided in Sections 1.4(a) through (f) above, unless and until the rate of interest again exceeds the Maximum Lawful Rate, and at that time this paragraph shall again apply. In no event shall the total interest received by any Lender pursuant to the terms hereof exceed the amount which such Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this paragraph, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made. If, notwithstanding the provisions of this Section 1.4(g), a court of competent jurisdiction shall finally determine that a Lender has received interest hereunder in excess of the Maximum Lawful Rate, Agent shall, to the extent permitted by applicable law, promptly apply such excess in the order specified in Section 1.10 and thereafter shall refund any excess to Borrowers or as a court of competent jurisdiction may otherwise order.

1.5. Eligible Accounts.

Based on the most recent Borrowing Base Certificate delivered by the Borrowers to Agent and on other information available to Agent, Agent shall in its reasonable credit judgment determine which Accounts shall be "Eligible Accounts" for purposes of this Agreement. In determining whether a particular Account of any Borrower constitutes an Eligible Account, Agent shall not include any such Account to which any of the exclusionary criteria set forth below applies. Agent reserves the right, at any time and from time to time after the Closing Date, to adjust any such criteria, to establish new criteria in its reasonable credit judgment with respect to circumstances arising after the Closing Date (to the extent practicable under the circumstances, Agent shall provide prior notice to Borrowers of any such adjustment).  Eligible Accounts shall not include any Account of any Borrower:

(a) which does not arise from the sale of goods or the performance of services by such Borrower in the ordinary course of its business;

(b) upon which (i) such Borrower's right to receive payment is not absolute or is contingent upon the fulfillment of any condition whatsoever or (ii) such Borrower is not able to bring suit or otherwise enforce its remedies against the Account Debtor through judicial process or binding arbitration;

(c) to the extent any defense, counterclaim, credit, setoff or dispute is asserted as to such Account or if the Account represents a progress billing consisting of an invoice for goods sold or used or services rendered pursuant to a contract under which the Account Debtor's obligation to pay that invoice is subject to such Borrower's completion of further performance under such contract;

(d) that is not a true and correct statement of bona fide indebtedness or obligations incurred in the amount of the Account for merchandise sold to or services rendered and accepted by the applicable Account Debtor;

(e) with respect to which an electronic or paper invoice, acceptable to Agent in form and substance, has not been sent to the applicable Account Debtor;

(f) that (i) is not owned by such Borrower or (ii) is subject to any right, claim, security interest or other interest of any other Person, other than Liens in favor of Agent, on behalf of itself and Lenders;

(g) that arises from a sale to any director, officer, other employee or Affiliate of any Borrower, or to any entity (other than a public company or an affiliate of a public company) which has any common officer or director with any Borrower;

(h) that is the obligation of an Account Debtor that is the United States government or a political subdivision thereof, or any state or municipality or department, agency or instrumentality thereof unless Agent, in its sole discretion, has agreed to the contrary in writing and such Borrower, if necessary or desirable, has complied with the Federal Assignment of Claims Act of 1940, and any amendments thereto, or any applicable state statute or municipal ordinance of similar purpose and effect, with respect to such obligation;

(i) to the extent such Borrower or any Subsidiary thereof is liable for goods sold or services rendered by the applicable Account Debtor to such Borrower or any Subsidiary thereof but only to the extent of the potential offset;

(j) that arises with respect to goods which are delivered on a bill and hold, cash-on-delivery basis or placed on consignment, guaranteed sale or other terms by reason of which the payment by the Account Debtor is or may be conditional;

(k) that is in default; provided, that, without limiting the generality of the foregoing, an Account shall be deemed in default upon the occurrence of any of the following:

(i)   it is not paid within sixty (60) days following its due date;

(ii)  if any Account Debtor obligated upon such Account suspends business, makes a general assignment for the benefit of creditors or fails to pay its debts generally as they come due; or

(iii) if any petition is filed by or against any Account Debtor obligated upon such Account under any bankruptcy law or any other federal, state or foreign (including any provincial) receivership, insolvency relief or other law or laws for the relief of debtors;

(l) which is the obligation of an Account Debtor if the applicable Borrower has placed that Account Debtor on a cash-on-delivery status or fifty percent (50%) or more of the dollar amount of all Accounts owing by that Account Debtor are ineligible under the other criteria set forth in this Section 1.5; 

(m) as to which any of the representations or warranties pertaining to Accounts set forth in this Agreement or the Security Agreement is untrue; 

(n) to the extent such Account is evidenced by a judgment, Instrument or Chattel Paper; 

(o) that is not payable by its terms within ninety (90) days of the date of its invoice; or

(p) if the Account Debtor obligated upon such Account is not a United States resident.

1.6. Eligible Inventory.

Based on the most recent Borrowing Base Certificate delivered by the Borrowers to Agent and on other information available to Agent, Agent shall in its reasonable credit judgment determine which Inventory of each Borrower shall be "Eligible Inventory" for purposes of this Agreement. In determining whether any particular Inventory of any Borrower constitutes Eligible Inventory, Agent shall not include any such Inventory to which any of the exclusionary criteria set forth below applies.  Agent reserves the right, at any time and from time to time after the Closing Date, to adjust any such criteria and to establish new criteria in its reasonable credit judgment with respect to circumstances arising after the Closing Date (to the extent practicable under the circumstances, Agent shall provide prior notice to Borrowers of any such adjustment), subject to the approval in the case of adjustments or new criteria which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower:

(a) that is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the rights of a purchaser that has made progress payments, the rights of a surety that has issued a bond to assure such Borrower's performance with respect to that Inventory and the right of any Person under the Federal Perishable Agricultural Commodities Act), except the Liens in favor of Agent, on behalf of itself and Lenders and Permitted Encumbrances in favor of landlords and bailees to the extent permitted in Section 5.9 and subject to Reserves;

(b) that is covered by a negotiable document of title, unless such document has been delivered to Agent;

(c) that in Agent's reasonable determination, is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale;

(d) that consists of goods which have been returned by the buyer;

(e) that is not of a type held for sale in the ordinary course of such Borrower's business;

(f) as to which any of the representations or warranties pertaining to Inventory set forth in this Agreement or the Security Agreement is untrue;

(g) that consists of Hazardous Materials or goods that can be transported or sold only with licenses that are not readily available; or

(h) that is not covered by casualty insurance reasonably acceptable to Agent.

1.7. Cash Management Systems.

Borrowers confirm their election to continue to use the cash management systems currently in place with Agent (the "Cash Management Systems").

1.8. Fees.

(a) Borrowers shall pay to Fleet National Bank, individually, an Agent's Fee in the amount of $5,000.00 per annum, payable on or before March 31st of each year, provided that the Agent Fee for the partial year from the date hereof through March 31, 2003, shall be prorated and payable on the date hereof.

(b) As additional compensation for the Revolving Lenders, Borrowers agree to pay to Agent, for the ratable benefit of such Lenders, in arrears, on the first Business Day of each calendar quarter prior to the Commitment Termination Date and on the Commitment Termination Date, a fee for Borrowers' non-use of available funds in an amount equal to the Applicable Unused Line Fee Margin per annum (calculated on the basis of a 360 day year for actual days elapsed) of the difference between (x) the Maximum Amount (as it may be reduced from time to time) and (y) the average for the period of the daily closing balances of the aggregate Revolving Loan and the Swing Line Loan outstanding during the period for which such fee is due.

(c) As additional compensation for the Revolving Lenders, Borrowers agree to pay to Agent, for the ratable benefit of the Revolving Lenders, on the Closing Date a facility fee in the aggregate amount of $25,000.00.  Fleet National Bank's pro rata portion of the fee shall be reduced by $5,000 as a result of fees previously paid.

(d) As additional compensation for the Term Lenders, Borrowers agree to pay to Agent, for the ratable benefit of the Term Lenders, on the Closing Date a commitment fee in the aggregate amount of $30,000.00.  Fleet National Bank's pro rata portion of the fee shall be reduced by $7,500 as a result of fees previously paid.

(e) As additional compensation for the Equipment Line Lenders, Borrowers agree to pay to Agent, for the ratable benefit of the Equipment Line Lenders, on the Closing Date a commitment fee in the amount of $5,000.00.

1.9. Receipt of Payments.

Borrowers shall make each payment under this Agreement not later than 2:00 p.m. (Manchester, New Hampshire time) on the day when due in immediately available funds in Dollars to the Agent unless Agent has automatically debited such payments against Borrower's account(s) with Agent. For purposes of computing interest and Fees and determining Borrowing Availability or Net Borrowing Availability as of any date, all payments shall be deemed received on the day of receipt of immediately available funds therefore in the Collection Account prior to 2:00 p.m. Manchester, New Hampshire time. Payments received after 2:00 p.m. Manchester, New Hampshire time on any Business Day shall be deemed to have been received on the following Business Day.

1.10. Application and Allocation of Payments.

(a) So long as no Default or Event of Default shall have occurred and be continuing, (i) payments consisting of proceeds of Accounts received in the ordinary course of business shall be applied to the Swing Line Loan and the Revolving Loan; (ii) payments matching specific scheduled payments then due shall be applied to those scheduled payments; (iii) voluntary prepayments shall be applied as determined by Borrower Representative, subject to the provisions of Section 1.2(a); and (iv) mandatory prepayments shall be applied as set forth in Section 1.2(c).  As to each other payment, and as to all payments made when a Default or Event of Default shall have occurred and be continuing or following the Commitment Termination Date, each Borrower hereby irrevocably waives the right to direct the application of any and all payments received from or on behalf of such Borrower, and each Borrower hereby irrevocably agrees that Agent shall have the continuing exclusive right to apply any and all such payments against the Obligations of Borrowers as Agent may deem advisable notwithstanding any previous entry by Agent in the Loan Account or any other books and records. In the absence of a specific determination by Agent with respect thereto, payments shall be applied to amounts then due and payable in the following order: (1) to Fees and Agent's expenses reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to principal payments on the Swing Line Loan; (4) to interest on the other Loans, ratably in proportion to the interest accrued as to each Loan; (5) to principal payments on the other Loans ratably to the aggregate, combined principal balance of the other Loans; and (6) to all other Obligations including expenses of Lenders to the extent reimbursable under Section 11.3.

(b) Agent is authorized to, and at its sole election may, charge to the Revolving Loan balance on behalf of each Borrower and cause to be paid all Fees, expenses, Charges, costs (including insurance premiums in accordance with Section 5.4(a)) and interest and principal, other than principal of the Revolving Loan, owing by Borrowers under this Agreement or any of the other Loan Documents if and to the extent Borrowers fail to promptly pay any such amounts as and when due, even if such charges would cause the balance of the aggregate Revolving Loan and the Swing Line Loan to exceed Borrowing Availability or would cause the balance of the Revolving Loan and the Swing Loan of any Borrower to exceed such Borrower's Borrowing Base. At Agent's option and to the extent permitted by law, any charges so made shall constitute part of the Revolving Loan hereunder.

1.11. Loan Account and Accounting.

Agent shall maintain a loan account (the "Loan Account") on its books to record: all Advances and the Term Loans, all payments made by Borrowers, and all other debits and credits as provided in this Agreement with respect to the Loans or any other Obligations. All entries in the Loan Account shall be made in accordance with Agent's customary accounting practices as in effect from time to time. The balance in the Loan Account, as recorded on Agent's most recent printout or other written statement, shall, absent manifest error, be presumptive evidence of the amounts due and owing to Agent and Lenders by each Borrower; provided that any failure to so record or any error in so recording shall not limit or otherwise affect any Borrower's duty to pay the Obligations. Agent shall render to Borrower Representative a monthly accounting of transactions with respect to the Loans setting forth the balance of the Loan Account as to each Borrower. Unless Borrower Representative notifies Agent in writing of any objection to any such accounting (specifically describing the basis for such objection), within thirty (30) days after the date thereof, each and every such accounting shall (absent manifest error) be deemed final, binding and conclusive upon Borrowers in all respects as to all matters reflected therein. Only those items expressly objected to in such notice shall be deemed to be disputed by Borrowers.

1.12. Indemnity.

(a) Each Borrower shall jointly and severally indemnify and hold harmless each of Agent, Lenders and their respective Affiliates, and each such Person's respective officers, directors, employees, attorneys, agents and representatives (each, an "Indemnified Person"), from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys' fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal) which may be instituted or asserted against or incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents and the administration of such credit, and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, including any and all Environmental Liabilities and legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Loan Documents (collectively, "Indemnified Liabilities"); provided, that no such Borrower shall be liable for any indemnification to an Indemnified Person to the extent that any such suit, action, proceeding, claim, damage, loss, liability or expense results from that Indemnified Person's gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

(b) To induce Lenders to provide the LIBOR Rate option on the terms provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to the last day of any applicable LIBOR Period (whether that repayment is made pursuant to any provision of this Agreement or any other Loan Document or is the result of acceleration, by operation of law or otherwise); (ii) any Borrower shall default in payment when due of the principal amount of or interest on any LIBOR Loan; (iii) any Borrower shall default in making any borrowing of, conversion into or continuation of LIBOR Loans after Borrower Representative has given notice requesting the same in accordance herewith; or (iv) any Borrower shall fail to make any prepayment of a LIBOR Loan after Borrower Representative has given a notice thereof in accordance herewith, Borrowers shall jointly and severally pay each Lender a Yield Maintenance Fee with respect to such prepayment and, but without duplication of the Yield Maintenance Fee, indemnify and hold harmless each Lender from and against all losses, costs and expenses resulting from or arising from any of the foregoing.  Such indemnification shall include any loss (including loss of margin) or expense arising from the reemployment of funds obtained by it or from fees payable to terminate deposits from which such funds were obtained. For the purpose of calculating amounts payable to a Lender under this subsection, each Lender shall be deemed to have actually funded its relevant LIBOR Loan through the purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a maturity comparable to the relevant Interest Period; provided, however, that each Lender may fund each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be utilized only for the calculation of amounts payable under this subsection. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. As promptly as practicable under the circumstances, each Lender shall provide Borrower Representative with its written calculation of all amounts payable pursuant to this Section 1.12(b), and such calculation shall be binding on the parties hereto unless Borrower Representative shall object in writing within ten (10) Business Days of receipt thereof, specifying the basis for such objection in detail.

1.13. Access.

Each Borrower shall, during normal business hours, from time to time upon three (3) Business Days' prior notice as frequently as Agent determines to be appropriate: (a) provide Agent and any of its officers, employees and agents access to its properties, facilities, advisors and employees (including officers) of each Borrower and to the Collateral, (b) permit Agent, and any of its officers, employees and agents, to inspect, audit and make extracts from any Borrower's books and records, and (c) permit Agent, and its officers, employees and agents, to inspect, review, evaluate and make test verifications and counts of the Accounts, Inventory and other Collateral of any Borrower. If a Default or Event of Default shall have occurred and be continuing, each such Borrower shall provide such access to Agent and to each Lender at all times and without advance notice. Furthermore, so long as any Event of Default shall have occurred and be continuing, Borrowers shall provide Agent and each Lender with access to their suppliers and customers. Each Borrower shall make available to Agent and its counsel, as quickly as is possible under the circumstances, originals or copies of all books and records which Agent may request. Each Borrower shall deliver any document or instrument necessary for Agent, as it may from time to time request, to obtain records from any service bureau or other Person which maintains records for such Borrower, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned by such Borrower consistent with past practices. Agent will give Lenders at least ten (10) days' prior written notice of regularly scheduled audits. Representatives of other Lenders may accompany Agent's representatives on regularly scheduled audits at no charge to Borrowers.

1.14. Taxes.

(a) Any and all payments by each Borrower hereunder or under the Notes shall be made, in accordance with this Section 1. 14, free and clear of and without deduction for any and all present or future Taxes. If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Notes, (i) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 1. 14) Agent or Lenders, as applicable, receive an amount equal to the sum they would have received had no such deductions been made, (ii) such Borrower shall make such deductions, and (iii) such Borrower shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within thirty (30) days after the date of any payment of Taxes, Borrower Representative shall furnish to Agent the original or a certified copy of a receipt evidencing payment thereof.

(b) Each Borrower shall jointly and severally indemnify and, within ten (10) days of demand therefor, pay Agent and each Lender for the full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts payable under this Section 1. 14) paid by Agent or such Lender, as appropriate, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted.

1.15. Capital Adequacy: Increased Costs: Illegality.

(a) If any Lender shall have determined that the adoption after the date hereof of any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by any Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law) from any central bank or other Governmental Authority increases or would have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender and thereby reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder, then Borrowers shall from time to time upon demand by such Lender (with a copy of such demand to Agent) pay to Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of that reduction and showing the basis of the computation thereof submitted by such Lender to Borrower Representative and to Agent shall, absent manifest error, be final, conclusive and binding for all purposes.

(b) If, due to the introduction of or any change in any law or regulation (or any change in the interpretation thereof), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Loan, then Borrowers shall from time to time, upon demand by such Lender (with a copy of such demand to Agent), pay to Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to Borrower Representative and to Agent by such Lender, shall be conclusive and binding on Borrowers for all purposes, absent manifest error. Each Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, the affected Lender shall, to the extent not inconsistent with such Lender's internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrowers pursuant to this Section 1.15(b).

(c) Notwithstanding anything to the contrary contained herein, if the introduction of or any change in any law or regulation (or any change in the interpretation thereof) shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender to agree to make or to make or to continue to fund or maintain any LIBOR Loan or BAR Loan, then, unless that Lender is able to make or to continue to fund or to maintain such LIBOR Loan or BAR Loan at another branch or office of that Lender without, in that Lender's opinion, adversely affecting it or its Loans or the income obtained therefrom, on notice thereof and demand therefor by such Lender to Borrower Representative through Agent, (i) the obligation of such Lender to agree to make or to make or to continue to fund or maintain LIBOR Loans or BAR Loans shall terminate and (ii) each Borrower shall forthwith prepay in full all outstanding LIBOR Loans or BAR Loans owing by such Borrower to such Lender, together with interest accrued thereon, unless Borrower Representative on behalf-of such Borrower, within five (5) Business Days after the delivery of such notice and demand, converts all such affected Loans into a Loan bearing interest based on the Prime Rate.

(d) Within fifteen (15) days after receipt by Borrower Representative of written notice and demand from any Lender (an "Affected Lender") for payment of additional amounts or increased costs as provided in Sections 1.15(a) or 1.15(b), Borrower Representative may, at its option, notify Agent and such Affected Lender of its intention to replace the Affected Lender. So long as no Default or Event of Default shall have occurred and be continuing, Borrower Representative, with the consent of Agent (which may not be unreasonably withheld or delayed), may obtain, at Borrowers' expense, a replacement Lender ("Replacement Lender") for the Affected Lender, which Replacement Lender must be satisfactory to Agent. If Borrowers obtain a Replacement Lender within ninety (90) days following notice of their intention to do so, the Affected Lender must sell and assign its Loans and Commitments to such Replacement Lender for an amount equal to the principal balance of all Loans held by the Affected Lender and all accrued interest and Fees with respect thereto through the date of such sale, provided that Borrowers shall have reimbursed such Affected Lender for the additional amounts or increased costs that it is entitled to receive under this Agreement through the date of such sale and assignment.

Notwithstanding the foregoing, Borrowers shall not have the right to obtain a Replacement Lender if the Affected Lender rescinds its demand for increased costs or additional amounts within fifteen (15) days following its receipt of Borrowers' notice of intention to replace such Affected Lender. Furthermore, if Borrowers give a notice of intention to replace and do not so replace such Affected Lender within ninety (90) days thereafter, Borrowers' rights under this Section 1.15(d) shall terminate and Borrowers shall promptly pay all increased costs or additional amounts demanded by such Affected Lender pursuant to Sections 1.15(a) and 1.15(b).

1.16. Single Loan.

All Loans to the Borrowers and all of the other Obligations of  Borrowers arising under this Agreement and the other Loan Documents shall constitute one general joint and several obligation of the Borrowers secured, until the Termination Date, by all of the Collateral.

1.17. Letters of Credit.

1.17.1.Letters of Credit.  Subject to the terms and conditions hereof, including satisfaction of the conditions set forth in Section 2.2 hereof, and provided no Default has occurred and that the Agent is generally issuing letters of credit for the account of customers in its ordinary banking business, the Agent agrees upon the request of the Company pursuant to Section 1.17.2 hereof, to issue Letters of Credit, provided that:  (a) the outstanding stated amount of the Letters of Credit shall not exceed $1,000,000; (b) the sum of (i) the outstanding stated amount of all Letters of Credit and (ii) the aggregate principal amount of all outstanding Revolving Line Advances shall not exceed the lesser of (A) the Maximum Amount and (B) the Borrowing Base; and (c) each Letter of Credit shall expire on or before ten (10) days prior to the Revolving Loan Commitment Termination Date. 

1.17.2.Issuing a Letter of Credit.  The Company may request that the Agent issue a Letter of Credit by written notice (the "L/C Notice") given to the Agent not less than two (2) Business Days prior to the proposed date of issuance of such Letter of Credit.  The L/C Notice shall specify the proposed date of issuance and the beneficiary and amount of such Letter of Credit, and shall be accompanied by a letter of credit application completed to the satisfaction of, and with such amendments and modifications as may be deemed necessary by, the Agent. 

1.17.3.Letter of Credit Participations. 

(a)  The Agent shall notify the Lenders on a monthly basis and report the issuance or any amendment or extension of any Letter of Credit.  Immediately upon the issuance by the Agent of any Letter of Credit, the Agent shall be deemed to have sold to each Lender (each such Lender, in its capacity under this Section 1.17.3, an "L/C Participant"), and each such L/C Participant shall be deemed irrevocably and unconditionally to have purchased and received from the Agent, without recourse or warranty, an undivided interest and participation (each an "L/C Participation") equal to such L/C Participant's L/C Commitment in such Letter of Credit, any substitute Letter of Credit, each draw made thereunder and the obligations of the Borrowers under the Loan Documents with respect thereto, and any security therefor or any pertaining thereto. 

(b)  In determining whether to pay under any Letter of Credit, the Agent shall have no obligation relative to the L/C Participants other than to confirm that any documents required to be delivered under such Letter of Credit have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit.  Any action taken or omitted to be taken by the Agent under or in connection with any Letter of Credit, if taken or omitted to be taken in the absence of gross negligence or willful misconduct, shall not create for the Agent any resulting liability. 

1.17.4.Reimbursement and Other Payments. 

(a)  The Borrowers, jointly and severally, hereby agree to pay to the Agent, for the ratable accounts of the Lenders, on the date on which the Agent shall be required to pay any draft presented under any Letter of Credit, a sum (the "Reimbursement Amount") equal to:  (i) the amount so paid under such Letter of Credit, plus (ii) interest on any amount remaining unpaid by the Borrowers to the Lenders under clause (i) from and including the date on which such amount becomes payable pursuant to clause (i) until payment in full, payable on demand, at a per annum rate of interest equal to the rate applicable to Revolving Credit Advances.  If the Borrowers shall fail to pay to the Agent the Reimbursement Amount on the date on which the Agent shall be required to pay any draft presented under any Letter of Credit, the Agent shall, to the extent the Borrowers have availability to request a Revolving Credit Advance, consider such failure to be a request for a Revolving Credit Advance in the amount of the Reimbursement Amount.  In the event any such Loan is made pursuant to this Section 1.17.4(a), the Agent shall notify each Lender of such Lender's Revolving Loan Commitment of such Loan, and such Lender shall make available promptly to the Agent the corresponding amount of such Loan, all in accordance with Section 1.1(a) hereof.  The Borrowers, jointly and severally, agree that the Agent may make any such Loan, and each Lender agrees to deliver such Lender's Revolving Loan Commitment of such Loan, even if the making of such Loan causes the outstanding balance of all Loans to exceed the limits set forth in Section 1.1(a) hereof, and the Borrowers further agree that the making of such Loan by the Agent in excess of the limits set forth in Section 1.1(a) hereof shall constitute an automatic Default hereunder, entitling the Agent and the Lenders to exercise all rights and remedies available to them under the Lender Documents and applicable law.

(b)The Borrowers shall, jointly and severally, quarterly in arrears on the last day of each calendar quarter for the calendar quarter ending on such date, pay a fee (in each case, a "Letter of Credit Commission Fee") to the Agent in respect of each Letter of Credit issued, extended or renewed at the request of the Borrowers equal to the face amount determined daily of each Letter of Credit multiplied by the Letter of Credit Commission Fee Rate per annum.  The Agent shall, in turn, remit to each Lender its pro rata portion of such Letter of Credit Fee.   In addition, the Borrowers shall, jointly and severally, pay to the Agent, for its own account, on the date of issuance, or any extension or renewal of any Letter of Credit and at such other time or times as such charges are customarily made by the Agent, the Agent's standard issuance, processing, negotiation, amendment and administrative fees, determined in accordance with customary fees and charges for similar facilities.

(c)If prior to the time a Loan would have otherwise been made pursuant to Section 1.17.4(a), one of the events described in Section 8.1(h) or (i) below shall have occurred and be continuing, each Lender shall, on the date such Loan was to have been made pursuant to the provisions of paragraph (a) above (the "Reimbursement Date"), purchase an undivided participating interest in an amount equal to (i) such Lender's Pro Rata Share of the Revolving Loan Commitment times (ii) the aggregate principal amount of the Reimbursement Amount then outstanding which was to have been repaid with such Loan (the "Letter of Credit Participation Amount").  On the Reimbursement Date, each Lender shall transfer to the Agent, in immediately available funds, such Lender's Letter of Credit Participation Amount and upon receipt thereof the Agent shall deliver to such Lender a Letter of Credit Loan Participation Certificate dated the date of the Lender's receipt of such funds and in such Letter of Credit Participation Amount.

1.17.5.  Obligations Absolute.  The obligations of the Borrowers with respect to the Letters of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances:

(a)any lack of validity or enforceability of the Letters of Credit or this Agreement;

(b)any amendment or waiver of or any consent to or actual departure from this Agreement;

(c)the existence of any claim, set-off, defense or other right which the Borrowers may have at any time against any beneficiary or any transferee of a Letter of Credit (or any persons or entities for which any such beneficiary or any such transferee may be acting), the Agent, the Lenders or any other person or entity, whether in connection with this Agreement, the transactions contemplated herein or in any other agents or any unrelated transaction;

(d)any statement or any other document presented under a 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;

(e)payment by the Agent under a Letter of Credit against presentation by the beneficiary thereof of a draft or certificate which does not comply with terms of such Letter of Credit; or

(f)any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

1.17.6.  The Uniform Customs and Practice.  The Uniform Customs and Practice for Documentary Credits (ICC Publication No. 500) shall be binding on the Borrowers and the Agent.  The Borrowers assume all risks of the acts or omissions of the beneficiary of each Letter of Credit with respect to such Letter of Credit.  In furtherance of, and not in limitation of the Agent's rights and powers under the Uniform Customs and Practice, but subject to all other provisions of this Section 1.17.5, it is understood and agreed that the Agent shall not have any liability for, and that the Borrowers assume all responsibility for: (a) the genuineness of any signature; (b) the form, correctness, validity, sufficiency, genuineness, falsification and legal effect of any draft, certification or other document required by a Letter of Credit or the authority of the person signing the same; (c) the failure of any instrument to bear any reference or adequate reference to a Letter of Credit or the failure of any persons to note the amount of any instrument on the reverse of a Letter of Credit or to surrender a Letter of Credit or otherwise to comply with the terms and conditions of a Letter of Credit; (d) the good faith or acts of any person other than the Agent and its agents and employees; (e) the existence, form, sufficiency or breach of or default under any agreement or instrument of any nature whatsoever; (f) any delay in giving or failure to give any notice, demand or protest; and (g) any error, omission, delay in or nondelivery of any notice or other communication, however sent.  The determination as to whether the required documents are presented prior to the expiration of a Letter of Credit and whether such other documents are in proper and sufficient form for compliance with a Letter of Credit shall be made by the Agent in its sole discretion, which determination shall be conclusive and binding upon the Borrowers.  It is agreed that the Agent may honor, as complying with the terms of the Letters of Credit and this Agreement, any documents otherwise in order and signed or issued by the beneficiary thereof.  Any action, inaction or omission on the part of the Agent under or in connection with the Letters of Credit or any related instruments or documents, if in good faith and in conformity with such laws, regulations or commercial or banking customs as the Agent may reasonably deem to be applicable, shall be binding upon the Borrowers, shall not place the Agent or the Lenders under any liability to the Borrowers, and shall not affect, impair or prevent the vesting of any of the Agent's or the Lenders' rights or powers hereunder or the Borrowers' obligation to make full reimbursement.

1.17.7.  Modification, Consent, etc.  If the Borrowers, either in writing or orally, request or consent to any modification or extension of a Letter of Credit or waives failure of any draft, certificate or other documents to comply with the terms of a Letter of Credit, the Agent shall be entitled to rely and shall be deemed to have relied on such request, consent or waiver with respect to any action taken or omitted by the Agent pursuant to any such request, consent or waiver, and such extension, modification or waiver binding upon the Borrowers.

1.17.8.  Liability of the Agent and the Lenders.  Neither the Agent, the Lenders nor any of their officers or directors shall be liable or responsible for:  (a) the use which may be made of the Letters of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by the Agent against presentation of documents which do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to a Letter of Credit; or (d) any other circumstances whatsoever in making or failure to make payment under a Letter of Credit, except that notwithstanding anything in this Section 1.17.7 to the contrary, the Borrowers shall have a claim against the Agent, and the Agent shall be liable to the Borrowers, to the extent but only to the extent, of any direct, as opposed to consequential, damages suffered by the Borrowers which were caused by the Agent's failure to conform to the standards of the Uniform Customs and Practice.  In furtherance and not in limitation of the foregoing, the Agent may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.  Nothing contained in this Section 1.17.8 shall affect the Agent's responsibilities under Section 1.17.8.

2.CONDITIONS PRECEDENT;  CONDITIONS SUBSEQUENT

2.1. Conditions to the Initial Loans.

No Lender shall be obligated to make any Loan on the Closing Date, or to take, fulfill, or perform any other action hereunder, until the following conditions have been satisfied or provided for in a manner satisfactory to Agent, or waived in writing by Agent on behalf of the  Lenders:

(a) Credit Agreement: Loan Documents. This Agreement or counterparts hereof shall have been duly executed by, and delivered to, Borrowers, Agent and Lenders; and Agent shall have received such documents, instruments, agreements and legal opinions as Agent shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents, including all those listed in the Closing Checklist attached hereto as Annex B, each in form and substance satisfactory to Agent.

(b) Approvals. Agent shall have received (i) satisfactory evidence that the Borrowers have obtained all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents and the consummation of the Related Transactions or (ii) an officer's certificate in form and substance satisfactory to Agent affirming that no such consents or approvals are required.

(c) Payment of Fees. Borrowers shall have paid the Fees required to be paid on the Closing Date, and shall have reimbursed Agent for all fees, costs and expenses of closing presented as of the Closing Date.

2.2. Further Conditions to Each Loan.

Except as otherwise expressly provided herein, no Lender shall be obligated to fund any Loan, or convert or continue any Loan as a LIBOR Loan or BAR Loan, if, as of the date thereof:

(a) Any representation or warranty by any Borrower contained herein or in any of the other Loan Documents shall be untrue or incorrect in any material respect as of such date, except to the extent that such representation or warranty expressly relates to an earlier date and except for changes therein expressly permitted or expressly contemplated by this Agreement; or

(b) Any event or circumstance having a Material Adverse Effect shall have occurred since the date hereof; or

(c) (i) Any Event of Default shall have occurred and be continuing or would result after giving effect to any Loan, or (ii) a Default shall have occurred and be continuing or would result after giving effect to any Loan, and Agent or Requisite Revolving Lenders shall have determined not to make any Loan so long as that Default is continuing; or

(d) After giving effect to any Advance, (i) the outstanding principal amount of the aggregate Revolving Loan would exceed the lesser of the Borrowing Base  and the Maximum Amount, less, in each case, the then outstanding principal amount of the Swing Line Loan, or (ii) the outstanding principal amount of the Revolving Loan would exceed the Borrowing Base  less the outstanding principal amount of the Swing Line Loan; or

(e) After giving effect to any Swing Line Advance, (i) the outstanding principal amount of the Swing Line Loan would exceed Swing Line Availability, or (ii) the outstanding principal amount of the Swing Line Loan would exceed the Borrowing Base  less the outstanding principal amount of the Revolving Loan.

The request and acceptance by the Borrower Representative of the proceeds of any Loan, or the conversion or continuation of any Loan into, or as, a LIBOR Loan or a BAR Loan, as the case may be, shall be deemed to constitute, as of the date of such request or acceptance, (i) a representation and warranty by Borrowers that the conditions in this Section 2.2 have been satisfied and (ii) a reaffirmation by Borrowers of the granting and continuance of Agent's Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.

2.3. Conditions Subsequent.

On and after September 30, 2002, no Lender shall be obligated to fund any Loan, or convert or continue any Loan as a LIBOR Loan or BAR Loan, unless and until the Borrowers have delivered to the Agent for the benefit of the Lenders, the continuing, unlimited, and unconditional guaranty of Green Mountain Coffee, Inc. (the "Parent") and Parent has become a party to this Agreement and to the affirmative and negative covenants of the Borrowers hereunder, where applicable.

 

3. REPRESENTATIONS AND WARRANTIES

To induce Lenders to make the Loans, the Borrowers executing this Agreement, jointly and severally, make the following representations and warranties to Agent and each Lender with respect to all Borrowers, each and all of which shall survive the execution and delivery of this Agreement. 

3.1. Corporate Existence; Compliance with Law.

Each Borrower (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification except where the failure to be so qualified would not have a Material Adverse Effect; (c) has the requisite corporate power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now, heretofore and proposed to be conducted; (d) subject to specific representations set forth herein regarding Environmental Laws, has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (e) is in compliance with its charter and by-laws; and (f) subject to specific representations set forth herein regarding ERISA, Environmental Laws, tax and other laws, is in compliance with all applicable provisions of law, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

3.2. Executive Offices; FEIN.

As of the Closing Date, the current location of each Borrower's chief executive office and principal place of business is set forth in Disclosure Schedule (3.2), and none of such locations have changed within the twelve (12) months preceding the Closing Date. In addition, Disclosure Schedule (3.2) lists the federal employer identification number of each Borrower.

3.3. Corporate Power; Authorization; Enforceable Obligations.

The execution, delivery and performance by each Borrower of the Loan Documents to which it is a party and the creation of all Liens provided for therein: (a) are within such Person's corporate or partnership power; (b) have been duly authorized by all necessary or proper corporate, shareholder and other action; (c) do not contravene any provision of such Person's charter, bylaws or partnership agreement; (d) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (e) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, instrument, mortgage, deed of trust, or any material lease or other agreement to which such Person is a party or by which such Person or any of its property is bound; (f) do not result in the creation or imposition of any Lien upon any of the property of such Person other than those in favor of Agent, on behalf of itself and Lenders, pursuant to the Loan Documents; and (g) do not require the consent or approval of any Governmental Authority or any other Person, except those referred to in Section 2.1 (c), all of which will have been duly obtained, made or complied with prior to the Closing Date. On or prior to the Closing Date, each of the Loan Documents shall have been duly executed and delivered by each Borrower and each such Loan Document shall then constitute a legal, valid and binding obligation enforceable in accordance with its terms.

3.4. Financial Statements.

All Financial Statements concerning Borrowers which are referenced below have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited Financial Statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended.  The following Financial Statements attached hereto as Disclosure Schedule (3.4(A)) have been delivered on the date hereof:

(i)  The audited consolidated balance sheets of the Borrowers as of September 29, 2001 and the related statements of income and cash flows of the Borrowers for their Fiscal Year then ended.

(ii) The unaudited balance sheet at July 6, 2002 of the Borrowers and the related statement(s) of income and cash flows of the Borrowers for the period then ended.

3.5. Material Adverse Effect.

Between the date of the most recent financial statements of the Borrowers delivered to the Agent (the "Financial Statement Date") and the Closing Date, (a) no Borrower has incurred any obligations, contingent or non-contingent liabilities, liabilities for Charges, long-term leases or unusual forward or long-term commitments which are not reflected in such financial statements and which, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, (b) no contract, lease or other agreement or instrument has been entered into by any  Borrower or has become binding upon any Borrower's assets and no law or regulation applicable to any Borrower has been adopted which has had or could reasonably be expected to have a Material Adverse Effect, and (c) no Borrower is in default and to the best of Borrowers' knowledge no third party is in default under any material contract, lease or other agreement or instrument, which alone or in the aggregate could reasonably be expected to have a Material Adverse Effect. Between the Financial Statement Date and the Closing Date no event has occurred, which alone or together with other events, could reasonably be expected to have a Material Adverse Effect.

3.6. Ownership of Property: Liens.

As of the Closing Date, the real estate ("Real Estate") listed on Disclosure Schedule (3.6) constitutes all of the real property owned, leased, subleased, or used by any Borrower. Each Borrower owns good and marketable fee simple title to all of its owned real estate, and valid and marketable leasehold interests in all of its leased Real Estate, all as described on Disclosure Schedule (3.6), and copies of all such leases or a summary of terms thereof satisfactory to Agent have been delivered to Agent. Disclosure Schedule (3.6) further describes any Real Estate with respect to which any Borrower is a lessor, sublessor or assignor as of the Closing Date. Each Borrower also has good and marketable title to, or valid leasehold interests in, all of its personal properties and assets. As of the Closing Date, none of the properties and assets of any Borrower are subject to any Liens other than Permitted Encumbrances, and there are no facts, circumstances or conditions known to any Borrower that may result in any Liens (including Liens arising under Environmental Laws) other than Permitted Encumbrances. Each Borrower has received all deeds, assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and has duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Borrower's right, title and interest in and to all such Real Estate and other properties and assets. Disclosure Schedule (3.6) also describes any purchase options, rights of first refusal or other similar contractual rights pertaining to any Real Estate. As of the Closing Date, no portion of any Borrower's Real Estate has suffered any material damage by fire or other casualty loss which has not heretofore been repaired and restored in all material respects to its original condition or otherwise remedied. As of the Closing Date, all material permits required to have been issued to enable the Real Estate to be lawfully occupied and used for all of the purposes for which they are currently occupied and used have been lawfully issued and are in full force and effect.

3.7. Labor Matters.

As of the Closing Date (a) no strikes or other material labor disputes against any Borrower are pending or, to any Borrower's knowledge, threatened; (b) hours worked by and payment made to employees of each Borrower comply with the Fair Labor Standards Act and each other federal, state, local or foreign law applicable to such matter; (c) all payments due from any Borrower for employee health and welfare insurance have been paid or accrued as a liability on the books of such Borrower; (d) except as set forth in Disclosure Schedule (3.7), no Borrower is a party to or bound by any collective bargaining agreement, management agreement, consulting agreement or any employment agreement (and true and complete copies of any agreements described on Disclosure Schedule (3.7) have been delivered to Agent); (e) there is no organizing activity involving any Borrower pending or, to any Borrower's knowledge, threatened by any labor union or group of employees; (f) there are no representation proceedings pending or, to any Borrower's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of any Borrower has made a pending demand for recognition; and (g) except as set forth in Disclosure Schedule (3.7), there are no complaints or charges against any Borrower pending or, to the knowledge of any Borrower, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by any Borrower of any individual.

3.8. Ventures, Indebtedness.

Except as set forth in Disclosure Schedule (3.8), no Borrower has any Subsidiaries, is engaged in any joint venture or partnership with any other Person, or is an Affiliate of any Person other than the other Borrowers.  As of the Closing Date, the Borrowers have no Indebtedness or Guaranteed Indebtedness except as set forth in Section 6.3 and Disclosure Schedule (6.3).

3.9. Government Regulation.

No Borrower is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. No Borrower is subject to regulation under the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, as amended, or any other federal or state statute that restricts or limits its ability to incur Indebtedness or to perform its obligations hereunder. The borrowings by Borrowers, and the application of the proceeds thereof and repayment thereof will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission applicable to Borrowers.

3. 10. Margin Regulations.

No Borrower is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin security" as such terms are defined in Regulation U or G of the Federal Reserve Board as now and from time to time hereafter in effect (such securities being referred to herein as "Margin Stock"). No Borrower owns any Margin Stock, and none of the proceeds of the Loans or other extensions of credit under this Agreement will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry any Margin Stock or for any other purpose which might cause any of the Loans or other extensions of credit under this Agreement to be considered a "purpose credit" within the meaning of Regulation G, T, U or X of the Federal Reserve Board. No Borrower will take or permit to be taken any action which might cause any Loan Document to violate any regulation of the Federal Reserve Board.

3.11. Taxes.

All tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by any Borrower have been filed with the appropriate Governmental Authority and all Charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof (or any such fine, penalty, interest, late charge or loss has been paid), excluding Charges or other amounts being contested in accordance with Section 5.2(b). Proper and accurate amounts have been withheld by each Borrower from its respective employees for all periods in full and complete compliance with all applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective Governmental Authorities. Disclosure Schedule (3.11 ) sets forth as of the Closing Date those taxable years for which any Borrower's tax returns are currently being audited by the IRS or any other applicable Governmental Authority and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding. Except as described on Disclosure Schedule (3.11), no Borrower has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges. None of the Borrowers and their respective predecessors are liable for any Charges: (a) under any agreement (including any tax sharing agreements) or (b) to each Borrower's knowledge, as a transferee. As of the Closing Date, no Borrower has agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, which would have a Material Adverse Effect.

3.12. ERISA.

(a) Disclosure Schedule (3.12) lists and separately identifies all Title IV Plans, Multiemployer Plans, ESOPs and Retiree Welfare Plans. Each Qualified Plan has been determined by the IRS to qualify under Section 401 of the IRC, and the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the IRC, and nothing has occurred which would cause the loss of such qualification or tax-exempt status. Each Plan is in compliance with the applicable provisions of ERISA and the IRC, including the filing of reports required under the IRC or ERISA. No Borrower or ERISA Affiliate has failed to make any contribution or pay any amount due as required by either Section 4~12 of the IRC or Section 302 of ERISA or the terms of any such Plan. No Borrower or ERISA Affiliate has engaged in a prohibited transaction, as defined in Section 4975 of the IRC, in connection with any Plan, which would subject any Borrower to a material tax on prohibited transactions imposed by Section 4975 of the IRC.

(b) Except as set forth in Disclosure Schedule (3.12): (i) no Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event described in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is reasonably expected to occur; (iii) there are no pending, or to the knowledge of any Borrower, threatened claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no Borrower or ERISA Affiliate has incurred or reasonably expects to incur any liability as a result of a complete or partial withdrawal from a Multiemployer Plan; (v) within the last five years no Title IV Plan with Unfunded Pension Liabilities has been transferred outside of the "controlled group" (within the meaning of Section 4001 (a)(14) of ERISA) of any Borrower or ERISA Affiliate; and (vi) no liability under any Title IV Plan has been satisfied with the purchase of a contract from an insurance company that is not rated AAA by the Standard & Poor's Corporation or the equivalent by another nationally recognized rating agency.

3.13. No Litigation.

No action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the knowledge of any Borrower, threatened against any Borrower, before any Governmental Authority or before any arbitrator or panel of arbitrators (collectively, "Litigation"), (a) which challenges any Borrower's right or power to enter into or perform any of its obligations under the Loan Documents to which it is a party, or the validity or enforceability of any Loan Document or any action taken thereunder, or (b) which has a reasonable risk of being determined adversely to any Borrower and which, if so determined, could reasonably be expected to have a Material Adverse Effect. Except as set forth on Disclosure Schedule (3. 13), as of the Closing Date there is no Litigation pending or threatened which seeks damages in excess of $25,000 or injunctive relief or alleges criminal misconduct of any Borrower.

3.14. Brokers.

Except as set forth on Disclosure Schedule (3.14), no broker or finder acting on behalf of any Borrower brought about the obtaining, making or closing of the Loans or the Related Transactions, and no Borrower has any obligation to any Person in respect of any finder's or brokerage fees in connection therewith.

3.15. Intellectual Property.

As of the Closing Date, each Borrower owns or has rights to use all Intellectual Property necessary to continue to conduct its business as now or heretofore conducted by it or proposed to be conducted by it, and each Patent, Trademark, Copyright and each material License is listed, together with application or registration numbers, as applicable, in Disclosure Schedule (3. 15) hereto. To the best of its knowledge, each Borrower conducts its business and affairs without infringement of or interference with any Intellectual Property of any other Person.

3.16. First Priority.

The Liens granted to Agent, on behalf of itself and Lenders, pursuant to the Collateral Documents will at all times be fully perfected first priority Liens in and to the Collateral described therein, subject, as to priority, only to Permitted Encumbrances with respect to the Collateral other than Accounts.

3.17. Environmental Matters.

(a) Except as set forth in Disclosure Schedule (3.17), as of the Closing Date: (i) to the best of each Borrower's knowledge, the Real Estate is free of contamination from any Hazardous Material except for such contamination that would not result in Environmental Liabilities which could reasonably be expected to have a Material Adverse Effect; (ii) no Borrower has caused or suffered to occur any Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, except for such Releases as would not result in Environmental Liabilities which could reasonably be expected to have a Material Adverse Effect; (iii) the Borrowers are and have been in compliance with all Environmental Laws, except for such noncompliance which would not result in Environmental Liabilities which could reasonably be expected to have a Material Adverse Effect; (iv) the Borrowers have obtained, and are in compliance with, all Environmental Permits required by Environmental Laws for the operations of their respective businesses as presently conducted or as proposed to be conducted, except where the failure to so obtain or comply with such Environmental Permits would not result in Environmental Liabilities which could reasonably be expected to have a Material Adverse Effect, and all such Environmental Permits are valid, uncontested and in good standing; (v) no Borrower is involved in operations or knows of any facts, circumstances or conditions, including any Releases of Hazardous Materials, that are likely to result in any Environmental Liabilities of such Borrower which could reasonably be expected to have a Material Adverse Effect, and no Borrower has permitted any current or former tenant or occupant of the Real Estate to engage in any such operations; (vi) there is no Litigation arising under or related to any Environmental Laws, Environmental Permits or Hazardous Material which seeks damages, penalties, fines, costs or expenses in excess of $25,000 or injunctive relief, or which alleges criminal misconduct by any Borrower; (vii) no notice has been received by any Borrower identifying it as a "potentially responsible party" or requesting information under CERCLA or analogous state statutes, and to the knowledge of the Borrowers, there are no facts, circumstances or conditions that may result in any Borrower being identified as a "potentially responsible party" under CERCLA or analogous state statutes; and (viii) the Borrowers have provided to Agent copies of all existing environmental reports and audits in their possession pertaining to actual or potential Environmental Liabilities, in each case relating to any Real Estate.

(b) Each Borrower hereby acknowledges and agrees that Agent (i) is not now, and has not ever been, in control of any of the Real Estate or any Borrower's affairs, and (ii) does not have the capacity through the provisions of the Loan Documents or otherwise to influence any Borrower's conduct with respect to the ownership, operation or management of any of its Real Estate or compliance with Environmental Laws or Environmental Permits.

3.18. Insurance.

Disclosure Schedule (3. 18) lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by each Borrower, as well as a summary of the terms of each such policy.

3. 19. Deposit and Disbursement Accounts.

Disclosure Schedule (3.19) lists all banks and other financial institutions at which any Borrower maintains deposits and/or other accounts as of the Closing Date, including any Disbursement Accounts, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number.

3.20. Government Contracts.

 No Borrower is a party to any contract or agreement with any Governmental Authority and no Borrower's Accounts are subject to the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727), or any similar state or local law.

3.21. Customer and Trade Relations.

 There exists no actual or, to the knowledge of any Borrower, threatened termination or cancellation of, or any material adverse modification or change in: the business relationship of, any Borrower with any customer or group of customers whose purchases during the preceding twelve (12) months caused them to be ranked among the ten (10) largest customers of such Borrower; or the business relationship of any Borrower with any supplier material to its operations.

3.22. Agreements and Other Documents.

As of the Closing Date, each Borrower has provided to Agent or its counsel, on behalf of Lenders, accurate and complete copies (or summaries) of all of the following agreements or documents to which any it is subject and each of which are listed on Disclosure Schedule (3.22): supply agreements and purchase agreements not terminable by such Borrower within sixty (60) days following written notice issued by such Borrower and involving transactions in excess of $1,000,000 per annum; any lease of Equipment having a remaining term of one year or longer and requiring aggregate rental and other payments in excess of $500,000 per annum; licenses and permits held by the Borrowers, the absence of which could be reasonably likely to have a Material Adverse Effect; instruments or documents evidencing Indebtedness of such Borrower and any security interest granted by such Borrower with respect thereto; and instruments and agreements evidencing the issuance of any equity securities, warrants, rights or options to purchase equity securities of such Borrower.

3.23. Solvency.

Both before and after giving effect to (a) the Loans to be made or extended on the Closing Date or such other date as Loans requested hereunder are made or extended, (b) the disbursement of the proceeds of such Loans pursuant to the instructions of Borrower Representative, and (c) the payment and accrual of all transaction costs in connection with the foregoing, each Borrower is Solvent.

4. FINANCIAL STATEMENTS AND INFORMATION

4.1. Reports and Notices.

(a) Each Borrower hereby agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Agent and/or Lenders, as required, the Financial Statements, notices, projections and other information at the times, to the Persons and in the manner set forth in Annex C.

(b) Each Borrower executing this Agreement hereby agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Agent and/or Lenders, as required, the various Collateral Reports (including Borrowing Base Certificates in the form of Exhibit 4.1(b)) at the times, to the Persons and in the manner set forth in Annex D.

4.2. Communication with Accountants.

Each Borrower executing this Agreement authorizes Agent and, so long as a Default or Event of Default shall have occurred and be continuing, each Lender, to communicate directly with its independent certified public accountants, and authorizes and shall instruct those accountants and advisors to disclose and make available to Agent and each Lender any and all Financial Statements and other supporting financial documents, schedules and information relating to any Borrower (including copies of any issued management letters) with respect to the business, financial condition and other affairs of any Borrower in a manner consistent with the policies of such accountants and advisors.

5.AFFIRMATIVE COVENANTS

Each Borrower, jointly and severally, agrees as to all Borrowers and Parent (where applicable) that from and after the date hereof and until the Termination Date:

5.1. Maintenance of Existence and Conduct of Business.

Each Borrower shall: do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and its rights and franchises; continue to conduct its business substantially as now conducted or as otherwise permitted hereunder; at all times maintain, preserve and protect all of its assets and properties used or useful in the conduct of its business, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices; and transact business only in such corporate and trade names as are set forth in Disclosure Schedule (5.1).

5.2. Payment of Obligations.

(a) Subject to Section 5.2(b), each Borrower shall pay and discharge or cause to be paid and discharged promptly all Charges payable by it, including (A) Charges imposed upon it, its income and profits, or any of its property (real, personal or mixed) and all Charges with respect to tax, social security and unemployment withholding with respect to its employees, and (B) lawful claims for labor, materials, supplies and services or otherwise, before any thereof shall become past due.

(b) Each Borrower may in good faith contest, by appropriate proceedings, the validity or amount of any Charges or claims described in Section 5.2(a); provided, that (i) at the time of commencement of any such contest no Default or Event of Default shall have occurred and be continuing, (ii) adequate reserves with respect to such contest are maintained on the books of such Borrower, in accordance with GAAP, (iii) such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such Charges or claims or any Lien in respect thereof, (iv) none of the Collateral becomes subject to forfeiture or loss as a result of such contest, (v) no Lien shall be imposed to secure payment of such Charges or claims other than Permitted Encumbrances, (vi) such Borrower shall promptly pay or discharge such contested Charges or claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to Agent evidence acceptable to Agent of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to such Borrower or the conditions set forth in this Section 5.2(b) are no longer met, and (vii) Agent has not advised Borrowers in writing that Agent reasonably believes that nonpayment or nondischarge thereof could have or result in a Material Adverse Effect.

5.3. Books and Records.

Each Borrower shall keep adequate books and records with respect to its business activities in which proper entries, reflecting all financial transactions, are made in accordance with GAAP and on a basis consistent with the Financial Statements attached as Disclosure Schedule (3.4(A)).

5.4. Insurance: Damage to or Destruction of Collateral.

(a) The Borrowers shall, at their sole cost and expense, maintain the policies of insurance described on Disclosure Schedule (3.18) as in effect on the date hereof in form and with insurers acceptable to Agent. If any Borrower at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay all premiums relating thereto, Agent may at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which Agent deems advisable. Agent shall have no obligation to obtain insurance for any Borrower or pay any premiums therefor. By doing so, Agent shall not be deemed to have waived any Default or Event of Default arising from any Borrower's failure to maintain such insurance or pay any premiums therefor. All sums so disbursed, including attorneys' fees, court costs and other charges related thereto, shall be payable on demand by Borrowers to Agent and shall be additional Obligations hereunder secured by the Collateral.

(b) Agent reserves the right at any time upon any change in any Borrower's risk profile (including any change in the product mix maintained by any Borrower or any laws affecting the potential liability of such Borrower) to require additional forms and limits of insurance to, in Agent's reasonable opinion, adequately protect both Agent's and Lender's interests in all or any portion of the Collateral and to ensure that each Borrower is protected by insurance in amounts and with coverage customary for its industry. If requested by Agent, each Borrower shall deliver to Agent from time to time a report of a reputable insurance broker, reasonably satisfactory to Agent, with respect to its insurance policies.

(c) Each Borrower shall deliver to Agent, in form and substance satisfactory to Agent, endorsements to (i) all "All Risk" and business interruption insurance naming Agent, on behalf of itself and Lenders, as loss payee, and (ii) all general liability and other liability policies naming Agent, on behalf of itself and Lenders, as additional insured. Each Borrower irrevocably makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent), so long as any Default or Event of Default shall have occurred and be continuing, as such Borrower's true and lawful agent and attorney-in-fact for the purpose of making, settling and adjusting claims under such "All Risk" policies of insurance, endorsing the name of such Borrower on any check or other item of payment for the proceeds of such "All Risk" policies of insurance and for making all determinations and decisions with respect to such "All Risk" policies of insurance. Agent shall have no duty to exercise any rights or powers granted to it pursuant to the foregoing power-of-attorney. Borrower Representative shall promptly notify Agent of any loss, damage, or destruction to the Collateral in the amount of $50,000 or more, whether or not covered by insurance. After deducting from such proceeds the expenses, if any, incurred by Agent in the collection or handling thereof, Agent may, at its option, apply such proceeds to the reduction of the Obligations in accordance with Section 1.3(d), or permit or require the applicable Borrower to use such money, or any part thereof, to replace, repair, restore or rebuild the Collateral in a diligent and expeditious manner with materials and workmanship of substantially the same quality as existed before the loss, damage or destruction. Notwithstanding the foregoing, (a) if the casualty giving rise to such insurance proceeds would not reasonably be expected to have a Material Adverse Effect and such insurance proceeds do not exceed $50,000.00 in the aggregate, Agent shall permit the applicable Borrower to replace, restore, repair or rebuild the property, and (b) if the casualty giving rise to such insurance proceeds would not reasonably be expected to have a Material Adverse Effect and such insurance proceeds exceed $50,000.00 in the aggregate, Agent shall permit the applicable Borrower to replace, restore, repair or rebuild the property, provided that if such Borrower shall not have completed such replacement, restoration, repair or rebuilding within 360 days of such casualty, Agent may apply such insurance proceeds to the Obligations in accordance with Section 1.3(d). All insurance proceeds which are to be made available to any Borrower to replace, repair, restore or rebuild the Collateral shall be applied by Agent to reduce the outstanding principal balance of the Revolving Loan of such Borrower (which application shall not result in a permanent reduction of the Revolving Loan Commitment) and upon such application, Agent shall establish a Reserve against the separate Borrowing Base of the affected Borrower in an amount equal to the amount of such proceeds so applied or a cash collateral account subject to a Control Letter. Thereafter, such funds shall be made available to that Borrower to provide funds to replace, repair, restore or rebuild the Collateral as follows: (i) Borrower Representative shall request a Revolving Credit Advance or a release from such cash collateral account be made to such Borrower in the amount requested to be released; (ii) so long as the conditions set forth in Section 2.2 have been met, Revolving Lenders shall make such Revolving Credit Advance or release from such cash collateral account; and (iii) the Reserve established with respect to such insurance proceeds shall be reduced by the amount of such Revolving Credit Advance. To the extent not used to replace, repair, restore or rebuild the Collateral, such insurance proceeds shall be applied in accordance with Section 1.2(d).

5.5. Compliance with Laws.

Each Borrower shall comply with all federal, state, local and foreign laws and regulations applicable to it, including without limitation those relating to licensing, ERISA and labor matters, except to the extent that the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

5.6. Supplemental Disclosure.

From time to time as may be requested by Agent (which request will not be made more frequently than once each year absent the occurrence and continuance of a Default or an Event of Default), the Borrowers shall supplement each Disclosure Schedule hereto, or any representation herein or in any other Loan Document, with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule or as an exception to such representation or which is necessary to correct any information in such Disclosure Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to any Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to show the changes made therein); provided that (a) no such supplement to any such Disclosure Schedule or representation shall be or be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as consented to by Agent and Requisite Lenders in writing; and (b) no supplement shall be required as to representations and warranties that relate solely to the Closing Date.

5.7. Intellectual Property.

Each Borrower will use its best efforts to  conduct its business and affairs without infringement of or interference with any Intellectual Property of any other Person which could reasonably be expected to have a Material Adverse Effect.

5.8. Environmental Matters.

Each Borrower shall and shall cause each Person within its control to: (a) conduct its operations and keep and maintain its Real Estate in compliance with all Environmental Laws and Environmental Permits other than noncompliance which could not reasonably be expected to have a Material Adverse Effect; (b) implement any and all investigation, remediation, removal and response actions which are necessary to comply with Environmental Laws and Environmental Permits pertaining to the presence, generation, treatment, storage, use, disposal, transportation or Release of any Hazardous Material on, at, in, under, above, to, from or about any of its Real Estate; (c) notify Agent promptly after such Borrower becomes aware of any violation of Environmental Laws or Environmental Permits or any Release on, at, in, under, above, to, from or about any Real Estate which is reasonably likely to result in Environmental Liabilities in excess of $50,000; and (d) promptly forward to Agent a copy of any order, notice, request for information or any communication or report received by such Borrower in connection with any such violation or Release or any other matter relating to any Environmental Laws or Environmental Permits that could reasonably be expected to result in Environmental Liabilities in excess of $100,000 in each case whether or not the Environmental Protection Agency or any Governmental Authority has taken or threatened any action in connection with any such violation or Release. If Agent at any time has a reasonable basis to believe that there may be a violation of any Environmental Laws or Environmental Permits by any Borrower or any Environmental Liability arising thereunder, or a Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, which, in each case, could reasonably be expected to have a Material Adverse Effect, then each Borrower shall, upon Agent's written request (i) cause the performance of such environmental audits including subsurface sampling of soil and groundwater, and preparation of such environmental reports, at Borrowers' expense, as Agent may from time to time reasonably request, which shall be conducted by reputable environmental consulting firms reasonably acceptable to Agent and shall be in form and substance acceptable to Agent, and (ii) permit Agent or its representatives to have access to all Real Estate for the purpose of conducting such environmental audits and testing as Agent deems reasonably appropriate, including subsurface sampling of soil and groundwater. Borrowers shall reimburse Agent for the costs of such audits and tests and the same will constitute a part of the Obligations secured hereunder.

5.9. Landlords' Agreements; Mortgagee Agreements and Bailee Letters.

Each Borrower shall use its best efforts to obtain a landlord's agreement, mortgagee agreement or bailee letter, as applicable, from the lessor of each leased property or mortgagee of owned property or with respect to any warehouse, processor or converter facility or other location where Collateral is located, which agreement or letter shall contain a waiver or subordination of all Liens or claims that the landlord, mortgagee or bailee may assert against the Inventory or Collateral at that location, and shall otherwise be satisfactory in form and substance to Agent. With respect to such locations or warehouse space leased or owned as of the Closing Date, if Agent has not received a landlord or mortgagee agreement or bailee letter as of the Closing Date, any Borrower's Eligible Inventory at that location shall, in Agent's discretion, be excluded from such Borrower's Borrowing Base or be subject to such Reserves as may be established by Agent in its reasonable credit judgment; provided, that any such exclusion from such Borrower's Borrowing Base, and any such additional Reserve, shall be canceled upon Agent's receipt of an acceptable landlord or mortgagee agreement or bailee letter. After the Closing Date, no real property or warehouse space shall be leased or acquired by any Borrower and no Inventory shall be shipped to a processor or converter under arrangements established after the Closing Date without the prior written consent of Agent, unless and until a reasonably satisfactory landlord or mortgagee agreement or bailee letter, as appropriate, shall first have been obtained with respect to such location. Each Borrower shall timely and fully pay and perform its obligations under all leases and other agreements with respect to each leased location or public warehouse where any Collateral is or may be located. If any Borrower obtains an ownership interest in any real property following the Closing Date, such Borrower shall execute and deliver all documents and instruments necessary to grant Agent a fully perfected first priority security interest in such real property.

5.10. Operating Accounts.

Each Borrower shall maintain its primary operating and deposit accounts with Fleet National Bank.

5. 11. Further Assurances.

Each Borrower agrees that it shall and shall cause each other Borrower to, at such Borrower's expense and upon request of Agent, duly execute and deliver, or cause to be duly executed and delivered, to Agent such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of Agent to carry out more effectively the provisions and purposes of this Agreement or any other Loan Document.

6. NEGATIVE COVENANTS

Each Borrower, jointly and severally, agrees as to all Borrowers and Parent (where applicable) that, without the prior written consent of Agent and the Requisite Lenders, from and after the date hereof until the Termination Date:

6.1. Mergers, Subsidiaries, Etc.

Neither Parent nor any Borrower shall directly or indirectly, by operation of law or otherwise, (a) form or acquire any Subsidiary; (b) merge with, consolidate with, acquire all or substantially all of the assets or capital stock of, or otherwise combine with or acquire, any Person; or (c) acquire all or substantially all of the assets of any Person which under clauses (a), (b) or (c) involves consideration of greater than $5,000,000 in any one transaction or which involves consideration of greater than $10,000,000 in the aggregate for all such transactions occurring from the date of closing through March 31, 2005.  In no event shall Borrower engage in any such transaction under clauses (a), (b) or (c) with any Person that does not have twelve (12) months of positive EBITDA for the fiscal period ending immediately prior to the date of such transaction.

6.2. Investments: Loans and Advances.

Except as otherwise expressly permitted by this Section 6.2, no Borrower shall make or permit to exist any investment in, or make, accrue or permit to exist loans or advances of money to, any Person, through the direct or indirect lending of money, holding of securities or otherwise, except that (a) Borrowers may hold investments comprised of notes payable, or stock or other securities issued by Account Debtors to any Borrower pursuant to negotiated agreements with respect to settlement of such Account Debtor's Accounts in the ordinary course of business, so long as the aggregate amount of such Accounts so settled by Borrowers does not exceed $250,000; and (b) provided that no Event of Default shall have occurred and be continuing and that Agent, for itself and the benefit of Lenders, has a first priority perfected security interest therein pursuant to a Control Letter, and (x) that if there are outstanding Revolving Credit Advances, the amount of such investments does not exceed $1,000,000 in the aggregate or such investments shall be limited to overnight repurchase obligations (described below) or (y) that if there are no outstanding Revolving Credit Advances (in which case the amount of such investments is not subject to any limitation), Borrowers may make and own investments in (i) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency thereof maturing within one year from the date of acquisition thereof, (ii) commercial paper maturing no more than one year from the date of creation thereof and currently having the highest rating obtainable from either Standard & Poor's Ratings Group or Moody's Investors Service, Inc., (iii) certificates of deposit maturing no more than one year from the date of creation thereof or overnight repurchase obligations issued by commercial banks incorporated under the laws of the United States of America, each having combined capital, surplus and undivided profits of not less than $200,000,000 and having a senior unsecured rating of "A" or better by a nationally recognized rating agency, provided that the aggregate amount invested in such certificates of deposit shall not at any time exceed $500,000 for any one such certificate of deposit and $1,000,000 for any one such bank, (iv) time deposits, maturing no more than thirty (30) days from the date of creation thereof with commercial banks or savings and loan associations each having membership either in the Federal Deposit Insurance Corporation or in the Federal Savings and Loan Insurance Corporation and in amounts not exceeding the maximum amounts of insurance thereunder, and (v) any other type of investment not exceeding $1,000,000 in the aggregate at any time outstanding.

6.3. Indebtedness.

(a) No Borrower shall create, incur, assume or permit to exist any Indebtedness, except (without duplication) (i) Indebtedness secured by purchase money security interests permitted in clause (c) of Section 6.7, (ii) the Loans and the other Obligations, (iii) deferred taxes, (iv) unfunded pension fund and other employee benefit plan obligations and liabilities to the extent they are permitted to remain unfunded under applicable law, (v) existing Indebtedness described in Disclosure Schedule (6.3) and refinancings thereof or amendments or modifications thereto which do not have the effect of increasing the principal amount thereof or changing the amortization thereof (other than to extend the same) and which are otherwise on terms and conditions no less favorable to any Borrower, Agent or any Lender, as reasonably determined by Agent, than the terms of the Indebtedness being refinanced, amended or modified, (vi) Indebtedness consisting of intercompany loans and advances made by any Borrower to any other Borrower, provided that (A) each obligor of such loans or advances shall have executed and delivered to the Borrower making such loan or advances, on the Closing Date, a demand note (collectively, the "Intercompany Notes") to evidence any such intercompany Indebtedness owing at any time by such obligor to such Borrower, which Intercompany Notes shall be in form and substance satisfactory to Agent and shall be pledged and delivered to Agent pursuant to the applicable Security Agreement as additional collateral security for the Obligations; (B) each Borrower shall record all intercompany transactions on its books and records in a manner satisfactory to Agent; (C) at the time any such intercompany loan or advance is made by any Borrower to any other Borrower and after giving effect thereto, each such Borrower shall be Solvent; and (D) no Default or Event of Default would occur and be continuing after giving effect to any such proposed intercompany loan.

(b) No Borrower shall, directly or indirectly, voluntarily purchase, redeem, defease or prepay any principal of, premium, if any, interest or other amount payable in respect of any Indebtedness, other than (i) the Obligations, (ii) Indebtedness secured by a Permitted Encumbrance if the asset securing such Indebtedness has been sold or otherwise disposed of in accordance with Sections 6.8(b), or (iii) other Indebtedness not in excess of $500,000.

6.4. Employee Loans and Affiliate Transactions.

(a) Except as otherwise expressly permitted in this Section 6 with respect to Affiliates, no Borrower shall enter into or be a party to any transaction with any other Borrower or any Affiliate thereof except (i) transfers of equipment and sales of inventory between Borrowers in the ordinary course of business; provided that such assets are physically moved to the premises of the transferee and each Borrower continues to be Solvent after giving effect to any such transfer; and (ii) other transactions in the ordinary course of and pursuant to the reasonable requirements of such Borrower's business (but expressly excluding any Restricted Payments except as expressly permitted in Section 6.14) and, in each case, upon fair and reasonable terms that are no less favorable to such Borrower than would be obtained in a comparable arm's length transaction with a Person not an Affiliate of such Borrower. In addition, if any such transaction or series of related transactions involves payments in excess of $1,000,000 in the aggregate, the terms of these transactions must be disclosed in advance to Agent and Lenders. All such transactions existing as of the date hereof are described on Disclosure Schedule (6.4(a)).

(b) No Borrower shall enter into any lending or borrowing transaction with any employees of any Borrower, except loans to their respective employees on an arms-length basis in the ordinary course of business consistent with past practices for travel expenses, relocation costs and similar purposes up to a maximum of $100,000 to any employee and up to a maximum of $500,000 in the aggregate at any one time outstanding.

6.5. Capital Structure and Business.

Neither Parent nor any Borrower shall (a) make any changes in any of its business objectives, purposes or operations which could in any way adversely affect the repayment of the Loans or any of the other Obligations or could reasonably be expected to result in a Material Adverse Effect, (b) make any change in its capital structure, including the issuance of any shares of Stock, warrants or other securities convertible into Stock or any revision of the terms of its outstanding Stock, except that Parent may issue shares to Borrowers' employees and other eligible persons upon exercise of options or pursuant to Parent's Stock Option Plan, Stock Purchase Plan, and Employee Stock Ownership Plan, or (c) amend its charter or bylaws in a manner which would adversely affect Agent or Lenders or such Borrower's duty or ability to repay the Obligations. No Borrower shall engage in any business other than the businesses currently engaged in by it or businesses reasonably related thereto.

6.6. Guaranteed Indebtedness.

No Borrower shall create, incur, assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement of instruments or items of payment for deposit to the general account of any Borrower, and (b) for Guaranteed Indebtedness incurred for the benefit of any other Borrower if the primary obligation is expressly permitted by this Agreement.

6.7. Liens.

No Borrower shall create, incur, assume or permit to exist any Lien on or with respect to its Accounts or any of its other properties or assets (whether now owned or hereafter acquired) except for (a) Permitted Encumbrances; (b) Liens in existence on the date hereof and summarized on Disclosure Schedule (6.7); (c) Liens created after the date hereof by conditional sale or other title retention agreements (including Capital Leases) or in connection with purchase money Indebtedness with respect to Equipment and Fixtures acquired by any Borrower in the ordinary course of business, involving the incurrence of an aggregate amount of purchase money Indebtedness and Capital Lease Obligations of not more than $500,000 outstanding at any one time for all such Liens (provided that such Liens attach only to the assets subject to such purchase money debt and such Indebtedness is incurred within twenty (20) days following such purchase and does not exceed 100% of the purchase price of the subject assets). In addition, no Borrower shall become a party to any agreement, note, indenture or instrument, or take any other action, which would prohibit the creation of a Lien on any of its properties or other assets in favor of Agent, on behalf of itself and Lenders, as additional collateral for the Obligations, except operating leases, Capital Leases or Licenses which prohibit Liens upon the assets that are subject thereto.

6.8. Sale of Stock and Assets.

Neither Parent nor any Borrower shall sell, transfer, convey, assign or otherwise dispose of any of its properties or other assets, including the capital Stock of any of its Subsidiaries and any of their Accounts, other than (a) the sale of Inventory in the ordinary course of business, (b) the sale, transfer, conveyance or other disposition by a Borrower of Equipment or Fixtures that are obsolete or no longer used or useful in such Borrower's business and having a value not exceeding $100,000 in any, single transaction or $500,000 in the aggregate in any Fiscal Year, and (c) other Equipment and Fixtures having a value not exceeding $250,000 in any, single transaction or $1,000,000 in the aggregate in any Fiscal Year. With respect to any disposition of assets or other properties permitted pursuant to clause (b) and clause (c) above, Agent agrees on reasonable prior written notice to release its Lien on such assets or other properties in order to permit the applicable Borrower to effect such disposition and shall execute and deliver to Borrowers, at Borrowers' expense, appropriate UCC-3 termination statements and other releases as reasonably requested by Borrowers.

6.9. ERISA.

No Borrower shall, or shall cause or permit any ERISA Affiliate to, cause or permit to occur an event which could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA.

6.10. Financial Covenants.

Borrowers shall not breach or fail to comply with any of the Financial Covenants (the "Financial Covenants") set forth in Annex E.

6.11. Hazardous Materials.

No Borrower shall cause or permit a Release of any Hazardous Material on, at, in, under, above, to, from or about any of the Real Estate where such Release would violate, or form the basis for Environmental Liabilities under, any Environmental Laws or Environmental Permits, other than such violations or Environmental Liabilities which could not reasonably be expected to have a Material Adverse Effect.

6.12. Sale-Leasebacks.

No Borrower shall engage in any sale-leaseback, synthetic lease or similar transaction involving any of its assets.

6. 13. Cancellation of Indebtedness.

No Borrower shall cancel any claim or debt owing to it, except for reasonable consideration negotiated on an arms-length basis and in the ordinary course of its business consistent with past practices.

6.14. Restricted Payments.

No Borrower shall make any Restricted Payment, except (a) intercompany loans and advances between Borrowers to the extent permitted by Section 6.3 above; (b) dividends and distributions by a Borrower to such Borrower as owns all of its capital stock; and (c) employee loans permitted under Section 6.4(b) above.

6. 15. Change of Corporate Name or Location; Change of Fiscal Year.

No Borrower shall (a) change its corporate name, or (b) change its chief executive office, principal place of business, corporate offices or warehouses or locations at which Collateral is held or stored, or the location of its records concerning the Collateral, in any case without at least thirty (30) days prior written notice to Agent and after Agent's written acknowledgment that any reasonable action requested by Agent in connection therewith, including to continue the perfection of any Liens in favor of Agent, on behalf of Lenders, in any Collateral, has been completed or taken, and provided that any such new location shall be in the continental United States. Without limiting the foregoing, no Borrower shall change its name, identity, corporate domicile, or corporate structure in any manner which might make any financing or continuation statement filed in connection herewith either ineffective or seriously misleading within the meaning of Section 9-402(7) of the Code or any other then applicable provision of the Code except upon prior written notice to Agent and Lenders and after Agent's written acknowledgment that any reasonable action requested by Agent in connection therewith, including to continue the perfection of any Liens in favor of Agent, on behalf of Lenders, in any Collateral, has been completed or taken. No Borrower shall change its Fiscal Year.

6. 16. No Impairment of Intercompany Transfers.

No Borrower shall directly or indirectly enter into or become bound by any agreement, instrument, indenture or other obligation (other than this Agreement and the other Loan Documents) which could directly or indirectly restrict, prohibit or require the consent of

any Person with respect to the payment of dividends or distributions or the making or repayment of intercompany loans by a Subsidiary of any Borrower to any Borrower or between Borrowers.

6. 17. No Speculative Transactions.

No Borrower shall engage in any transaction involving commodity options, futures contracts or similar transactions, except solely to hedge against fluctuations in the prices of commodities owned or to be purchased by it and the values of foreign currencies receivable or payable by it and interest swaps, caps or collars.

6.18. Leases.

No Borrower shall enter into any operating lease for Equipment or Real Estate, if the aggregate of all such operating lease payments payable in any Fiscal Year  for Borrowers on a consolidated basis would exceed $500,000.

7. TERM

7.1. Termination.

The financing arrangements contemplated hereby shall be in effect until each retroactive Commitment Termination Date, and each of Loans and all other Obligations incident thereto shall be automatically due and payable in full on its respective Commitment Termination Date.

7.2. Survival of Obligations Upon Termination of Financing Arrangements.

Except as otherwise expressly provided for in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under this Agreement shall in any way affect or impair the obligations, duties and liabilities of the Borrowers or the rights of Agent and Lenders relating to any unpaid portion of the Loans or any other Obligations, due or not due, liquidated, contingent or unliquidated or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which is required after the Commitment Termination Date. Except as otherwise expressly provided herein or in any other Loan Document, all undertakings, agreements, covenants, warranties and representations of or binding upon the Borrowers, and all rights of Agent and each Lender, all as contained in the Loan Documents, shall not terminate or expire, but rather shall survive any such termination or cancellation and shall continue in full force and effect until the Termination Date; provided however, that in all events the provisions of Section 11, the payment obligations under Sections 1.14 and 1.15, and the indemnities contained in the Loan Documents shall survive the Termination Date.

8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES

8.1. Events of Default.

The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an "Event of Default" hereunder:

(a) Any Borrower (i) fails to make any payment of principal of, or interest on, or Fees owing in respect of, the Loans or any of the other Obligations when due and payable, whether by acceleration or otherwise, or (ii) fails to pay or reimburse Agent or Lenders for any expense reimbursable hereunder or under any other Loan Document within ten (10) days following Agent's demand for such reimbursement or payment of expenses.

(b) Any Borrower shall fail or neglect to perform, keep or observe any of the provisions of Sections 1.4, 1.8, 5.4 or 6, or any of the provisions set forth in Annexes A or E, respectively.

(c) Any Borrower shall fail or neglect to perform, keep or observe any of the provisions of Section 4 or any provisions set forth in Annexes C or D, respectively, and the same shall remain unremedied for three (3) Business Days or more after notice to Borrowers by Agent.

(d) Any Borrower shall fail or neglect to perform, keep or observe any other provision of this Agreement or of any of the other Loan Documents (other than any provision embodied in or covered by any other clause of this Section 8.1) and the same shall remain unremedied for thirty (30) days or more after notice to Borrowers by Agent.

(e) A default or breach shall occur under any other agreement, document or instrument to which any Borrower is a party which is not cured within any applicable grace period, and such default or breach (i) involves the failure to make any payment when due in respect of any Indebtedness (other than the Obligations) of any Borrower in excess of $100,000 in the aggregate, or (ii) causes, or permits any holder of such Indebtedness or a trustee to cause, Indebtedness or a portion thereof in excess of $200,000 in the aggregate to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, regardless of whether such default is waived, or such right is exercised, by such holder or trustee.

(f) Any information contained in any Borrowing Base Certificate is untrue or incorrect in any respect, or any representation or warranty herein or in any Loan Document or in any written statement, report, financial statement or certificate (other than a Borrowing Base Certificate) made or delivered to Agent or any Lender by any Borrower is untrue or incorrect in any material respect as of the date when made or deemed made.

(g) Assets of any Borrower with a fair market value of $200,000 or more shall be attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors of any Borrower and such condition continues for thirty (30) days or more.

(h) A case or proceeding shall have been commenced against any Borrower seeking a decree or order in respect of any Borrower (i) under Title 11 of the United States Code, as now constituted or hereafter amended or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for any Borrower or of any substantial part of any such Person's assets, or (iii) ordering the winding up or liquidation of the affairs of any Borrower, and such case or proceeding shall remain undismissed or unstayed for sixty (60) days or more or such court shall enter a decree or order granting the relief sought in such case or proceeding.

(i) Any Borrower (i) shall file a petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) shall fail to contest in a timely and appropriate manner or shall consent to the institution of proceedings thereunder or to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) of any Borrower or of any substantial part of any such Person's assets, (iii) shall make an assignment for the benefit of creditors, (iv) shall take any corporate action in furtherance of any of the foregoing; or (v) shall admit in writing its inability to, or shall be generally unable to, pay its debts as such debts become due.

(j) A final judgment or judgments for the payment of money in excess of $100,000 in the aggregate at any time outstanding shall be rendered against any Borrower and the same shall not, within thirty (30) days after the entry thereof, have been discharged or execution thereof stayed or bonded pending appeal, or shall not have been discharged prior to the expiration of any such stay.

(k) Any material provision of any Loan Document shall for any reason cease to be valid, binding and enforceable in accordance with its terms (or any Borrower shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms), or any security interest created under any Loan Document shall cease to be a valid and perfected first priority security interest or Lien (except as otherwise permitted herein or therein) in any of the Collateral purported to be covered thereby.

(l) Any Change of Control shall occur.

(m) Any event shall occur, whether or not insured or insurable, as a result of which revenue-producing activities cease or are substantially curtailed at any facility of Borrowers generating more than 25% of Borrowers' consolidated revenues for the Fiscal Year preceding such event and such cessation or curtailment continues for more than thirty (30) days.

8.2. Remedies.

(a) If any Event of Default shall have occurred and be continuing or if a Default shall have occurred and be continuing and Agent or Requisite Revolving Lenders shall have determined not to make any Advances  so long as that specific Default is continuing, Agent may (and at the written request of the Requisite Revolving Lenders shall), without notice, suspend this facility with respect to further Advances  whereupon any further Advances shall be made or extended in Agent's sole discretion (or in the sole discretion of the Requisite Revolving Lenders, if such suspension occurred at their direction) so long as such Default or Event of Default is continuing. If any Default or Event of Default shall have occurred and be continuing, Agent may (and at the written request of Requisite Lenders shall), without notice except as otherwise expressly provided herein, increase the rate of interest applicable to the Loans to the Default Rate.

(b) If any Event of Default shall have occurred and be continuing, Agent may (and at the written request of the Requisite Lenders shall), without notice, (i) terminate this facility with respect to further Advances; (ii) declare all or any portion of the Obligations, including all or any portion of any Loan to be forthwith due and payable, all without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Borrowers and (iii) exercise any rights and remedies provided to Agent under the Loan Documents and/or at law or equity, including all remedies provided under the Code; provided, however, that upon the occurrence of an Event of Default specified in Sections 8.1(g), (h) or (i), all of the Obligations, including the aggregate Revolving Loan, shall become immediately due and payable without declaration, notice or demand by any Person.

8.3. Waivers by Borrowers.

Except as otherwise provided for in this Agreement or by applicable law, each Borrower waives: (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Agent on which any Borrower may in any way be liable, and hereby ratifies and confirms whatever Agent may do in this regard, (b) all rights to notice and a hearing prior to Agent's taking possession or control of, or to Agent's replevy, attachment or levy upon, the Collateral or any bond or security which might be required by any court prior to allowing Agent to exercise any of its remedies, and (c) the benefit of all valuation, appraisal, marshaling and exemption laws.

 

 

9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT

9.1. Assignment and Participations.

(a) Any Lender may sell participations in, or, with the consent of GMCR (which consent will not be unreasonably withheld or delayed and which consent shall not be required after an Event of Default) assign at any time or times, the Loan Documents, Loans, and any Commitment or of any portion thereof or interest therein, including any Lender's rights, title, interests, remedies, powers or duties thereunder, whether evidenced by a writing or not. Any assignment by a Lender shall (i) require the consent of Agent and GMCR (which shall not be unreasonably withheld or delayed and which consent shall not be required after an Event of Default) and the execution of an assignment agreement (an "Assignment Agreement") substantially in the from attached hereto as Exhibit 9.1 (a) and otherwise in form and substance satisfactory to, and acknowledged by, Agent; (ii) be conditioned on such assignee Lender representing to the assigning Lender and Agent that it is purchasing the applicable Loans to be assigned to it for its own account, for investment purposes and not with a view to the distribution thereof; (iii) if a partial assignment, be in an amount at least equal to $5,000,000 and, after giving effect to any such partial assignment, the assigning Lender shall have retained Commitments in an amount at least equal to $5,000,000; and (iv) include a payment to Agent of an assignment fee of $3,500.00. In the case of an assignment by a Lender under this Section 9.1, the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as it would if it were a Lender hereunder. The assigning Lender shall be relieved of its obligations hereunder with respect to its Commitments or assigned portion thereof from and after the date of such assignment. Each Borrower hereby acknowledges and agrees that any assignment will give rise to a direct obligation of Borrowers to the assignee and that the assignee shall be considered to be a "Lender". In all instances, each Lender's liability to make Loans hereunder shall be several and not joint and shall be limited to such Lender's Pro Rata Share of the applicable Commitment. In the event Agent or any Lender assigns or otherwise transfers all or any part of a Note, Agent or any such Lender shall so notify Borrowers and Borrowers shall, upon the request of Agent or such Lender, execute new Notes in exchange for the Notes being assigned. Notwithstanding the foregoing provisions of this Section 9.1 (a), any Lender may at any time pledge or assign all or any portion of such Lender's rights under this Agreement and the other Loan Documents to a Federal Reserve Bank; provided, however, that no such pledge or assignment shall release such Lender from such Lender's obligations hereunder or under any other Loan Document.

(b) Any participation by a Lender of all or any part of its Commitments shall be made with the understanding that all amounts payable by Borrowers hereunder shall be determined as if that Lender had not sold such participation, and that the holder of any such participation shall not be entitled to require such Lender to take or omit to take any action hereunder except actions directly affecting (i) any reduction in the principal amount of, or interest rate or Fees payable with respect to, any Loan in which such holder participates, (ii) any extension of the scheduled amortization of the principal amount of any Loan in which such holder participates or the final maturity date thereof, and (iii) any release of all or substantially all of the Collateral (other than in accordance with the terms of this Agreement, the Collateral Documents or the other Loan Documents).  Solely for purposes of Sections 1.12, 1.14, 1.15 and 9.8, each Borrower acknowledges and agrees that a participation shall give rise to a direct obligation of Borrowers to the participant and the participant shall be considered to be a "Lender". Except as set forth in the preceding sentence no Borrower shall have any obligation or duty to any participant. Neither Agent nor any Lender (other than the Lender selling a participation) shall have any duty to any participant and may continue to deal solely with the Lender selling a participation as if no such sale had occurred.

(c) Except as expressly provided in this Section 9.1, no Lender shall, as between Borrowers and that Lender, or Agent and that Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of participation in, all or any part of the Loans, the Notes or other Obligations owed to such Lender.

(d) Each Borrower shall assist any Lender permitted to sell assignments or participations under this Section 9.1 as reasonably required to enable the assigning or selling Lender to effect any such assignment or participation, including the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and, if requested by Agent, the preparation of informational materials for, and the participation of management in meetings with, potential assignees or participants. Each Borrower shall certify the correctness, completeness and accuracy of all descriptions of the Borrowers and their affairs contained in any selling materials provided by them and all other information provided by them and included in such materials.

(e) A Lender may furnish any information concerning Borrowers in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants). Each Lender shall obtain from assignees or participants confidentiality covenants substantially equivalent to those contained in Section 11.8.

(f) So long as no Event of Default shall have occurred and be continuing, no Lender shall assign or sell participations in any portion of its Loans or Commitments to a potential Lender or participant, if, as of the date of the proposed assignment or sale, the assignee Lender or participant would be subject to capital adequacy or similar requirements under Section 1.15(a), increased costs under Section 1.15(b), or an inability to fund LIBOR Loans or BAR Loans under Section 1.15(c). 

9.2. Appointment of Agent.

Fleet National Bank is hereby appointed to act on behalf of all Lenders as Agent under this Agreement and the other Loan Documents. The provisions of this Section 9.2 are solely for the benefit of Agent and Lenders and no Borrower nor any other Person shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and the other Loan Documents, Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for any Borrower or any other Person. Agent shall have no duties or responsibilities except for those expressly set forth in this Agreement and the other Loan Documents. The duties of Agent shall be mechanical and administrative in nature and Agent shall not have, or be deemed to have, by reason of this Agreement, any other Loan Document or otherwise a fiduciary relationship in respect of any Lender. Neither Agent nor any of its Affiliates nor any of their respective officers, directors, employees, agents or representatives shall be liable to any Lender for any action taken or omitted to be taken by it hereunder or under any other Loan Document, or in connection herewith or therewith, except for damages solely caused by its or their own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.

If Agent shall request instructions from Requisite Lenders, Requisite Revolving Lenders, or all affected Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Loan Document, then Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from Requisite Lenders, Requisite Revolving Lenders, or all affected Lenders, as the case may be, and Agent shall not incur liability to any Person by reason of so refraining. Agent shall be fully justified in failing or refusing to take any action hereunder or under any other Loan Document (a) if such action would, in the opinion of Agent, be contrary to law or the terms of this Agreement or any other Loan Document, (b) if such action would, in the opinion of Agent, expose Agent to Environmental Liabilities, or (c) if Agent shall not first be indemnified to its satisfaction against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting hereunder or under any other Loan Document in accordance with the instructions of Requisite Lenders, Requisite Revolving Lenders, or all affected Lenders, as applicable.

9.3. Agent's Reliance. Etc.

Neither Agent nor any of its Affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the other Loan Documents, except for damages caused by its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, Agent: (a) may treat the payee of any Note as the holder thereof until Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to Agent; (b) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of any Borrower or to inspect the Collateral (including the books and records) of any Borrower; (e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (f) shall incur no liability under or in respect of this Agreement or the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by e-mail, telecopy, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties.

9.4. Fleet National Bank and Affiliates.

With respect to its Commitments hereunder, Fleet National Bank shall have the same rights and powers under this Agreement and the other Loan Documents as any other Lender and may exercise the same as though it were not Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Fleet National Bank in its individual capacity. Fleet National Bank and its Affiliates may lend money to, invest in, and generally engage in any kind of business with any Borrower, any of their Affiliates and any Person who may do business with or own securities of any Borrower or any such Affiliate, all as if Fleet National Bank were not Agent and without any duty to account therefor to Lenders. Fleet National Bank and its Affiliates may accept fees and other consideration from any Borrower for services in connection with this Agreement or otherwise without having to account for the same to Lenders. Each Lender acknowledges the potential conflict of interest between Fleet National Bank as a Lender holding disproportionate interests in the Loans and Fleet National Bank as Agent.

9.5. Lender Credit Decision.

Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender and based on the Financial Statements referred to in Section 3.4(a) and such other documents and information as it has deemed appropriate, made its own credit and financial analysis of the Borrowers and its own decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon Agent 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. Each Lender acknowledges the potential conflict of interest of each other Lender as a result of Lenders holding disproportionate interests in the Loans, and expressly consents to, and waives any claim based upon, such conflict of interest.

9.6. Indemnification.

Lenders agree to indemnify Agent (to the extent not reimbursed by the Borrowers and without limiting the obligations of the Borrowers hereunder), ratably according to their respective Pro Rata Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by Agent in connection therewith; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent's gross negligence or willful misconduct. Without limiting the foregoing, each Lender agrees to reimburse Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement and each other Loan Document, to the extent that Agent is not reimbursed for such expenses by the Borrowers.

9.7. Successor Agent.

Agent may resign at any time by giving not less than thirty (30) days' prior written notice thereof to Lenders and Borrower Representative. Upon any such resignation, the Requisite Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Requisite Lenders and shall have accepted such appointment within thirty (30) days after the resigning Agent's giving notice of resignation, then the resigning Agent may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender, if a Lender is willing to accept such appointment, or otherwise shall be a commercial bank or financial institution or a subsidiary of a commercial bank or financial institution if such commercial bank or financial institution is organized under the laws of the United States of America or of any State thereof and has a combined capital and surplus of at least $1,000,000,000. If no successor Agent has been appointed pursuant to the foregoing by the 30th day after the date such notice of resignation was given by the resigning Agent, such resignation shall become effective and the Requisite Lenders shall thereafter perform all the duties of Agent hereunder until such time, if any, as the Requisite Lenders appoint a successor Agent as provided above. Any successor Agent appointed by Requisite Lenders hereunder shall be subject to the approval of Borrower Representative, such approval not to be unreasonably withheld or delayed; provided that such approval shall not be required if a Default or an Event of Default shall have occurred and be continuing. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent. Upon the earlier of the acceptance of any appointment as Agent hereunder by a successor Agent or the effective date of the resigning Agent's resignation, the resigning Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents, except that any indemnity rights or other rights in favor of such resigning Agent shall continue. After any resigning Agent's resignation hereunder, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents. Agent may be removed at the written direction of the holders (other than Agent) of two-thirds or more of the Commitments (excluding Agent's Commitment); provided that in so doing, such Lenders shall be deemed to have waived and released any and all claims they may have against Agent.

9.8. Setoff and Sharing of Payments.

In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, each Lender and each holder of any Note is hereby authorized at any time or from time to time, without notice to any Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all balances held by it at any of its offices for the account of any Borrower (regardless of whether such balances are then due to such Borrower) and any other properties or assets any time held or owing by that Lender or that holder to or for the credit or for the account of any Borrower against and on account of any of the Obligations which are not paid when due. Any Lender or holder of any Note exercising a right to set off or otherwise receiving any payment on account of the Obligations in excess of its Pro Rata Share thereof shall purchase for cash (and the other Lenders or holders shall sell) such participations in each such other Lender's or holder's Pro Rata Share of the Obligations as would be necessary to cause such Lender to share the amount so set off or otherwise received with each other Lender or holder in accordance with their respective Pro Rata Shares. Each Lender's obligation under this Section 9.8 shall be in addition to and not limitation of its obligations to purchase a participation in an amount equal to its Pro Rata Share of the Swing Line Loans under Section 1.1. Each Borrower agrees, to the fullest extent permitted by law, that (a) any Lender or holder may exercise its right to set off with respect to amounts in excess of its Pro Rata Share of the Obligations and may sell participations in such amount so set off to other Lenders and holders and (b) any Lender or holders so purchasing a participation in the Loans made or other Obligations held by other Lenders or holders may exercise all rights of set-off, bankers' lien, counterclaim or similar rights with respect to such participation as fully as if such Lender or holder were a direct holder of the Loans and the other Obligations in the amount of such participation. Notwithstanding the foregoing, if all or any portion of the set-off amount or payment otherwise received is thereafter recovered from the Lender that has exercised the right of set-off, the purchase of participations by that Lender shall be rescinded and the purchase price restored without interest.

9.9. Advances; Payments; Non-Funding Lenders; Information: Actions in Concert.

(a) Advances: Payments. (i) Revolving Lenders shall refund or participate in the Swing Line Loan in accordance with clauses (iii) and (iv) of Section 1.1 (d).  If the Swing Line Lender declines to make a Swing Line Loan or if Swing Line Availability is zero, Agent shall notify Revolving Lenders, promptly after receipt of a Notice of Revolving Credit Advance and in any event prior to 3:00 p.m. (Manchester, New Hampshire time) on the date such Notice of Revolving Advance is received, by e-mail, telecopy, telephone or other similar form of transmission. Each Revolving Lender shall make the amount of such Lender's Pro Rata Share of each Revolving Credit Advance available to Agent in same day funds by wire transfer to Agent's account as set forth in Annex F not later than 3:00 p.m. (Manchester, New Hampshire time) on the requested funding date, in the case of a Prime Rate Loan and not later than 10:00 a.m. (Manchester, New Hampshire time) on the requested funding date in the case of a LIBOR Loan or a BAR Loan. After receipt of such wire transfers (or, in the Agent's sole discretion, before receipt of such wire transfers), subject to the terms hereof, Agent shall make the requested Revolving Credit Advance to the Borrower designated by Borrower Representative in the Notice of Revolving Credit Advance. All payments by each Revolving Lender shall be made without setoff, counterclaim or deduction of any kind.

(ii) Each Business Day (each, a "Settlement Date"), Agent will advise each Lender by e-mail, telephone or telecopy of the amount of such Lender's Pro Rata Share of principal, interest and Fees paid for the benefit of Lenders with respect to each applicable Loan. Provided that such Lender has made all payments required to be made by it and has purchased all participations required to be purchased by it under this Agreement and the other Loan Documents as of such Settlement Date, Agent will pay to each Lender such Lender's Pro Rata Share of principal, interest and Fees paid by Borrowers since the previous Settlement Date for the benefit of that Lender on the Loans held by it. Such payments shall be made by wire transfer to such Lender's account (as specified by such Lender in Annex F or the applicable Assignment Agreement) not later than 1:00 p.m. (Manchester, New Hampshire time) on the next Business Day following each Settlement Date.

(b) Availability of Lender's Pro Rata Share. Agent may assume that each Revolving Lender will make its Pro Rata Share of each Revolving Credit Advance available to Agent on each funding date. If such Pro Rata Share is not, in fact, paid to Agent by such Revolving Lender when due, Agent will be entitled to recover such amount on demand from such Revolving Lender without set-off, counterclaim or deduction of any kind. If any Revolving Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent's demand, Agent shall promptly notify Borrower Representative and Borrowers shall immediately repay such amount to Agent. Nothing in this Section 9.9(b) or elsewhere in this Agreement or the other Loan Documents shall be deemed to require Agent to advance funds on behalf of any Revolving Lender or to relieve any Revolving Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Borrowers may have against any Revolving Lender as a result of any default by such Revolving Lender hereunder. To the extent that Agent advances funds to any Borrower on behalf of any Revolving Lender and is not reimbursed therefor on the same Business Day as such Advance is made, Agent shall be entitled to retain for its account all interest accrued on such Advance until reimbursed by the applicable Revolving Lender.

(c) Return of Payments.(i) If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from Borrowers and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender on demand without set-off, counterclaim or deduction of any kind.

(ii) If Agent determines at any time that any amount received by Agent under this Agreement must be returned to any Borrower or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Loan Document, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to any Borrower or such other Person, without set-off, counterclaim or deduction of any kind.

(d) Non-Funding Lenders. The failure of any Revolving Lender (such Revolving Lender, a "Non-Funding Lender") to make any Revolving Credit Advance or to purchase any participation in any Swing Line Loan to be made or purchased by it on the date specified therefor shall not relieve any other Revolving Lender (each such other Revolving Lender, an "Other Lender") of its obligations to make such Advance or purchase such participation on such date, but neither any Other Lender nor Agent shall be responsible for the failure of any Non-Funding Lender to make an Advance to be made, or to purchase a participation to be purchased, by such Non-Funding Lender. Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a "Lender" or a "Revolving Lender" (or be included in the calculation of "Requisite Lenders" or "Requisite Revolving Lenders" hereunder) for any voting or consent rights under or with respect to any Loan Document.

(e) Dissemination of Information. Agent will use reasonable efforts to provide Lenders with any notice of Default or Event of Default received by Agent from, or delivered by Agent to, any Borrower, with notice of any Event of Default of which Agent has actually become aware and with notice of any action taken by Agent following any Event of Default; provided, however, that Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable solely to Agent's gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. Lenders acknowledge that Borrowers are required to provide Financial Statements and Collateral Reports to Lenders in accordance with Annexes C and D hereto and agree that Agent shall have no duty to provide the same to Lenders.

(f) Actions in Concert. Anything in this Agreement to the contrary notwithstanding, each Lender hereby agrees with each other Lender that no Lender shall take any action to protect or enforce its rights arising out of this Agreement or the Notes (including exercising any rights of set-off) without first obtaining the prior written consent of Agent and Requisite Lenders, it being the intent of Lenders that any such action to protect or enforce rights under this Agreement and the Notes shall be taken in concert and at the direction or with the consent of Agent.

10. SUCCESSORS AND ASSIGNS

10.1. Successors and Assigns.

This Agreement and the other Loan Documents shall be binding on and shall inure to the benefit of each Borrower, Agent, Lenders and their respective successors and assigns (including, in the case of any Borrower, a debtor-in-possession on behalf of such Borrower), except as otherwise provided herein or therein. No Borrower may assign, transfer, hypothecate or otherwise convey its rights, benefits, obligations or duties hereunder or under any of the other Loan Documents without the prior express written consent of Agent and Requisite Lenders. Any such purported assignment, transfer, hypothecation or other conveyance by any Borrower without the prior express written consent of Agent and Requisite Lenders shall be void. The terms and provisions of this Agreement are for the purpose of defining the relative rights and obligations of each Borrower, Agent and Lenders with respect to the transactions contemplated hereby and no Person shall be a third party beneficiary of any of the terms and provisions of this Agreement or any of the other Loan Documents.

 

11. MISCELLANEOUS

11.1. Complete Agreement: Modification of Agreement.

The Loan Documents constitute the complete agreement between the parties with respect to the subject matter thereof and may not be modified, altered or amended except as set forth in Section 11.2 below. Any letter of interest, commitment letter, and/or fee letter (other than the Fleet Fee Letter) between any Borrower and Agent or any Lender or any of their respective affiliates, predating this Agreement and relating to a financing of substantially similar form, purpose or effect shall be superseded by this Agreement.

11.2. Amendments and Waivers.

(a) Except for actions expressly permitted to be taken by Agent, no amendment, modification, termination or waiver of any provision of this Agreement or any of the Notes, or any consent to any departure by any Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by Agent and Borrowers, and by Requisite Lenders, Requisite Revolving Lenders, or all affected Lenders, as applicable. Except as set forth in clauses (b) and (c) below, all such amendments, modifications, terminations or waivers requiring the consent of any Lenders shall require the written consent of Requisite Lenders.

(b) No amendment, modification, termination or waiver of or consent with respect to any provision of this Agreement which waives compliance with the conditions precedent set forth in Section 2.2 to the making of any Loan shall be effective unless the same shall be in writing and signed by Agent, Requisite Revolving Lenders and Borrowers. Notwithstanding anything contained in this Agreement to the contrary, no waiver or consent with respect to any Default (if in connection therewith Agent or Requisite Revolving Lenders, as the case may be, have exercised its or their right to suspend the making or incurrence of further Advances pursuant to Section 8.2(a)) or any Event of Default shall be effective for purposes of the conditions precedent to the making of Loans set forth in Section 2.2 unless the same shall be in writing and signed by Agent, Requisite Revolving Lenders and Borrowers.

(c) No amendment, modification, termination or waiver shall, unless in writing and signed by Agent and each Lender directly affected thereby, do any of the following: (i) increase the principal amount of any Lender's Commitment (which action shall be deemed to directly affect all Lenders); (ii) reduce the principal of, rate of interest on or Fees payable with respect to any Loan of any affected Lender; (iii) extend any scheduled payment date or final maturity date of the principal amount of any Loan of any affected Lender; (iv) waive, forgive, defer, extend or postpone any payment of interest or Fees as to any affected Lender; (v) except as otherwise permitted herein or in the other Loan Documents, permit any Borrower to sell or otherwise dispose of any Collateral with a value exceeding $100,000 in the aggregate (which action shall be deemed to directly affect all Lenders); (vi) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which shall be required for Lenders or any of them to take any action hereunder; and (vii) amend or waive this Section 11.2 or the definitions of the terms "Requisite Lenders", or "Requisite Revolving Lenders" insofar as such definitions affect the substance of this Section 11.2. Furthermore, no amendment, modification, termination or waiver affecting the rights or duties of Agent under this Agreement or any other Loan Document shall be effective unless in writing and signed by Agent, in addition to Lenders required hereinabove to take such action. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No amendment, modification, termination or waiver shall be required for Agent to take additional Collateral pursuant to any Loan Document. No amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the holder of that Note. No notice to or demand on any Borrower in any case shall entitle such Borrower or any other Borrower to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 11.2 shall be binding upon each holder of the Notes at the time outstanding and each future holder of the Notes.

(d) If, in connection with any proposed amendment, modification, waiver or termination (a "Proposed Change"):

(i) requiring the consent of all affected Lenders, the consent of Requisite Lenders is obtained, but the consent of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained as described this clause (i) and in clauses (ii), (iii) and (iv) below being referred to as a "Non-Consenting Lender"), or

(ii) requiring the consent of Requisite Revolving Lenders is obtained, or

(iii) requiring the consent of Requisite Revolving Lenders, but the consent of Requisite Revolving Lenders is not obtained, 

then, so long as Agent is not a Non-Consenting Lender, at Borrower Representative's request, Agent or a Person acceptable to Agent shall have the right with Agent's consent and in Agent's sole discretion (but shall have no obligation) to purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree that they shall, upon Agent's request, sell and assign to Agent or such Person, all of the Commitments of such Non-Consenting Lender for an amount equal to the principal balance of all Loans held by the Non-Consenting Lender and all accrued interest and Fees with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed Assignment Agreement.

(e) Upon indefeasible payment in full in cash and performance of all of the Obligations (other than indemnification Obligations under Section 1.13), termination of the Commitments and a release of all claims against Agent and Lenders, and so long as no suits, actions, proceedings, or claims are pending or threatened against any Indemnified Person asserting any damages, losses or liabilities that are Indemnified Liabilities, Agent shall deliver to Borrowers termination statements, mortgage releases and other documents necessary or appropriate to evidence the termination of the Liens securing payment of the Obligations.

 

11.3. Fees and Expenses.

Borrowers shall reimburse Agent for all out-of-pocket expenses incurred in connection with the preparation of the Loan Documents (including the reasonable fees and expenses of all of its loan counsel, advisors, consultants and auditors retained in connection with the Loan Documents and advice in connection therewith). Borrowers shall reimburse Agent (and, with respect to clauses (c), (d) and (e) below, all Lenders) for all fees, costs and expenses, including the reasonable fees, costs and expenses of counsel or other advisors (including environmental and management consultants and appraisers) for advice, assistance, or other representation in connection with:

(a) the forwarding to Borrowers or any other Person on behalf of Borrowers by Agent of the proceeds of the Loans;

(b) any amendment, modification or waiver of, or consent with respect to, any of the Loan Documents or Related Transactions Documents or advice in connection with the administration of the Loans made pursuant hereto or its rights hereunder or thereunder;

(c) any litigation, contest, dispute, suit, proceeding or action (whether instituted by Agent, any Lender, any Borrower or any other Person) in any way relating to the Collateral, any of the Loan Documents or any other agreement to be executed or delivered in connection therewith or herewith, whether as party, witness, or otherwise, including any litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against any or all of the Borrowers or any other Person that may be obligated to Agent by virtue of the Loan Documents; including any such litigation, contest, dispute, suit, proceeding or action arising in connection with any work-out or restructuring of the Loans during the pendency of one or more Events of Default; provided that in the case of reimbursement of counsel for Lenders other than Agent, such reimbursement shall be limited to one counsel for all such Lenders;

(d) any attempt to enforce any remedies of Agent against any or all of the Borrowers or any other Person that may be obligated to Agent or any Lender by virtue of any of the Loan Documents; including any such attempt to enforce any such remedies in the course of any work-out or restructuring of the Loans during the pendency of one or more Events of Default; provided that in the case of reimbursement of counsel for Lenders other than Agent, such reimbursement shall be limited to one counsel for all such Lenders;

(e) any work-out or restructuring of the Loans during the pendency of one or more Events of Default;

(f) efforts to (i) monitor the Loans or any of the other Obligations, (ii) evaluate, observe or assess any of the Borrowers or their respective affairs, and (iii) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Collateral, provided that with respect to field audits or other access reviews pursuant to Section 1.13 conducted while there are no outstanding Events of Default, Borrowers shall only be obligated to reimburse Agent for expenses incurred with respect to one such field audit per Fiscal Year;

including all attorneys' and other professional and service providers' fees arising from such services, including those in connection with any appellate proceedings; and all expenses, costs, charges and other fees incurred by such counsel and others in any way or respect arising in connection with or relating to any of the events or actions described in this Section 11.3 shall be payable, on demand, by Borrowers to Agent. Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include: fees, costs and expenses of accountants, environmental advisors, appraisers, field auditors, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; telegram or telecopy charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal or other advisory services.

11.4. No Waiver.

Agent's or any Lender's failure, at any time or times, to require strict performance by the Borrowers of any provision of this Agreement and any of the other Loan Documents shall not waive, affect or diminish any right of Agent or such Lender thereafter to demand strict compliance and performance therewith. Any suspension or waiver of an Event of Default shall not suspend, waive or affect any other Event of Default whether the same is prior or subsequent thereto and whether the same or of a different type. Subject to the provisions of Section 11.2, none of the undertakings, agreements, warranties, covenants and representations of any Borrower contained in this Agreement or any of the other Loan Documents and no Default or Event of Default by any Borrower shall be deemed to have been suspended or waived by Agent or any Lender, unless such waiver or suspension is by an instrument in writing signed by an officer of or other authorized employee of Agent and the applicable required Lenders, and directed to Borrowers specifying such suspension or waiver.

11.5. Remedies.

Agent's and Lenders' rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies which Agent or any Lender may have under any other agreement, including the other Loan Documents, by operation of law or otherwise. Recourse to the Collateral shall not be required.

11.6. Severability.

Wherever possible, each provision of this Agreement and the other Loan Documents shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

11.7. Conflict of Terms.

Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement is in conflict with, or inconsistent with, any provision in any of the other Loan Documents, the provision contained in this Agreement shall govern and control.

11.8. Confidentiality.

Agent and each Lender agree to use commercially reasonable efforts (equivalent to the efforts Agent or such Lender applies to maintaining the confidentiality of its own confidential information) to maintain as confidential all confidential information provided to them by the Borrowers and designated as confidential for a period of two (2) years following receipt thereof, except that Agent and any Lender may disclose such information (a) to Persons employed or engaged by Agent or such Lender in evaluating, approving, structuring or administering the Loans and the Commitments; (b) to any bona fide assignee or participant or potential assignee or participant that has agreed to comply with the covenant contained in this Section 11.8 (and any such bona fide assignee or participant or potential assignee or participant may disclose such information to Persons employed or engaged by them as described in clause (a) above); (c) as required or requested by any Governmental Authority or reasonably believed by Agent or such Lender to be compelled by any court decree, subpoena or legal or administrative order or process; (d) as, in the opinion of Agent's or such Lender's counsel, required by law; (e) in connection with the exercise of any right or remedy under the Loan Documents or in connection with any Litigation to which Agent or such Lender is a party; or (f) which ceases to be confidential through no fault of Agent or such Lender.

11.9. GOVERNING LAW.

EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN HILLSBOROUGH COUNTY, CITY OF MANCHESTER, NEW HAMPSHIRE SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE BORROWERS, AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT AGENT, LENDERS AND THE BORROWERS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF HILLSBOROUGH COUNTY, CITY OF MANCHESTER, NEW HAMPSHIRE AND, PROVIDED, FURTHER NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY WAIVES ANY OBJECTION WHICH SUCH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER AT THE ADDRESS SET FORTH IN ANNEX G OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

11.10. Notices.

Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires to give or serve upon any other parties any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this Section 11. 10), (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid, or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated on Annex G or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person (other than Borrower Representative or Agent) designated on Annex G to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication.

 

 

 

11.11. Section Titles.

The Section titles and Table of Contents contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.

11.12. Counterparts.

This Agreement may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement.

11.13. WAIVER OF JURY TRIAL. 

BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY BORROWER ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.

11.14. Reinstatement. 

This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Borrower for liquidation or reorganization, should any Borrower become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of any Borrower's assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

 

 

 

11.15. Advice of Counsel.

Each of the parties represents to each other party hereto that it has discussed this Agreement and, specifically, the provisions of Sections 11.9 and 11.13, with its counsel.

11.16. No Strict Construction.

The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

11.17. Joint and Several Obligations.

The Revolving Loans, the Term Loan, the Equipment Line and the other Obligations shall constitute the joint and several obligations of the Borrowers.

 

12. INTEREST RATE HEDGING

As a condition of the Agent and the Lenders committing to make the Loans and entering into the Agreement, the Borrowers covenant and agree to enter into an interest rate hedging agreement or instrument with the Agent or one of its Affiliates ("Interest Rate Protection Agreement") within thirty (30) days of the Closing Date, such Interest Rate Protection Agreement to have a duration of at least four_(4) years  and cover at least Five Million Dollars ($5,000,000.00) of the outstanding principal amount of the Term Loan.  The Interest Rate Protection Agreement shall provide a fixed interest rate.  The obligations of the Borrowers under the Interest Rate Protection Agreement shall be secured pari passu with the Loans and other Obligations.

 

 

 

[SIGNATURE PAGE FOLLOWS]

 

IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above.

 
BORROWERS:

                                                                           
GREEN MOUNTAIN COFFEE ROASTERS, INC.

                                                                           
GREEN MOUNTAIN COFFEE ROASTERS FRANCHISING INC.

 

_s/ H. Kenneth Merritt, Jr._______                    
By:s/ William G. Hogan__________________

Witness                                                                
William G. Hogan, for, on behalf of, and as Duly Authorized Officer or

                                                                             
Agent of each of the above-named corporations

 

                                                                       
AGENT AND LENDERS:

                                                                       
FLEET NATIONAL BANK

 s/ Thomas P. Manson                                        
By: s/ Kenneth P. Sheldon 

Witness                                                            
Kenneth A. Sheldon

                                                                        
Vice President

                                                                   
BANKNORTH, N.A.

 s/Thomas P. Manson                                        
By: Douglas S. Graham

Witness                                                           
Douglas S. Graham

                                                                       
Vice President

 

[COUNTERPART SIGNATURE PAGE TO CREDIT AGREEMENT

DATED AS OF AUGUST 30, 2002]

 

 

ANNEX A

to

CREDIT AGREEMENT 

DEFINITIONS

Capitalized terms used in the Loan Documents shall have (unless otherwise provided elsewhere in the Loan Documents) the following respective meanings and all section references in the following definitions shall refer to Sections of the Agreement:

"Account Debtor" shall mean any Person who may become obligated to any Borrower under, with respect to, or on account of, an Account.

"Accounts" shall mean all "accounts," as such term is defined in the Code, now owned or hereafter acquired by any Borrower and, in any event, including (a) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper, Documents or Instruments) now owned or hereafter received or acquired by or belonging or owing to any Borrower, whether arising out of goods sold or services rendered by it or from any other transaction (including any such obligations which may be characterized as an account or contract right under the Code), (b) all of each Borrower's rights in, to and under all purchase orders or receipts now owned or hereafter acquired by it for goods or services, (c) all of each Borrower's rights to any goods represented by any of the foregoing (including unpaid sellers' rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), (d) all monies due or to become due to any Borrower, under all purchase orders and contracts for the sale of goods or the performance of services or both by such Borrower or in connection with any other transaction (whether or not yet earned by performance on the part of such Borrower) now or hereafter in existence, including the right to receive the proceeds of said purchase orders and contracts, and (e) all collateral security and guarantees of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing.

"Advance" shall mean any Revolving Credit Advance, Swing Line Advance, or Equipment Line Advance, as the context may require.

"Affiliate" shall mean, with respect to any Person, (a) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, five percent (5%) or more of the Stock having ordinary voting power in the election of directors of such Persons, (b) each Person that controls, is controlled by or is under common control with such Person, (c) each of such Person's officers, directors, joint venturers and partners and (d) in the case of Borrowers, the immediate family members, spouses and lineal descendants of individuals who are Affiliates of any Borrower. For the purposes of this definition, "control" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise; provided, however, that the term "Affiliate" shall specifically exclude Agent and each Lender.

"Agent" shall mean Fleet National Bank or its successor appointed pursuant to Section 9.7.

"Agreement" shall mean the Credit Agreement dated as of the Closing Date by and among Borrowers, Fleet National Bank, as Agent and Lender and the other Lenders signatory from time to time thereto.

"Appendices" shall have the meaning assigned to it in the recitals to the Agreement.

"Applicable Margins" means collectively the Applicable Unused Line Fee Margin, the Applicable Revolver LIBOR Margin, Applicable Revolver BAR Margin, the Applicable Term Loan LIBOR Margin, the Applicable Term Loan Prime Margin, the Applicable Equipment Line LIBOR Margin, and the Applicable Equipment Line Prime Margin.

"Applicable Equipment Line LIBOR Margin" shall mean the per annum interest rate from time to time in effect and payable in addition to the LIBOR Rate applicable to the Equipment Line as determined by reference to Section 1.4(a) of the Agreement.

"Applicable Equipment Line Prime Margin" shall mean the per annum interest rate from time to time in effect and payable in addition to the Prime Rate applicable to the Equipment Line, as determined by reference to Section 1.4(a) of the Agreement.

"Applicable Revolver BAR Margin" shall mean the per annum interest rate from time to time in effect and payable in addition to the Banker's Acceptance Rate applicable to the Revolving Loan, as determined by reference to Section 1.4(a) of the Agreement.

"Applicable Revolver LIBOR Margin" shall mean the per annum interest rate from time to time in effect and payable in addition to the LIBOR Rate applicable to the Revolving Loan, as determined by reference to Section 1.4(a) of the Agreement.

"Applicable Term Loan LIBOR Margin" shall mean the per annum interest rate from time to time in effect and payable in addition to the LIBOR Rate applicable to the Term Loan, as determined by reference to Section 1.4(a) of the Agreement.

"Applicable Term Loan Prime Margin" shall mean the per annum interest rate from time to time in effect and payable in addition to the Prime Rate applicable to the Term Loan, as determined by reference to Section 1.4(a) of the Agreement.

"Applicable Unused Line Fee Margin" shall mean the per annum fee, from time to time in effect, payable in respect to Borrowers' non-use of available funds pursuant to Section 1.8(b), which fee is determined by reference to Section 1.4(a).

"Banker's Acceptance" shall mean a banker's acceptance issued from time to time by Agent in favor of any Borrower in accordance with Agent's practices and procedures.

"Banker's Acceptance Rate" or "BAR" shall mean such fixed rate of interest for the BAR Period as is determined and established by the Agent, and which may be changed by the Agent from time to time, for banker's acceptance rate borrowings, whether or not such rate shall be otherwise published or Borrower receives notice thereof.

"BAR Loan" shall mean a Revolving Credit Advance to fund the issuance of a Banker's Acceptance in favor of the Borrower, which Advance bears interest by reference to the Banker's Acceptance Rate.

"BAR Period" shall mean a period of thirty (30), sixty (60), or ninety (90) days commencing on a Business Day selected by Borrower Representative pursuant to the Agreement,; provided that the foregoing provisions relating to BAR Periods is subject to the following:

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

(b) any BAR Period that would otherwise extend beyond the Commitment Termination Date shall end two (2) Business Days prior to such date; 

(c) any BAR Period pertaining to a BAR 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 BAR Period) shall end on the last Business Day of a calendar month; and

(d) Borrower Representative shall select BAR Periods so that there shall be no more than five (5) separate BAR Loans in existence at any one time.

"Assignment Agreement" shall have the meaning assigned to it in Section 9.1 (a).

"Borrower Accounts" shall have the meaning assigned to it in Annex C.

"Borrower Representative" shall mean GMCR in its capacity as Borrower Representative pursuant to the provisions of Section 1.1 (e).

"Borrowers" and "Borrower" shall have the respective meanings assigned thereto in the recitals to the Agreement.

"Borrowing Availability" shall have the meaning assigned to it in Section 1.1 (a)(i).

"Borrowing Base" shall mean, as of any date of determination by Agent, from time to time, an amount equal to (a) the Maximum Amount, but only through and until such date as the aggregate outstanding principal balance of the Obligations equals or exceeds $20,000,000, and (b) at all times after such date the sum of: (i) eighty percent (80%) of Eligible Accounts, less any Reserves established by Agent at such time, and (ii) fifty percent (50%) of the value of Eligible Inventory, valued on a first-in, first out basis (at the lower of cost or market) less a Collateral Reserve of $2,000,000 and any other Reserves established by Agent from time to time.

"Borrowing Base Certificate" shall mean a certificate to be executed and delivered from time to time by the Borrowers in the form attached to the Agreement as Exhibit 4.1 (b).

"Business Day" shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New Hampshire and in reference to LIBOR Loans shall mean any such day that is also a LIBOR Business Day.

"Capital Expenditures" shall mean, with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Indebtedness) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto, that have a useful life of more than one year and that are required to be capitalized under GAAP.

"Capital Lease" shall mean, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, would be required to be classified and accounted for as a capital lease on a balance sheet of such Person.

"Capital Lease Obligation" shall mean, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease.

"Cash Flow" shall mean, with respect to Borrowers for any fiscal period, an amount equal to EBITDA.

"Cash Management Systems" shall have the meaning assigned to it in Section 1.7.

"Change of Control" shall mean any event, transaction or occurrence as a result of which (a) Parent shall cease to own and control all of the economic and voting rights associated with all of the outstanding Stock of the Borrowers, or (b) if any person or group of persons (within the meaning of the Securities Exchange Act of 1934, as amended), other than Robert P. Stiller and /or his Affiliates, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) of 20% or more of the issued and outstanding capital Stock of Parent having the right to vote for the election of directors of Parent  under ordinary circumstances.

"Charges" shall mean all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to the PBGC at the time due and payable), levies, assessments, charges, liens, claims or encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income or gross receipts of any Borrower, (b) any Borrower's ownership or use of any properties or other assets, or (e) any other aspect of any Borrower's business.

"Chattel Paper" shall mean any "chattel paper," as such term is defined in the Code, now owned or hereafter acquired by any Borrower, wherever located.

"Closing Date" shall mean the date first set forth in this Agreement.

"Closing Checklist" shall mean the schedule, including all appendices, exhibits or schedules thereto, listing certain documents and information to be delivered in connection with the Agreement, the other Loan Documents and the transactions contemplated thereunder, substantially in the form attached hereto as Annex D.

"Code" shall mean the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of New Hampshire; provided, however, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of Agent's or any Lender's security interest in any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New Hampshire, the term "Code" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions.

"Collateral" shall mean the property covered by the Security Agreement, the Mortgages and the other Collateral Documents and any other property, real or personal, tangible or intangible, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of Agent, on behalf of itself and Lenders, to secure the Obligations.  Collateral shall also mean and include any and all "Collateral" under the current Credit Agreement.

"Collateral Documents" shall mean the Security Agreement, the Pledge Agreement, and all similar agreements entered into guaranteeing payment of, or granting a Lien upon property as security for payment of, the Obligations.

"Collateral Reports" shall mean the reports with respect to the Collateral referred to in Annex F.

"Commitment Termination Date" shall mean the earliest of (a) March 31, 2005 with respect to the Revolving Loan, August 30, 2007 with respect to Term Loan, and such date as determined at the discretion of the Agent with respect to the Equipment Line (provided that such date shall not extend beyond March 31, 2005), (b) the date of termination of Lenders' obligations to make Advances or permit existing Loans to remain outstanding pursuant to Section 8.2(b), and (c) the date of indefeasible prepayment in full by Borrowers of the Loans and the permanent reduction of the Revolving Loan Commitment and the Swing Line Commitment to zero dollars ($0), in accordance with the provisions of Section 1.2(a).

"Commitments" shall mean (a) as to any Lender, the aggregate of such Lender's Revolving Loan Commitment (including without duplication the Swing Line Lender's Swing Line Commitment), Term Loan and the Equipment Line Commitment as set forth on Annex H to the Agreement, as such Annex H may be amended from time to time, or in the most recent Assignment Agreement executed by such Lender and (b) as to all Lenders, the aggregate of all Lenders' Revolving Loan Commitments (including without duplication the Swing Line Lender's Swing Line Commitment), Term Loan Commitments and Equipment Line Commitments, which aggregate commitment shall be Thirty-two Million Five Hundred Thousand Dollars ($32,500,000) on the Closing Date, as such amount may be adjusted or amortized from time to time in accordance with the Agreement.

"Compliance Certificate" shall have the meaning assigned to it in Annex C.

"Contracts" shall mean all "contracts," as such term is defined in the Code, now owned or hereafter acquired by any Borrower, in any event, including all contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any Borrower may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account.

"Control Letter" means a letter agreement between Agent and (i) the issuer of uncertificated securities with respect to uncertificated securities in the name of any Borrower, (ii) a securities intermediary with respect to securities, whether certificated or uncertificated, securities entitlements and other financial assets held in a securities account in the name of any Borrower, (iii) a futures commission merchant or clearing house with respect to commodity accounts and commodity contracts held by any Borrower, whereby, among other things, the issuer, securities intermediary or futures commission merchant disclaims any security interest in the applicable financial assets, acknowledges the Lien of Agent, on behalf of itself and Lenders, on such financial assets, and agrees to follow the instructions or entitlement orders of Agent without further consent by the affected Borrower.

"Copyright License" shall mean any and all rights now owned or hereafter acquired by any Borrower under any written agreement granting any right to use any Copyright or Copyright registration.

"Copyrights" shall mean all of the following now owned or hereafter acquired by any Borrower: (a) all copyrights and general intangibles of like nature (whether registered or unregistered), now owned or existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof, and (b) all reissues, extensions or renewals thereof.

"Current Credit Agreement" shall have the meaning assigned thereto in the recitals to the Agreement.

"Current Credit Facilities" shall have the meaning assigned thereto in the recitals to the Agreement.

 "Default" shall mean any event which, with the passage of time or notice or both, would, unless cured or waived, become an Event of Default.

"Default Rate" shall have the meaning assigned to it in Section 1.4(d).

"Disbursement Accounts" shall have the meaning assigned to it on Annex C.

"Disclosure Schedules" shall mean the Schedules prepared by Borrowers and denominated as Disclosure Schedules 1.3 through 6.7 in the Index to the Agreement.

"Documents" shall mean any "documents," as such term is defined in the Code, now owned or hereafter acquired by any Borrower, wherever located.

"Dollars" or "$" shall mean lawful currency of the United States of America.

"EBITDA" shall mean, with respect to Borrowers for any fiscal period, an amount equal to (a) consolidated net income of Borrowers for such period, minus (b) the sum of (i) income tax credits, (ii) interest income, (iii) gain from extraordinary items for such period, (iv) any aggregate net gain during such period arising from the sale, exchange or other disposition of capital assets by Borrowers (including any fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities), and (v) any other non-cash gains which have been added in determining consolidated net income, in each case to the extent included in the calculation of consolidated net income of Borrowers for such period in accordance with GAAP, but without duplication, plus (c) the sum of (i)   accrued income taxes, (ii) Interest Expense, (iii) loss from extraordinary items for such period, (iv) the amount of non-cash charges (including depreciation and amortization) for such period, and (v) an aggregate net loss during such period arising from the sale, exchange or other disposition of capital assets by Borrowers (including any fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities), in each case to the extent included in the calculation of consolidated net income of Borrowers for such period in accordance with GAAP, but without duplication. For purposes of this definition, the following items shall be excluded in determining consolidated net income of Borrowers: (1) the income (or deficit) of any other Person accrued prior to the date it became a Subsidiary of, or was merged or consolidated into, a Borrower or any Borrower's Subsidiaries; (2) the income (or deficit) of any other Person (other than a Subsidiary) in which any Borrower has an ownership interest, except to the extent any such income has actually been received by a Borrower in the form of cash dividends or distributions; (3) the undistributed earnings of any Subsidiary of a Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or requirement of law applicable to such Subsidiary; (4) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period; (5) any write-up of any asset; (6) any net gain from the collection of the proceeds of life insurance policies; (7) any net gain arising from the acquisition of any securities, or the extinguishment, under GAAP, of any Indebtedness, of a Borrower, (8) in the case of a successor to a Borrower by consolidation or merger or as a transferee of its assets, any earnings of such successor prior to such consolidation, merger or transfer of assets, and (9) any deferred credit representing the excess of equity in any Subsidiary of a Borrower at the date of acquisition of such Subsidiary over the cost to a Borrower of the investment in such Subsidiary.

"Eligible Accounts" shall have the meaning assigned to it in Section 1.5 of the Agreement.

"Eligible Inventory" shall have the meaning assigned to it in Section 1.6 of the Agreement.

"Environmental Laws" shall mean all applicable federal, state, local and foreign laws, statutes, ordinances, codes, rules, standards and regulations, now or hereafter in effect, and in each case as amended or supplemented from time to time, and any applicable judicial or administrative interpretation thereof, including any applicable judicial or administrative order, consent decree, order or judgment, imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.) ("CERCLA"); the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. Section 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq ); the Solid Waste Disposal Act (42 U.S.C. Section 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. Section 2601 et seq.); the Clean Air Act (42 U.S.C. Section 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. Section 300(f) et seq.), each as from time to time amended, and any and all regulations promulgated thereunder, and all analogous state, local and foreign counterparts or equivalents and any transfer of ownership notification or approval statutes.

"Environmental Liabilities" shall mean, with respect to any Person, all liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and feasibility study costs, capital costs, operation and maintenance costs, losses, damages, punitive damages, property damages, natural resource damages, consequential damages, treble damages, costs and expenses (including all fees, disbursements and expenses of counsel, experts and consultants), fines, penalties, sanctions and interest incurred as a result of or related to any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, including any arising under or related to any Environmental Laws, Environmental Permits, or in connection with any Release or threatened Release or presence of a Hazardous Material whether on, at, in, under, from or about or in the vicinity of any real or personal property.

"Environmental Permits" shall mean all permits, licenses, authorizations, certificates, approvals, registrations required by any Governmental Authority under any Environmental Laws.

"Equipment" shall mean all "equipment," as such term is defined in the Code, now owned or hereafter acquired by any Borrower, wherever located and, in any event, including all such Borrower's machinery and equipment, including processing equipment, conveyors, machine tools, data processing and computer equipment with software and peripheral equipment (other than software constituting part of the Accounts), and all engineering, processing and manufacturing equipment, office machinery, furniture, materials handling equipment, tools, attachments, accessories, automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other equipment of every kind and nature, trade fixtures and fixtures not forming a part of real property, all whether now owned or hereafter acquired, and wherever situated, together with all additions and accessions thereto, replacements therefor, all parts therefor, all substitutes for any of the foregoing, fuel therefor, and all manuals, drawings, instructions, warranties and rights with respect thereto, and all products and proceeds thereof and condemnation awards and insurance proceeds with respect thereto.

"Equipment Line Advance" shall have the meaning assigned to it in Section 1.1(b)(i))

"Equipment Lenders" shall mean, as of any date of determination, Lenders having a Equipment Line Commitment.

"Equipment Line" shall mean as the context may require, at any time, the aggregate amount of outstanding Equipment Line Advances.

"Equipment Line Commitment" shall mean (a) as to any Lender, the aggregate commitment of such Lender to make Equipment Line Advances or in the most recent Assignment Agreement executed by such Lender and (b) as to all Lenders, the aggregate commitment of all Lenders to make Equipment Line Advances which aggregate commitment shall be Five Million Dollars ($5,000,000) on the Closing Date, as such amount may be adjusted, if at all, from time to time in accordance with the Agreement.

"Equipment Line Note" and "Equipment Line Notes" shall have the respective meanings assigned thereto in Section 1.1(b)(ii).

"ERISA" shall mean the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder.

"ERISA Affiliate" shall mean, with respect to any Borrower, any trade or business (whether or not incorporated) which, together with such Borrower, are treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC.

"ERISA Event" shall mean, with respect to any Borrower or any ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a Title IV Plan; (b) the withdrawal of any Borrower or ERISA Affiliate from a Title IV 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; (c) the complete or partial withdrawal of any Borrower or any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Borrower or ERISA Affiliate to make when due required contributions to a Multiemployer Plan or Title IV Plan unless such failure is cured within 30 days; (g) any other 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 Title IV Plan or Multiemployer Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the termination of a Multiemployer Plan under Section 4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241 of ERISA; or (i) the loss of a Qualified Plan's qualification or tax exempt status.

"ESOP" shall mean a Plan which is intended to satisfy the requirements of Section 4975(e)(7) of the IRC.

"Event of Default" shall have the meaning assigned to it in Section 8.1.

"Federal Funds Rate" shall mean, for any day, a floating rate equal to the weighted average of the rates on overnight Federal funds transactions among members of the Federal Reserve System, as determined by Agent.

"Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any successor thereto.

"Fees" shall mean any and all fees payable to Agent or any Lender pursuant to the Agreement or any of the other Loan Documents.

"Financial Statement Date" shall have the meaning assigned to it in Section 3.5.

"Financial Statements" shall mean the consolidated and consolidating income statements, statements of cash flows and balance sheets of Borrowers delivered in accordance with Section 3.4 of the Agreement and Annex E to the Agreement.

"Fiscal Month" shall mean any of the thirteen (13) fiscal accounting periods which comprise the Parent's Fiscal Year.

"Fiscal Quarter" shall mean any of the quarterly accounting periods which comprise the Parent's Fiscal Year.

"Fiscal Year" shall mean any of the annual fiscal accounting periods of Parent.

"Fixed Charge Coverage Ratio" shall mean, with respect to the Borrowers for any period on a combined basis, the ratio of (a) EBITDA less income taxes paid in cash and Capital Expenditures (but not reducing EBITDA by Capital Expenditures financed by Lenders pursuant to the Agreement (including within such Capital Expenditures financed by Lenders, but without duplication, up to $2,500,000 advanced by Fleet National Bank under the Existing Facilities to Borrower in each of its third and fourth Fiscal Quarters of its Fiscal Year ending September 28, 2002 for Capital Expenditures)) to (b) the sum of (i) Interest Expense paid in cash, and (ii) scheduled principal payments on Funded Debt.

"Fixtures" shall mean any "fixtures" as such term is defined in the Code, now owned or hereafter acquired by any Borrower.

"Fleet National Bank" shall have the meaning ascribed thereto in the recitals to the Agreement.

"Funded Debt" shall mean, with respect to any Person, all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness and which by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person's option under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from the date of creation thereof, and specifically including Capital Lease Obligations, current maturities of long-term debt, revolving credit and short-term debt extendible beyond one year at the option of the debtor, and also including, in the case of Borrowers, the Obligations.

"Funded Debt to EBITDA Ratio" shall mean, with respect to the Borrowers as of any date of determination, the ratio of (a) Borrowers' Funded Debt on a consolidated basis to (b) consolidated EBITDA of Borrowers determined as of the last day of each Fiscal Quarter for the four Fiscal Quarters then ended; provided that for purposes of such determination, the amount of cash balances of Borrowers in accounts maintained with Agent in excess of $600,000 shall reduce the amount of Funded Debt by the amount of such excess.

"GAAP" shall mean generally accepted accounting principles in the United States of America as in effect on the Closing Date, consistently applied as such term is further defined in Annex G to the Agreement.

"General Intangibles" shall mean any "general intangibles," as such term is defined in the Code, now owned or hereafter acquired by any Borrower, and, in any event, including all right, title and interest which such Borrower may now or hereafter have in or under any Contract, all customer lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor and reissues, extensions or renewals thereof, rights in Intellectual Property, interests in partnerships, joint ventures and other business associations, licenses, permits, copyrights, trade secrets, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill (including the goodwill associated with any Trademark or Trademark License), all rights and claims in or under insurance policies (including insurance for fire, damage, loss and casualty, whether covering personal property, real property, intangible rights, all liability, life, key man and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit, checking and other bank accounts, rights to receive tax refunds and other payments, rights of indemnification, all books and records, correspondence, credit files, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of such Borrower or any computer bureau or service company from time to time acting for such Borrower.

"Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

"Guaranteed Indebtedness" shall mean, as to any Person, any obligation of such Person guaranteeing any indebtedness, lease, dividend, or other obligation ("primary obligations") of any other Person (the "primary obligor") in any manner, including any obligation or arrangement of such Person (a) to purchase or repurchase any such primary obligation, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) to indemnify the owner of such primary obligation against loss in respect thereof. The amount of any Guaranteed Indebtedness at any time shall be deemed to be an amount equal to the lesser at such time of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranteed Indebtedness is made and (y) the maximum amount for which such Person may be liable pursuant to the terms of the instrument embodying such Guaranteed Indebtedness; or, if not stated or determinable, the maximum reasonably anticipated liability (assuming full performance) in respect thereof.

"Hazardous Material" shall mean any substance, material or waste which is regulated by or forms the basis of liability now or hereafter under, any Environmental Laws, including any material or substance which is (a) defined as a "solid waste," "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "pollutant," "contaminant," "hazardous constituent," "special waste," "toxic substance" under any Environmental Laws, (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or any radioactive substance.

"Indebtedness" of any Person shall mean without duplication (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property payment for which is deferred six (6) months or more, but excluding obligations to trade creditors incurred in the ordinary course of business that are not overdue by more than six (6) months unless being contested in good faith, (b) all reimbursement and other obligations with respect to letters of credit, bankers' acceptances and surety bonds, whether or not matured, (c) all obligations evidenced by notes, bonds, debentures or similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations, (f) all obligations of such Person under commodity purchase or option agreements or other commodity price hedging arrangements, in each case whether contingent or matured, (g) all obligations of such Person under any foreign exchange contract, currency swap agreement, interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates, in each case whether contingent or matured, (h) all Indebtedness referred to above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property or other assets (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (i) the Obligations.

"Indemnified Liabilities" shall have the meaning assigned to it in Section 1.12.

"Indemnified Persons" shall have the meaning assigned to it in Section 1.12.

"Instruments" shall mean any "instrument," as such term is defined in the Code, now owned or hereafter acquired by any Borrower, wherever located, and, in any event, including all certificated securities, all certificates of deposit, and all notes and other, without limitation, evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper.

"Intellectual Property" shall mean any and all Licenses, Patents, Copyrights, Trademarks, trade secrets and customer lists.

"Interest Expense" shall mean, with respect to any Person for any fiscal period, interest expense (whether cash or non-cash and including financing commitment fees) of such Person determined in accordance with GAAP for the relevant period ended on such date, including, in any event, interest expense with respect to any Funded Debt of such Person.

"Interest Rate Protection Agreement" shall have the meaning assigned to it in Section 12.

"Interest Payment Date" means (a) as to any Prime Rate Loan, the first Business Day of each month to occur while such Loan is outstanding, (b) as to any LIBOR Loan, the last day of the applicable LIBOR Period, and (c) as to any BAR Loan, the first day of the applicable BAR Period; provided, that, in addition to the foregoing, each of (x) the date upon which all of the Commitments have been terminated and the Loans have been paid in full and (y) the Commitment Termination Date shall be deemed to be an Interest Payment Date with respect to any interest which is then accrued under the Agreement.

"Inventory" shall mean any "inventory," as such term is defined in the Code, now or hereafter owned or acquired by any Borrower wherever located, and in any event including inventory, merchandise, goods and other personal property which are held by or on behalf of any Borrower for sale or lease or are furnished or are to be furnished under a contract of service, or which constitute raw materials, work in process or materials used or consumed or to be used or consumed in such Borrower's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including other supplies.

"Investment Property" shall have the meaning ascribed thereto in the Code in those jurisdictions in which such definition has been adopted and shall include (i) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all securities entitlements of any Borrower, including the rights of any Borrower to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (iii) all securities accounts held by any Borrower; (iv) all commodity contracts held by any Borrower; and (v) all commodity accounts held by any Borrower.

"IRC" shall mean the Internal Revenue Code of 1986, as amended, and any successor thereto.

"IRS" shall mean the Internal Revenue Service, or any successor thereto.

"L/C Commitment" shall mean with respect to each Lender the amount of a Letter of Credit equal to the product obtained by multiplying the face amount of the Letter of Credit by the such Lender's Pro Rata Share of the aggregate Revolving Loan Commitment.

"L/C Notice" shall have the meaning assigned to it in Section 1.17.2.

"L/C Participant" shall have the meaning assigned to it in Section 1.17.3. 

"Lenders" shall mean Fleet National Bank, the other Lenders named on the signature page of the Agreement, and, if any such Lender shall decide to assign all or any portion of the Obligations, such term shall include such assignee.

"Letters of Credit" shall mean Letters of Credit of the Agent issued for the account of the Borrowers in accordance with the provisions of Section 1.17.

"Letter of Credit Commission Fee" shall have the meaning assigned to it in Section 1.17.4 (b). 

"Letter of Credit Commission Fee Rate" shall mean 1.0% per annum of the face amount of each Letter of Credit, determined daily based on the face amount of each Letter of Credit outstanding on such day.

"Letter of Credit Participation Amount" shall have the meaning assigned to it in Section 1.17.4 (c). 

"LIBOR Business Day" shall mean a Business Day on which banks in the city of London are generally open for interbank or foreign exchange transactions.

"LIBOR Loan" shall mean a Loan or any portion thereof bearing interest by reference to the LIBOR Rate.

"LIBOR Period" shall mean each period commencing on a LIBOR Business Day selected by Borrower Representative pursuant to the Agreement and (i) with respect to the Revolving Line of Credit Loan ending one, two, three or six months thereafter, (ii) with respect to the Term Loan ending one or three months thereafter but in no event extending beyond the next scheduled date for the payment of principal under the Term Loan, and (iii) with respect to an Equipment Line Advance ending one month thereafter but in no event extending beyond the next scheduled date for the payment of principal under such Equipment Line Advance, each as selected by Borrower Representative's irrevocable notice to Agent as set forth in Section 1.4(e); provided that the foregoing provision relating to LIBOR Periods is subject to the following:

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

(b) any LIBOR Period that would otherwise extend beyond the Commitment

Termination Date shall end two (2) LIBOR Business Days prior to such date;

(c) any LIBOR Period pertaining to a LIBOR Loan that begins on the last LIBOR 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 LIBOR Period) shall end on the last LIBOR Business Day of a calendar month;

(d) Borrower Representative shall select LIBOR Periods so as not to require a payment or prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and

(e) Borrower Representative shall select LIBOR Periods so that there shall be no more than five (5) separate LIBOR Loans in existence at any one time.

"LIBOR Rate" shall mean for each LIBOR Period, a rate of interest determined by Agent equal to the rate per annum as determined on the basis of the offered rates for deposits in U.S. Dollars, for a period of time comparable to such LIBOR Loan which appears on the Telerate page 3750 as of 11:00 a.m. London time on the day that is two (2) LIBOR Business Days preceding the first day of such LIBOR Loan; provided, however, if the rate described above does not appear on the Telerate System on any applicable interest determination date, the LIBOR rate shall be the rate (rounded upward, if necessary, to the nearest one hundred-thousandth of a percentage point), determined on the basis of the offered rates for deposits in U.S. dollars for a period of time comparable to such LIBOR Loan which are offered by four major banks in the London interbank market at approximately 11:00 a.m. London time, on the day that is two (2) LIBOR Business Days preceding the first day of such LIBOR Loan as selected by Agent.  The principal London office of each of the four (4)  major London banks will be requested to provide a quotation of its U.S. Dollar deposit offered rate.  If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the quotations.  If fewer than two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in U.S. dollars to leading European banks for a period of time comparable to such LIBOR Loan offered by major banks in New York City at approximately 11:00 a.m. New York City time, on the day that is two LIBOR Business Days preceding the first day of such LIBOR Loan.  In the event that Agent is unable to obtain any such quotation as provided above, it will be deemed that LIBOR pursuant to a LIBOR Loan cannot be determined.  In the event that the Board of Governors of the Federal Reserve System shall impose a Reserve Percentage with respect to LIBOR deposits of any Lender, then for any period during which such Reserve Percentage shall apply, LIBOR shall be equal to the amount determined above divided by an amount equal to 1 minus the Reserve Percentage.  "Reserve Percentage" shall mean the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed on member banks of the Federal Reserve System against "Euro-currency Liabilities" as defined in Regulation D.

"License" shall mean any Copyright License, Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by any Borrower.

"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction).

"Litigation" shall have the meaning assigned to it in Section 3. 13.

"Loan Account" shall have the meaning assigned to it in Section 1.11.

"Loan Documents" shall mean the Agreement, the Notes, the Collateral Documents and all other agreements, instruments, documents and certificates identified in the Closing Checklist executed and delivered to, or in favor of, Agent and/or Lenders and including all other pledges, powers of attorney, consents, assignments, contracts, notices, and all other written matter whether heretofore, now or hereafter executed by or on behalf of any Borrower, or any employee of any Borrower, and delivered to Agent or any Lender in connection with the Agreement or the transactions contemplated hereby. Any reference in the Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to such Agreement as the same may be in effect at any and all times such reference becomes operative.

"Loans" shall mean the Revolving Loan, the Swing Line Loan, the Term Loan and Equipment Line. 

"Material Adverse Effect" shall mean a material adverse effect on (a) the business, assets, operations or financial or other condition of any Borrower, (b) any Borrower's ability to pay any of the Loans or any of the other Obligations in accordance with the terms of the Agreement, (c) the Collateral or Agent's Liens, on behalf of itself and Lenders, on the Collateral or the priority of such Liens, or (d) Agent's or any Lender's rights and remedies under the Agreement and the other Loan Documents. Without limiting the foregoing, any event or occurrence which results or could reasonably be expected to result in costs or liabilities in excess of the lesser of $500,000 and 10% of Borrowing Availability as of any date of determination shall be deemed to have had Material Adverse Effect.

"Maximum Amount" shall mean, at any particular time, an amount equal to the Revolving Loan Commitment of all Lenders.

"Multiemployer Plan" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA, and to which any Borrower or ERISA Affiliate is making, is obligated to make, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them.

"Net Borrowing Availability" shall mean as of any date of determination the lesser of (i) the Maximum Amount and (ii) the Borrowing Base, in each case less the sum of the aggregate Revolving Loan (including funded Banker's Acceptances issued in favor of the Borrowers), Swing Line Loan, and Letters of Credit then outstanding.

"Net Worth" shall mean, with respect to any Person as of any date of determination, the book value of the assets of such Person, minus (a) reserves applicable thereto, and minus (b) all of such Person's liabilities on a consolidated basis (including accrued and deferred income taxes), all as determined in accordance with GAAP.

"Net Income" shall mean, with respect to Borrowers for any fiscal period, an amount equal to (a) consolidated net income of Borrowers for such period, minus (b) the sum of (i) income tax credits, (ii) interest income, (iii) gain from extraordinary items for such period, (iv) any aggregate net gain during such period arising from the sale, exchange or other disposition of capital assets by Borrowers (including any fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities), and (v) any other non-cash gains which have been added in determining consolidated net income, in each case to the extent included in the calculation of consolidated net income of Borrowers for such period in accordance with GAAP, but without duplication, plus (c) the sum of (i) loss from extraordinary items for such period, and (ii) an aggregate net loss during such period arising from the sale, exchange or other disposition of capital assets by Borrowers (including any fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities), in each case to the extent included in the calculation of consolidated net income of Borrowers for such period in accordance with GAAP, but without duplication. For purposes of this definition, the following items shall be excluded in determining consolidated net income of Borrowers: (1) the income (or deficit) of any other Person accrued prior to the date it became a Subsidiary of, or was merged or consolidated into, a Borrower or any Borrower's Subsidiaries; (2) the income (or deficit) of any other Person (other than a Subsidiary) in which any Borrower has an ownership interest, except to the extent any such income has actually been received by a Borrower in the form of cash dividends or distributions; (3) the undistributed earnings of any Subsidiary of a Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or requirement of law applicable to such Subsidiary; (4) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period; (5) any write-up of any asset; (6) any net gain from the collection of the proceeds of life insurance policies; (7) any net gain arising from the acquisition of any securities, or the extinguishment, under GAAP, of any Indebtedness, of a Borrower, (8) in the case of a successor to a Borrower by consolidation or merger or as a transferee of its assets, any earnings of such successor prior to such consolidation, merger or transfer of assets, and (9) any deferred credit representing the excess of equity in any Subsidiary of a Borrower at the date of acquisition of such Subsidiary over the cost to a Borrower of the investment in such Subsidiary.

"Non-Consenting Lender" shall have the meaning assigned to it in Section 11.2 (c). 

"Non-Funding Lender" shall have the meaning assigned to it in Section 9.9 (d). 

"Notes" shall mean the Revolving Notes, the Swing Line Notes, the Term Notes and the Equipment Notes, collectively.

"Notice of Conversion/Continuation" shall have the meaning assigned to it in Section 1.4(e).

"Notice of Revolving Credit Advance" shall have the meaning assigned to it in Section l.l(a).

"Notice of Equipment Line Advance" shall have the meaning assigned to it in Section 1.1(b).

"Obligations" shall mean all loans, advances, debts, liabilities and obligations, for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by any Borrower to Agent or any Lender, or to an Affiliate of the Agent or any Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under the Agreement, any of the other Loan Documents, or any Interest Rate Protection Agreement. This term includes all principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of any Borrower, whether or not allowed in such proceeding), Fees, Charges, expenses, attorneys' fees and any other sum chargeable to any Borrower under the Agreement, any of the other Loan Documents, or any Interest Rate Protection Agreement.

"Parent" shall mean Green Mountain Coffee, Inc., a Delaware corporation.

"Patents" shall mean all of the following in which any Borrower now holds or hereafter acquires any interest: (a) all letters patent of the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar of lice or agency of the United States, any State or Territory thereof, or any other country, and (b) all reissues, continuations, continuations-in-part or extensions thereof.

"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor thereto.

"Permitted Encumbrances" shall mean the following encumbrances: (a) Liens for taxes or assessments or other governmental Charges not yet due and payable or being contested in accordance with Section 5.2(b) of the Agreement; (b) pledges or deposits of money securing obligations under workmen's compensation, unemployment insurance, social security or public liability laws or similar legislation; (c) pledges or deposits of money securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which any Borrower is a party as lessee made in the ordinary course of business; (d) deposits of money securing statutory obligations of any Borrower for workers compensation and similar charges; (e) inchoate and unperfected workers', mechanics' or similar liens arising in the ordinary course of business, so long as such Liens attach only to Equipment, Fixtures and/or Real Estate; (f) carriers', warehousemen's, suppliers' or other similar possessory liens arising in the ordinary course of business and securing liabilities in an outstanding aggregate amount not in excess of $25,000 at any time, so long as such Liens attach only to Inventory; (g) deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings to which any Borrower is a party; (h) any attachment or judgment lien not constituting an Event of Default under Section 8.1(j), so long as such Lien only attaches to Real Estate; (i) zoning restrictions, easements, licenses, or other restrictions on the use of any Real Estate or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such Real Estate; (j) presently existing or hereinafter created Liens in favor of Agent, on behalf of Lenders; and (k) Liens expressly permitted under clauses (b) and (c) of Section 6.7 of the Agreement.

"Person" shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof).

"Plan" shall mean, at any time, an employee benefit plan, as defined in Section 3(3) of ERISA, which any Borrower maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any Borrower.

"Pledge Agreement" shall mean the Stock Pledge and Security Agreement dated as of the Closing Date between Borrowers and Agent pledging to the Lenders the stock of Keurig, Incorporated owned by GMCR (as required by the Agreement).

"Prime Rate" shall mean the variable per annum rate of interest so designated from time to time by Fleet National Bank as its prime rate.  The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate being charged to any customer.  Changes in the rate of interest resulting from changes in the Prime Rate shall take place immediately without notice or demand of any kind.

"Prime Rate Loan" shall mean a Loan or portion thereof bearing interest by reference to the Prime Rate.

"Proceeds" shall mean all "proceeds," as such term is defined in the Code and, in any event, shall include (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Borrower from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to any Borrower from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of governmental authority), (c) any claim of any Borrower against third parties (i) for past, present or future infringement of any Patent or Patent License, or (ii) for past, present or future infringement or dilution of any Copyright, Copyright License, Trademark or Trademark License, or for injury to the goodwill associated with any Trademark or Trademark License, (d) any recoveries by any Borrower against third parties with respect to any litigation or dispute concerning any of the Collateral, and (e) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral, upon disposition or otherwise.

"Projections" means Borrowers' forecasted consolidated: (a) balance sheets; (b) profit and loss statements; (c) cash flow statements; and (d) capitalization statements, all prepared on a Subsidiary by Subsidiary or division by division basis, if applicable, and otherwise consistent with the historical Financial Statements of the Borrowers, together with appropriate supporting details and a statement of underlying assumptions, and such additional detail as requested by Agent.

"Proposed Change" shall have the meaning assigned to it in Section 11.2 (d).  

"Pro Rata Share" shall mean with respect to all matters relating to any Lender (a) with respect to the Revolving Loan or the Swing Line Loan, the percentage obtained by dividing (i) the Revolving Loan Commitment, including the Swing Line Commitment of that Lender by (ii) the aggregate Revolving Loan Commitments, including the Swing Line Commitment of all Lenders, (b) with respect to the Term Loan, the percentage obtained by dividing (i) the Term Loan Commitment of that Lender by (ii) the aggregate Term Loan Commitments of all Lenders, and (c) with respect to the Equipment Line, the percentage obtained by dividing (i) the Equipment Line Commitment of that Lender by (ii) the aggregate Equipment Line Commitment of all Lenders, as any such percentages may be adjusted by assignments permitted pursuant to Section 9. 1.

"Qualified Plan" shall mean a Plan which is intended to be tax-qualified under Section 401(a) of the IRC.

"Real Estate" shall have the meaning assigned to it in Section 3.6.

"Refunded Swing Line Loan" shall have the meaning assigned to it in Section 1.1(d)(iii).

"Reimbursement Amount" shall have the meaning assigned to it in Section 1.17.4.

"Reimbursement Date" shall have the meaning assigned to it in Section 1.17.4 (c).

"Release" shall mean any spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material in the indoor or outdoor environment, including the movement of Hazardous Material through or in the air, soil, surface water, ground water or property.

"Requisite Lenders" shall mean Fleet National Bank and at least one (1) other Lender  provided that Fleet National Bank and such other Lender(s) have (a) at least fifty-one percent (51%) of the Commitments of all Lenders, or (b) if the Commitments have been terminated, at least fifty-one percent (51%) of the aggregate outstanding amount of all Loans (with the Swing Line Loan being attributed to the Lender making such loan).

"Requisite Revolving Lenders" shall mean Fleet National Bank and at least one (1) other Lender provided that Fleet National Bank and such other Lender(s) have (a) at least fifty-one percent (51%) of the Revolving Loan Commitments of all Lenders, or (b) if the Revolving Loan Commitments have been terminated, at least  fifty-one percent (51%) of the aggregate outstanding amount of the Revolving Loan (with the Swing Line Loan being attributed to the Lender making such Loan).

"Reserves" shall mean, with respect to the Borrowing Base (a) reserves established by Agent from time to time against Eligible Inventory pursuant to Section 1.6, (b) reserves established pursuant to Section 5.4(c), and (c) such other reserves against Eligible Accounts or Eligible Inventory which Agent may, in its reasonable credit judgment, establish on the Closing Date or from time to time after the Closing Date based on circumstances arising after the Closing Date. Without limiting the generality of the foregoing, Reserves established to ensure the payment of accrued Interest Expenses or Indebtedness shall be deemed to be a reasonable exercise of Agent's credit judgment.

"Restricted Payment" shall mean (a) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets in respect of a Person's Stock, (b) any payment on account of the purchase, redemption, defiance, sinking fund or other retirement of a Person's Stock or any other payment or distribution made in respect thereof, either directly or indirectly, (c) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defiance, sinking fund or similar payment and any claim for rescission with respect to, any Subordinated Debt; (d) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire Stock of such Person now or hereafter outstanding; (e) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any shares of such Person's Stock or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission; (f) any payment, loan, contribution, or other transfer of funds or other property to any Stockholder of such Person; and (g) any payment of management fees (or other fees of a similar nature) by such Person to any Stockholder of such Person or their Affiliates.

"Retiree Welfare Plan" shall mean, at any time, a Plan that is a "welfare plan" as defined in Section 3(2) of ERISA, that provides for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant's termination of employment, other than continuation coverage provided pursuant to Section 4980B of the IRC and at the sole expense of the participant or the beneficiary of the participant.

"Revolving Credit Advance" shall have the meaning assigned to it in Section 1.l(a)(i).

"Revolving Lenders" shall mean, as of any date of determination, Lenders having a Revolving Loan Commitment.

"Revolving Loan" shall mean as the context may require, at any time, the aggregate amount of outstanding Revolving Credit Advances.

"Revolving Loan Commitment" shall mean (a) as to any Lender, the aggregate commitment of such Lender to make Revolving Credit Advances (including without duplication Swing Line Advances) or in the most recent Assignment Agreement executed by such Lender and (b) as to all Lenders, the aggregate commitment of all Lenders to make Revolving Credit Advances (including without duplication Swing Line Advances) which aggregate commitment shall be Twelve Million Five Hundred Thousand Dollars ($12,500,000) on the Closing Date, as such amount may be adjusted, if at all, from time to time in accordance with the Agreement.

"Revolving Note" and "Revolving Notes" shall have the respective meanings assigned thereto in Section 1.1(a)(ii).

"Security Agreement" shall mean the Security Agreement, entered into among Agent, on behalf of itself and Lenders, and each Borrower on the Closing Date.

"Solvent" shall mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities (such as litigation, guarantees and pension plan liabilities) at any time shall be computed as the amount which, in light of all the facts and circumstances existing at the time, represents the amount which can be reasonably be expected to become an actual or matured liability.

"Stock" shall mean all shares, options, warrants, general or limited partnership interests or other equivalents (regardless of how designated) of or in a corporation, partnership or equivalent entity whether voting or nonvoting, including common stock, preferred stock or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended).

"Subsidiary" shall mean, with respect to any Person, (a) any corporation of which an aggregate of more than fifty percent (50%) of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of fifty percent (50%) or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) or of which any such Person is a general partner or may exercise the powers of a general partner.

 "Swing Line Advance" has the meaning assigned to it in Section l.l(d)(i).

"Swing Line Availability" has the meaning assigned to it in Section l.l(d)(i).

"Swing Line Commitment" shall mean, as to the Swing Line Lender, the commitment of the Swing Line Lender to make Swing Line Loans as set forth on Annex J to the Agreement, which commitment constitutes a subfacility of the Revolving Loan Commitment of the Swing Line Lender and shall equal $1,000,000 as of the Closing Date.

"Swing Line Lender" shall mean Fleet National Bank.

"Swing Line Loan" shall mean, as the context may require, at any time, the aggregate amount of Swing Line Advances outstanding to any Borrower or to all Borrowers.

"Swing Line Loan Participation Certificate" shall mean a certificate delivered pursuant to Section l.l(d)(iv).

"Swing Line Note" has the meaning assigned to it in Section l.l(d)(ii).

"Taxes" shall mean taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Agent or a Lender by the jurisdictions under the laws of which Agent and Lenders are organized or any political subdivision thereof.

"Term Lenders" shall mean those Lenders having Term Loan Commitments.

"Term Loan" shall have the meaning assigned to it in Section 1.1 (c)(i).

"Term Loan Commitment" shall mean (a) as to any Lender with a Term Loan Commitment, the commitment of such Lender to make or hold its Pro Rata Share of Term Loan as set forth on Annex J to the Agreement or in the most recent Assignment Agreement executed by such Lender, and (b) as to all Lenders with a Term Loan Commitment, the aggregate commitment of all Lenders to make or hold Term Loan, which aggregate commitment shall be Fifteen Million Dollars ($15,000,000.00) on the Closing Date.

"Term Loan" shall mean the term loan.

"Term Note" and "Term Notes" shall have the respective meanings assigned thereto in Section 1.1 (c)(i).

"Termination Date" shall mean the date on which the Loans have been indefeasibly repaid in full and all other Obligations under the Agreement and the other Loan Documents have been completely discharged and none of Borrowers shall have any further right to borrow any monies under the Agreement.

"Title IV Plan" shall mean an employee pension benefit plan, as defined in Section 3 (2) of ERISA (other than a Multiemployer Plan), which is covered by Title IV of ERISA, and which any Borrower or ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them.

 "Trademark License" shall mean rights under any written agreement now owned or hereafter acquired by any Borrower granting any right to use any Trademark.

"Trademarks" shall mean all of the following now owned or hereafter acquired by any Borrower: (a) all trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered or unregistered), now owned or existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar of rice or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill associated with or symbolized by any of the foregoing.

"Unfunded Pension Liability" shall mean, at any time, the aggregate amount, if any, of the sum of (a) the amount by which the present value of all accrued benefits under each Title IV Plan exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, all determined as of the most recent valuation date for each such Title IV Plan using the actuarial assumptions for funding purposes in effect under such Title IV Plan, and (b) for a period of five (5) years following a transaction which might reasonably be expected to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by any Borrower or any ERISA Affiliate as a result of such transaction.

"Yield Maintenance Fee" shall mean an amount computed as follows: The current rate for United States Treasury securities (bills on a discounted basis shall be converted to a bond equivalent) with a maturity date closest to the LIBOR Period chosen for the LIBOR Loan as to which the prepayment is made, shall be subtracted from the LIBOR Rate plus the Applicable Margin in effect for such LIBOR Loan at the time of prepayment.  If the result is zero or a negative number, there shall be no yield maintenance fee.  If the result is a positive number, then the resulting percentage shall be multiplied by the amount of the principal balance being prepaid.  The resulting amount shall be divided by 360 and multiplied by the number of days remaining in the LIBOR Period chosen for the LIBOR Loan as to which the prepayment is made.  Said amount shall be reduced to present value calculated by using the above referenced United States Treasury securities rate and the number of days remaining in the LIBOR Period chosen for the LIBOR Loan as to which prepayment is made.  The resulting amount shall be the yield maintenance fee due to Bank upon the prepayment of a LIBOR Loan. 

All other undefined terms contained in any of the Loan Documents shall, unless the context indicates otherwise, have the meanings provided for by the Code as in effect in the State of New Hampshire to the extent the same are used or defined therein. Unless otherwise specified, references in the Agreement or any of the Appendices to a Section, subsection or clause refer to such Section, subsection or clause as contained in the Agreement. The words "herein," "hereof'' and "hereunder" and other words of similar import refer to the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the same may from time to time be amended, restated, modified or supplemented, and not to any particular section, subsection or clause contained in the Agreement or any such Annex, Exhibit or Schedule.

Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter genders. The words "including", "includes" and "include" shall be deemed to be followed by the words "without limitation"; references to Persons include their respective successors and assigns (to the extent and only to the extent permitted by the Loan Documents) or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations. Whenever any provision in any Loan Document refers to the knowledge (or an analogous phrase) of any Borrower, such words are intended to signify that such Borrower has actual knowledge or awareness of a particular fact or circumstance or that such Borrower, if it had exercised reasonable diligence, would have known or been aware of such fact or circumstance.

 

EXHIBIT l.l(a)(ii)

CREDIT AGREEMENT

FORM OF REVOLVING NOTE

$___,___,___ 

Manchester, New Hampshire 

August __, 2002

FOR VALUE RECEIVED, each of the undersigned (each individually a "Borrower" and collectively, the "Borrowers") HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of ____________________________ ("Lender"), at the offices of FLEET NATIONAL BANK, a national banking association organized under the laws of the United States of America, as Agent for Lenders ("Agent"), with an address of Mail Stop NH DE 01102A, 1155 Elm Street, Manchester, New Hampshire 03101, or at such other place as Agent may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the amount of _____________________ Dollars ($__________) or, if less, the aggregate unpaid amount of all Revolving Credit Advances made to the Borrowers under the Credit Agreement (as hereinafter defined) by Lender. All capitalized terms used but not otherwise defined herein have the meanings given to them in the Credit Agreement or in Annex A thereto.

This Revolving Note is one of the Revolving Notes issued pursuant to that certain Credit Agreement dated as of August ____, 2002 by and among the Borrowers, Agent, Lender and the other Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified, the "Credit Agreement"), and is entitled to the benefit and security of the Credit Agreement, the Security Agreement and all of the other Loan Documents referred to therein.  Reference is hereby made to the Credit Agreement for a statement of all of the terms and conditions under which the Loans evidenced hereby are made and are to be repaid.  The date and amount of each Revolving Credit Advance made by Lender to the Borrowers, the rates of interest applicable thereto and each payment made on account of the principal thereof, shall be recorded by Agent on its books; provided that the failure of Agent to make any such recordation shall not affect the obligations of each Borrower to make a payment when due of any amount owing under the Credit Agreement or this Note in respect of the Revolving Credit Advances made by Lender to the Borrowers.

This Revolving Note, together with each of the other Revolving Notes of even date herewith executed by Borrowers (the "Other Notes"), is substitution for the Replacement Revolving Note issued by the Borrowers on April 7, 2000 to Fleet Bank - NH (the "Prior Note"). The principal balance outstanding under the Prior Note shall continue in all respects to be outstanding hereunder and under each of the Other Notes, and this Revolving Note shall not be deemed to evidence a novation or payment and refunding of that outstanding principal balance.

The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Credit Agreement, the terms of which are hereby incorporated herein by reference.  Interest hereon shall be paid until such principal amount is paid in full at such interest rates and at such times, and pursuant to such calculations, as are specified in the Credit Agreement.

If any payment on this Revolving Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

Upon and after the occurrence of any Event of Default, this Revolving Note may, as provided in the Credit Agreement, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable.

Time is of the essence of this Revolving Note.  Demand, presentment, protest and notice of nonpayment and protest are hereby waived by each Borrower.

Except as provided in the Credit Agreement, this Revolving Note may not be assigned by Lender to any Person.

Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other security document which is not of public record, and, in the case of any such loss, theft, destruction or mutilation, upon cancellation of such Note or other security document, Borrower will issue, in lieu thereof, a replacement note or other security document in the same principal amount thereof and otherwise of like tenor.

THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.

[signature page follows]

 

IN WITNESS WHEREOF, the Borrowers have executed and delivered this Revolving Note as of the date first set forth above.

 

                                                            
BORROWERS:

                                                            
GREEN MOUNTAIN COFFEE ROASTERS, INC.

                                                           
GREEN MOUNTAIN COFFEE ROASTERS FRANCHISING CORPORATION

 

_____________________________ By:______________________________

Witness                                            
William G. Hogan, for, on behalf of, and as Duly Authorized Officer or Agent of each

                                                         
of the above-named corporations

 

EXHIBIT l.l(b)(ii)

CREDIT AGREEMENT

FORM OF EQUIPMENT LINE NOTE

$___,___,___ 

Manchester, New Hampshire 

August __, 2002

FOR VALUE RECEIVED, each of the undersigned (each individually a "Borrower" and collectively, the "Borrowers") HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of ____________________________ ("Lender"), at the offices of FLEET NATIONAL BANK, a national banking association organized under the laws of the United States of America, as Agent for Lenders ("Agent"), with an address of Mail Stop NH DE 01102A, 1155 Elm Street, Manchester, New Hampshire 03101, or at such other place as Agent may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the amount of _____________________ Dollars ($__________) or, if less, the aggregate unpaid amount of all Equipment Line Advances made to the Borrowers under the Credit Agreement (as hereinafter defined) by Lender. All capitalized terms used but not otherwise defined herein have the meanings given to them in the Credit Agreement or in Annex A thereto.

This Equipment Line Note is one of the Equipment Line Notes issued pursuant to that certain Credit Agreement dated as of August ____, 2002 by and among the Borrowers, Agent, Lender and the other Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified, the "Credit Agreement"), and is entitled to the benefit and security of the Credit Agreement, the Security Agreement and all of the other Loan Documents referred to therein.  Reference is hereby made to the Credit Agreement for a statement of all of the terms and conditions under which the Loans evidenced hereby are made and are to be repaid.  The date and amount of each Equipment Line Advance made by Lender to the Borrowers, the rates of interest applicable thereto and each payment made on account of the principal thereof, shall be recorded by Agent on its books; provided that the failure of Agent to make any such recordation shall not affect the obligations of each Borrower to make a payment when due of any amount owing under the Credit Agreement or this Note in respect of the Equipment Line Advances made by Lender to the Borrowers.

The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Credit Agreement, the terms of which are hereby incorporated herein by reference.  Interest hereon shall be paid until such principal amount is paid in full at such interest rates and at such times, and pursuant to such calculations, as are specified in the Credit Agreement.

If any payment on this Equipment Line Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

Upon and after the occurrence of any Event of Default, this Equipment Line Note may, as provided in the Credit Agreement, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable.

Time is of the essence of this Equipment Line Note.  Demand, presentment, protest and notice of nonpayment and protest are hereby waived by each Borrower.

Except as provided in the Credit Agreement, this Equipment Line Note may not be assigned by Lender to any Person.

Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other security document which is not of public record, and, in the case of any such loss, theft, destruction or mutilation, upon cancellation of such Note or other security document, Borrower will issue, in lieu thereof, a replacement note or other security document in the same principal amount thereof and otherwise of like tenor.

THIS EQUIPMENT LINE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.

[signature page follows]

 

IN WITNESS WHEREOF, the Borrowers have executed and delivered this Equipment Line Note as of the date first set forth above.

 

                                                            
BORROWERS:

                                                            
GREEN MOUNTAIN COFFEE ROASTERS, INC.

                                                           
GREEN MOUNTAIN COFFEE ROASTERS FRANCHISING CORPORATION

 

_____________________________ By:______________________________

Witness                                            
William G. Hogan, for, on behalf of, and as Duly Authorized Officer or Agent of each

                                                         
of the above-named corporations

 

 

 

 

 

 

EXHIBIT l.l(c)(ii) 

to

CREDIT AGREEMENT

FORM OF TERM NOTE

 

$___,___,___ 

Manchester, New Hampshire 

August __, 2002

FOR VALUE RECEIVED, each of the undersigned (each individually a "Borrower" and collectively, the "Borrowers") HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of ____________________________ ("Lender"), at the offices of FLEET NATIONAL BANK, a national banking association organized under the laws of the United States of America, as Agent for Lenders ("Agent"), with an address of Mail Stop NH DE 01102A, 1155 Elm Street, Manchester, New Hampshire 03101,or at such other place as Agent may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the amount of _________________________ Dollars ($____________).  All capitalized terms used but not otherwise defined herein have the meanings given to them in the Credit Agreement (as hereinafter defined) or in Annex A thereto.

This Term Note is one of the Term Notes issued pursuant to that certain Credit Agreement dated as of August ___, 2002, by and among the Borrowers, Agent, Lender and the other Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto and as from time to time amended, restated, supplemented or otherwise modified, the "Credit Agreement"), and is entitled to the benefit and security of the Credit Agreement, the Security Agreement and all of the other Loan Documents referred to therein. Reference is hereby made to the Credit Agreement for a statement of all of the terms and conditions under which the Loans evidenced hereby are made and are to be repaid. The principal balance of the Term Loan, the rates of interest applicable thereto and the date and amount of each payment made on account of the principal thereof, shall be recorded by Agent on its books; provided that the failure of Agent to make any such recordation shall not affect the obligations of each Borrower to make a payment when due of any amount owing under the Credit Agreement or this Term Note.

The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Credit Agreement.

Interest on the principal amount of the indebtedness evidenced hereby shall be paid until such principal amount is paid in full at such interest rates and at such times, and pursuant to such calculations, as are specified in the Credit Agreement. The terms of the Credit Agreement are hereby incorporated herein by reference.

If any payment on this Term Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

Upon and after the occurrence of any Event of Default, this Term Note may, as provided in the Credit Agreement, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable.

Time is of the essence of this Term Note. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by each Borrower.

Except as provided in the Credit Agreement, this Term Note may not be assigned by Lender to any Person.

Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other security document which is not of public record, and, in the case of any such loss, theft, destruction or mutilation, upon cancellation of such Note or other security document, Borrower will issue, in lieu thereof, a replacement note or other security document in the same principal amount thereof and otherwise of like tenor.

THIS TERM NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.

[signature page follows]

 

IN WITNESS WHEREOF, the Borrowers have executed and delivered this Term Note as of the date first set forth above.

 

                                                            
BORROWERS:

                                                            
GREEN MOUNTAIN COFFEE ROASTERS, INC.

                                                           
GREEN MOUNTAIN COFFEE ROASTERS FRANCHISING CORPORATION

 

_____________________________ By:______________________________

Witness                                            
William G. Hogan, for, on behalf of, and as Duly Authorized Officer or Agent of each

                                                         
of the above-named corporations

 

 

 

 

 

EXHIBIT 1.1(d)(ii)

to

CREDIT AGREEMENT

FORM OF SWING LINE NOTE

 

$1,000,000.00 

Manchester, New Hampshire 

August __, 2002

 

FOR VALUE RECEIVED, each of the undersigned (each individually a "Borrower" and, collectively, the "Borrowers"), HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of to the order of FLEET NATIONAL BANK, ("Swing Line Lender"), at the offices of FLEET NATIONAL BANK, a national banking association organized under the laws of the United States of America, as Agent for Lenders ("Agent"), with an address of Mail Stop NH DE 01102A, 1155 Elm Street, Manchester, New Hampshire 03101, or at such other place as Agent may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the amount of ONE MILLION DOLLARS AND NO CENTS ($1,000,000.00) or, if less, the aggregate unpaid amount of all Swing Line Advances made to the undersigned under the "Credit Agreement" (as hereinafter defined).  All capitalized terms used but not otherwise defined herein have the meanings given to them in the Credit Agreement (as hereinafter defined) or in Annex A thereto.

This Swing Line Note is issued pursuant to that certain Credit Agreement dated as of August __, 2002, by and among Borrowers, Agent, Swing Line Lender and the other Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto and as from time to time amended, restated, supplemented or otherwise modified, the "Credit Agreement"), and is entitled to the benefit and security of the Credit Agreement, the Security Agreement and all of the other Loan Documents. Reference is hereby made to the Credit Agreement for a statement of all of the terms and conditions under which the Loans evidenced hereby are made and are to be repaid. The date and amount of each Swing Line Advance made by Swing Line Lender to Borrowers, the rate of interest applicable thereto and each payment made on account of the principal thereof, shall be recorded by Agent on its books; provided that the failure of Agent to make any such recordation shall not affect the obligations of Borrowers to make a payment when due of any amount owing under the Credit Agreement or this Swing Line Note in respect of the Swing Line Advances made by Swing Line Lender to Borrowers.

The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Credit Agreement, the terms of which are hereby incorporated herein by reference. Interest thereon shall be paid until such principal amount is paid in full at such interest rates and at such times, and pursuant to such calculations, as are specified in the Credit Agreement.

If any payment on this Swing Line Note becomes due and payable on a day other than a Business Day. the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

Upon and after the occurrence of any Event of Default, this Swing Line Note may, as provided in the Credit Agreement, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable.

Time is of the essence of this Swing Line Note. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by each Borrower.

Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other security document which is not of public record, and, in the case of any such loss, theft, destruction or mutilation, upon cancellation of such Note or other security document, Borrower will issue, in lieu thereof, a replacement note or other security document in the same principal amount thereof and otherwise of like tenor.

THIS SWING LINE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.

 

 

IN WITNESS WHEREOF, the Borrowers have executed and delivered this Equipment Line Note as of the date first set forth above.

 

                                                            
BORROWERS:

                                                            
GREEN MOUNTAIN COFFEE ROASTERS, INC.

                                                           
GREEN MOUNTAIN COFFEE ROASTERS FRANCHISING CORPORATION

 

_____________________________ By:______________________________

Witness                                            
William G. Hogan, for, on behalf of, and as Duly Authorized Officer or Agent of each

                                                         
of the above-named corporations

 

EXHIBIT 1.4(e)

to

CREDIT AGREEMENT

FORM OF NOTICE OF CONVERSION/CONTINUATION

Reference is made to that certain Credit Agreement dated as of August ___, 2002 by and among the undersigned ("Borrower Representative"), the other Persons named therein as Borrowers, Fleet National Bank ("Agent"), and the Lenders from time to time signatory thereto (including all annexes, exhibits or schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified, the "Credit Agreement").  Capitalized terms used herein without definition are so used as defined in the Credit Agreement.

Borrower Representative hereby gives irrevocable notice, pursuant to Section 1.4(e) of the Credit Agreement, of its request to:

(a)on [date] convert $[_______] of the aggregate outstanding principal amount of the [______] Loan, bearing interest at the [______] Rate, into a(n) [________] Loan [and, in the case of a LIBOR Loan, having a LIBOR Period of [______] months(s)];

(b)     on [date] continue $[_______] of the aggregate outstanding principal amount of the [_______] Loan, bearing interest at the applicable LIBOR Rate, as a LIBOR Loan having a LIBOR period of [_____] month(s)].

Borrower Representative hereby represents and warrants that all of the conditions contained in Section 2.2 of the Credit Agreement have been satisfied on and as of the date hereof, and will continue to be satisfied on and as of the date of the conversion/continuation requested hereby, before and after giving effect thereto; and (ii) reaffirms the cross-guaranty provisions set forth in Section 12 of the Credit Agreement and the guaranty and continuance of Agent's Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.

IN WITNESS WHEREOF, Borrower Representative has caused this Notice of Conversion/Continuation be executed and delivered on behalf of the Borrower[s] specified above by its duly authorized officer as of the date first set forth above.

________________________________

[Name of Borrower Representative]

By:______________________________

Title_____________________________

 EXHIBIT 9.1(a)

ASSIGNMENT AGREEMENT

This Assignment Agreement (this "Agreement") is made as of ______________, ____ by and between ___________________________ ("Assignor Lender") and __________________________ ("Assignee Lender") and acknowledged and consented to by FLEET NATIONAL BANK, as agent ("Agent").  All capitalized terms used in this Agreement and not otherwise defined herein will have the respective meanings set forth in the Credit Agreement as hereinafter defined.

RECITALS:

Green Mountain Coffee Roasters, Inc. and Green Mountain Coffee Roasters Franchising Corporation (collectively, "Borrowers"), Agent, Assignor Lender and other Persons signatory thereto as Lenders have entered into that certain Credit Agreement dated as of August ____, 2002 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") pursuant to which Assignor Lender has agreed to make certain Loans to Borrowers;

WHEREAS, Assignor Lender desires to assign to Assignee Lender [all/a portion] of its interest in the Loans (as described below) and the Collateral and to delegate to Assignee Lender [all/a portion] of its Commitments and other duties with respect to such Loans and Collateral;

WHEREAS, Assignee Lender desires to become a Lender under the Credit Agreement and to accept such assignment and delegation from Assignor Lender; and

WHEREAS, Assignee Lender desires to appoint Agent to serve as agent for Assignee Lender under the Credit Agreement.

NOW, THEREFORE, in consideration of the premises and the agreements, provisions, and covenants herein contained, Assignor Lender and Assignee Lender agree as follows:

1. ASSIGNMENT, DELEGATION, AND ACCEPTANCE

1.01. Assignment. Assignor Lender hereby transfers and assigns to Assignee

Lender, without recourse and without representations or warranties of any kind (except as

set forth in Section 3.02), [all/such percentage] of Assignor Lender's right, title, and interest in [the Revolving Loan ], [the Term Loan ], [the Equipment Line] [the Loans], Loan Documents and Collateral as will result in Assignee Lender having as of the Effective Date (as hereinafter defined) a Pro Rata Share thereof, as follows:

	
Assignee Lender's Loans
	
Principal Amount
	
Pro Rata Share

	
Revolving Loan
	
$_____________
	
___%

	
Term Loan
	
$_____________
	
___%

	
Equipment Line
	
$_____________
	
___%

 

1.02. Delegation. Assignor Lender hereby irrevocably assigns and delegates to Assignee Lender [all/a portion] of its Commitments and its other duties and obligations as a Lender under the Loan Documents equivalent to [100%/___%] of Assignor Lender's Revolving Loan Commitment (such percentage representing a commitment of $______________), [100%/ ___%] of Assignor Lender's Term Loan Commitment (such percentage representing a commitment of $_______), [100%/ ___%] of Assignor Lender's Equipment Line Commitment (such percentage representing a commitment of $_______).  

1.03. Acceptance by Assignee Lender. By its execution of this Agreement, Assignee Lender irrevocably purchases, assumes and accepts such assignment and delegation and agrees to be a Lender with respect to the delegated interest under the Loan Documents and to be bound by the terms and conditions thereof. By its execution of this Agreement, Assignor Lender agrees, to the extent provided herein, to relinquish its rights and be released from its obligations and duties under the Credit Agreement.

1.04. Effective Date. Such assignment and delegation by Assignor Lender and acceptance by Assignee Lender will be effective and Assignee Lender will become a Lender under the Loan Documents as of [the date of this Agreement] ("Effective Date") and upon payment of the Assigned Amount and the Assignment Fee (as each term is defined below).

2. INITIAL PAYMENT AND DELIVERY OF NOTES

2.01. Payment of the Assigned Amount. Assignee Lender will pay to Assignor Lender, in immediately available funds, not later than 11:00 a.m. (Manchester, New Hampshire time) on the Effective Date, an amount equal to its Pro Rata Share of the then outstanding principal amount of the Loans as set forth above in Section 1.01 together with accrued interest, fees and other amounts as set forth on Schedule 2.1 (the "Assigned Amount").

2.02. Payment of Assignment Fee. [Assignor Lender and/or Assignee Lender] will pay to Agent, for its own account in immediately available funds, not later than 11:00 a.m. (Manchester, New Hampshire time) on the Effective Date, the assignment fee in the amount of $3,500 (the "Assignment Fee") as required pursuant to Section 9.1 (a) of the Credit Agreement.

2.03. Execution and Delivery of Notes. Following payment of the Assigned Amount and the Assignment Fee, Assignor Lender will deliver to Agent the Notes previously delivered to Assignor Lender for redelivery to Borrowers and Agent will obtain from Borrowers for delivery to [Assignor Lender and] Assignee Lender, new executed Notes evidencing Assignee Lender's [and Assignor Lender's respective] Pro Rata Share[s] in the Loans after giving effect to the assignment described in Section 1. Each new Note will be issued in the aggregate maximum principal amount of the [applicable] Commitment [of the Lender to whom such Note is issued] [OR] [the Assignee Lender].

3.  REPRESENTATIONS, WARRANTIES AND COVENANTS

3.01. Assignee Lender's Representations. Warranties and Covenants. Assignee Lender hereby represents, warrants, and covenants the following to Assignor Lender and Agent:

(a) This Agreement is a legal, valid, and binding agreement of Assignee Lender, enforceable according to its terms;

(b) The execution and performance by Assignee Lender of its duties and obligations under this Agreement and the Loan Documents will not require any registration with, notice to, or consent or approval by any Governmental Authority;

(c) Assignee Lender is familiar with transactions of the kind and scope reflected in the Loan Documents and in this Agreement;

(d) Assignee Lender has made its own independent investigation and appraisal of the financial condition and affairs of each Borrower, has conducted its own evaluation of the Loans, the Loan Documents and each Borrower's creditworthiness, has made its decision to become a Lender to Borrowers under the Credit Agreement independently and without reliance upon Assignor Lender or Agent, and will continue to do so;

(e) Assignee Lender is entering into this Agreement in the ordinary course of its business, and is acquiring its interest in the Loans for its own account and not with a view to or for sale in connection with any subsequent distribution; provided, however, that at all times the distribution of Assignee Lender's property shall, subject to the terms of the Credit Agreement, be and remain within its control;

(f) No future assignment or participation granted by Assignee Lender pursuant to Section 9.1 of the Credit Agreement will require Assignor Lender, Agent, or Borrower to file any registration statement with the Securities and Exchange Commission or to apply to qualify under the blue sky laws of any state;

(g) Assignee Lender has no loans to, written or oral agreements with, or equity or other ownership interest in any Borrower;

(h) Assignee Lender will not enter into any written or oral agreement with, or acquire any equity or other ownership interest in, any Borrower without the prior written consent of Agent; and

(i) As of the Effective Date, Assignee Lender (i) is entitled to receive payments of principal and interest in respect of the Obligations without deduction for or on account of any taxes imposed by the United States of America or any political subdivision thereof [, (ii) is not subject to capital adequacy or similar requirements under Section 1.15(a) of the Credit Agreement, (iii) does not require the payment of any increased costs under Section 1.15(b) of the Credit Agreement, and (iv) is not unable to fund LIBOR Loans under Section 1.15(c) of the Credit Agreement,] and Assignee Lender will indemnify Agent from and against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, or expenses that result from Assignee Lender's failure to fulfill its obligations under the terms of Section 

1.14(c) of the Credit Agreement [or from any other inaccuracy in the foregoing].

3.02. Assignor Lender's Representations Warranties and Covenants. Assignor

Lender hereby represents, warrants and covenants the following to Assignee Lender:

(a) Assignor Lender is the legal and beneficial owner of the Assigned

Amount;

(b) This Agreement is a legal, valid and binding agreement of Assignor Lender, enforceable according to its terms;

(c) The execution and performance by Assignor Lender of its duties and obligations under this Agreement and the Loan Documents will not require any registration with, notice to or consent or approval by any Governmental Authority;

(d) Assignor Lender has full power and authority, and has taken all action necessary to execute and deliver this Agreement and to fulfill the obligations hereunder and to consummate the transactions contemplated hereby;

(e) Assignor Lender is the legal and beneficial owner of the interests being assigned hereby, free and clear of any adverse claim, lien, encumbrance, security interest, restriction on transfer, purchase option, call or similar right of a third party; and

(f) This assignment by Assignor Lender to Assignee Lender complies, in all material respects, with the terms of the Loan Documents.

4.  LIMITATIONS OF LIABILITY

Neither Assignor Lender (except as provided in Section 3.02) nor Agent makes any representations or warranties of any kind, nor assumes any responsibility or liability whatsoever, with regard to (a) the Loan Documents or any other document or instrument furnished pursuant thereto or the Loans, Letter of Credit Obligations or other Obligations, (b) the creation, validity, genuineness, enforceability, sufficiency, value or collectibility of any of them, (c) the amount, value or existence of the Collateral, (d) the perfection or priority of any Lien upon the Collateral, or (e) the financial condition of any Borrower or other obligor or the performance or observance by any Borrower of its obligations under any of the Loan Documents. Neither Assignor Lender nor Agent has or will have any duty, either initially or on a continuing basis, to make any investigation, evaluation, appraisal of, or any responsibility or liability with respect to the accuracy or completeness of, any information provided to Assignee Lender which has been provided to Assignor Lender or Agent by any Borrower. Nothing in this Agreement or in the Loan Documents shall impose upon the Assignor Lender or Agent any fiduciary relationship in respect of the Assignee Lender.

5. FAILURE TO ENFORCE

No failure or delay on the part of Agent or Assignor Lender in the exercise of any power, right, or privilege hereunder or under any Loan Document will impair such power, right, or privilege or be construed to be a waiver of any default or acquiescence therein. No single or partial exercise of any such power, right, or privilege will preclude further exercise thereof or of any other right, power, or privilege. All rights and remedies existing under this Agreement are cumulative with, and not exclusive of, any rights or remedies otherwise available.

6. NOTICES

Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given will be in writing and addressed to the respective party as set

forth below its signature hereunder, or to such other address as the party may designate in writing to the other.

7. AMENDMENTS AND WAIVERS

No amendment, modification, termination, or waiver of any provision of this Agreement will be effective without the written concurrence of Assignor Lender, Agent and Assignee Lender.

8.  SEVERABILITY

Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law. In the event any provision of this Agreement is or is held to be invalid, illegal, or unenforceable under applicable law, such provision will be ineffective only to the extent of such invalidity, illegality, or unenforceability, without invalidating the remainder of such provision or the remaining provisions of the Agreement. In addition, in the event any provision of or obligation under this Agreement is or is held to be invalid, illegal, or unenforceable in any jurisdiction, the validity, legality, and enforceability of the remaining provisions or obligations in any other jurisdictions will not in any way be affected or impaired thereby.

9. SECTION TITLES

Section and Subsection titles in this Agreement are included for convenience of reference only, do not constitute a part of this Agreement for any other purpose, and have no substantive effect.

10.SUCCESSORS AND ASSIGNS

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

11.  APPLICABLE LAW

THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW HAMPSHIRE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.

12. COUNTERPARTS

This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts,

each of which, when so executed and delivered, will be deemed an original and all of which shall together constitute one and the same instrument.

[signature page follows]

IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above.

Assignee Lender                                
Assignor Lender

____________________________________________________________

By: ________________________By: ________________________

Title: ______________________Title: ______________________

Notice Address                            
Notice Address

 

 

Account Information:                    
Account Information:

 

 

Acknowledged and Consented to:

FLEET NATIONAL BANK

 

By: ____________________________

          Its Duly Authorized Signatory

SCHEDULE 2.1

Assignor Lender's Loans

Principal Amount

Revolving Loan$______________

Term Loan$______________

Equipment Line$______________

Subtotal$______________

 

Accrued Interest$______________

Unused Line Fee$______________

Other + or - $______________

                

Total$______________

 

All determined as of the Effective Date

SCHEDULE 1.1 (Section 1.1(a))

to

CREDIT AGREEMENT

 

Representative of Agent for Notice of Revolving Line of Credit Advance

 

Fleet National Bank

Mailstop: NH DE 01102A

1155 Elm Street

Manchester, NH 03101

Attention: Marybeth Bighinatti, Loan Administrator

Telephone: 603-647-3746

Fax: 603-647-7617

SCHEDULE 1.1 (Section 1.1(a))

to

CREDIT AGREEMENT

 

Representative of Agent for Notice of Revolving Line of Credit Advance

 

Fleet National Bank

Mailstop: NH DE 01102A

1155 Elm Street

Manchester, NH 03101

Attention: Marybeth Bighinatti, Loan Administrator

Telephone: 603-647-3746

Fax: 603-647-7617

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00043-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00043-of-00352.parquet"}]]