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<SEC-DOCUMENT>0000950124-02-002815.txt : 20020819
<SEC-HEADER>0000950124-02-002815.hdr.sgml : 20020819
<ACCEPTANCE-DATETIME>20020819112056
ACCESSION NUMBER:		0000950124-02-002815
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20020629
FILED AS OF DATE:		20020819

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CHAMPION ENTERPRISES INC
		CENTRAL INDEX KEY:			0000814068
		STANDARD INDUSTRIAL CLASSIFICATION:	MOBILE HOMES [2451]
		IRS NUMBER:				382743168
		STATE OF INCORPORATION:			MI
		FISCAL YEAR END:			1225

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-09751
		FILM NUMBER:		02742060

	BUSINESS ADDRESS:	
		STREET 1:		2701 CAMBRIDGE COURT
		STREET 2:		STE 300
		CITY:			AUBURN HILLS
		STATE:			MI
		ZIP:			48326
		BUSINESS PHONE:		2483409090

	MAIL ADDRESS:	
		STREET 1:		2701 UNIVERSITY DRIVE
		STREET 2:		STE 300
		CITY:			AUBURN HILLS
		STATE:			MI
		ZIP:			48326
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>k71231e10vq.txt
<DESCRIPTION>FORM 10-Q FOR QUARTER ENDED JUNE 29, 2002
<TEXT>
<PAGE>
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark one)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934.


FOR QUARTERLY PERIOD ENDED JUNE 29, 2002

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE TRANSITION PERIOD FROM ____________ TO ____________



Commission file number     1-9751
                           ------


                           CHAMPION ENTERPRISES, INC.
 -------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Michigan                                      38-2743168
- ----------------------------------               -------------------------------
 (State or other jurisdiction                        (I.R.S. Employer
 of incorporation or organization)                   Identification No.)


                         2701 Cambridge Court, Suite 300
                             Auburn Hills, MI 48326
 -------------------------------------------------------------------------------
                    (Address of principal executive offices)


Registrant's telephone number, including area code: (248) 340-9090


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes   X          No
    -----           -----

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

         49,161,188 shares of the registrant's $1.00 par value Common Stock were
outstanding as of August 2, 2002.



<PAGE>





                          PART I. FINANCIAL INFORMATION

                          Item 1. Financial Statements.

                           CHAMPION ENTERPRISES, INC.
                      Consolidated Statements of Operations
                    (In thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                             Unaudited                            Unaudited
                                                        Three Months Ended                    Six Months Ended
                                                    ---------------------------         ----------------------------
                                                     June 29,          June 30,          June 29,          June 30,
                                                      2002               2001              2002              2001
                                                    ---------         ---------         ---------         ---------
<S>                                                 <C>               <C>               <C>               <C>
Net sales                                           $ 361,506         $ 428,202         $ 667,883         $ 754,514

Cost of sales                                         301,300           351,791           563,168           633,295
                                                    ---------         ---------         ---------         ---------

Gross margin                                           60,206            76,411           104,715           121,219

Selling, general and administrative expenses           67,720            67,839           125,958           139,702
Goodwill impairment charges                            97,000                --            97,000                --
Closing-related expenses                                4,900             1,000             4,900             8,700
Gain on debt retirement                                (5,870)               --            (5,870)               --
                                                    ---------         ---------         ---------         ---------

Operating income (loss)                              (103,544)            7,572          (117,273)          (27,183)

Interest income                                           601               766             1,219             1,343
Interest expense                                       (7,648)           (6,548)          (13,083)          (13,553)
                                                    ---------         ---------         ---------         ---------

Income (loss) before income taxes                    (110,591)            1,790          (129,137)          (39,393)

Income taxes (benefits)                                88,700             1,300            82,000           (13,800)
                                                    ---------         ---------         ---------         ---------

Net income (loss)                                   $(199,291)        $     490         $(211,137)        $ (25,593)
                                                    =========         =========         =========         =========

Basic earnings (loss) per share                     $   (4.10)        $    0.01         $   (4.36)        $   (0.54)
                                                    =========         =========         =========         =========

Weighted shares for basic EPS                          48,729            47,847            48,617            47,672
                                                    =========         =========         =========         =========

Diluted earnings (loss) per share                   $   (4.10)        $    0.01         $   (4.36)        $   (0.54)
                                                    =========         =========         =========         =========

Weighted shares for diluted EPS                        48,729            49,508            48,617            47,672
                                                    =========         =========         =========         =========

</TABLE>

See accompanying Notes to Consolidated Financial Statements.



                                                                    Page 2 of 40
<PAGE>


                           CHAMPION ENTERPRISES, INC.
                           Consolidated Balance Sheets
                        (In thousands, except par value)

<TABLE>
<CAPTION>
                                                                              Unaudited                 December 29,
                                                                             June 29, 2002                  2001
                                                                             -------------               ------------
                                  ASSETS
<S>                                                                            <C>                       <C>
CURRENT ASSETS
  Cash and cash equivalents                                                    $  85,636                 $  69,456
  Restricted cash                                                                 17,777                       648
  Accounts receivable, trade                                                      49,436                    27,507
  Inventories                                                                    171,457                   172,276
  Deferred tax assets                                                                 --                    39,100
  Other current assets                                                            46,423                    36,637
                                                                               ---------                 ---------
     Total current assets                                                        370,729                   345,624
                                                                               ---------                 ---------

LOANS RECEIVABLE                                                                   6,145                        --

PROPERTY, PLANT AND EQUIPMENT                                                    303,574                   307,741
  Less-accumulated depreciation                                                  139,007                   130,311
                                                                               ---------                 ---------
                                                                                 164,567                   177,430
                                                                               ---------                 ---------

GOODWILL, NET                                                                    165,964                   258,967

OTHER NON-CURRENT ASSETS
  Restricted cash                                                                 18,443                        --
  Deferred tax assets                                                                 --                    55,700
  Other non-current assets                                                        26,190                    20,431
                                                                               ---------                 ---------
     Total assets                                                              $ 752,038                 $ 858,152
                                                                               =========                 =========

                   LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
  Floor plan payable                                                           $  10,745                 $  70,919
  Accounts payable                                                                67,312                    47,559
  Warehouse borrowings                                                             2,103                        --
  Accrued warranty obligations                                                    41,248                    42,540
  Accrued volume rebates                                                          33,145                    39,426
  Accrued compensation and payroll taxes                                          20,634                    22,639
  Accrued insurance                                                               23,421                    19,089
  Other current liabilities                                                       55,239                    50,342
                                                                               ---------                 ---------
     Total current liabilities                                                   253,847                   292,514
                                                                               ---------                 ---------

LONG-TERM LIABILITIES
  Long-term debt                                                                 344,867                   224,926
  Deferred portion of purchase price                                              14,000                    18,000
  Other long-term liabilities                                                     31,291                    30,678
                                                                               ---------                 ---------
                                                                                 390,158                   273,604
                                                                               ---------                 ---------
CONTINGENT LIABILITIES (Note 7)

REDEEMABLE CONVERTIBLE PREFERRED STOCK,
  no par value, 5,000 shares authorized, 45 and 20 shares
  issued and outstanding, respectively                                            43,959                    20,000

SHAREHOLDERS' EQUITY
  Common stock, $1 par value, 120,000 shares authorized, 48,822
    and 48,320 shares issued and outstanding, respectively                        48,822                    48,320
  Capital in excess of par value                                                  39,362                    36,423
  Retained earnings (deficit)                                                    (22,688)                  189,262
  Accumulated other comprehensive income (loss)                                   (1,422)                   (1,971)
                                                                               ---------                 ---------
     Total shareholders' equity                                                   64,074                   272,034
                                                                               ---------                 ---------
     Total liabilities and shareholders' equity                                $ 752,038                 $ 858,152
                                                                               =========                 =========

</TABLE>

See accompanying Notes to Consolidated Financial Statements.



                                                                    Page 3 of 40
<PAGE>


                           CHAMPION ENTERPRISES, INC.
                      Consolidated Statements of Cash Flows
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                       Unaudited
                                                                                    Six Months Ended
                                                                         -------------------------------------
                                                                         June 29, 2002           June 30, 2001
                                                                         -------------           -------------
<S>                                                                       <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                  $(211,137)                $ (25,593)
                                                                          ---------                 ---------
Adjustments to reconcile net loss to
  net cash provided by (used for) operating activities:
  Depreciation and amortization                                              11,563                    18,337
  Goodwill impairment charges                                                97,000                        --
  Deferred income taxes                                                      94,800                        --
  Fixed asset impairment charges                                              1,900                     6,500
  Gain on debt retirement                                                    (5,870)                       --
  Increase/decrease
    Accounts receivable                                                     (21,929)                  (34,549)
    Inventories                                                                 819                    35,534
    Accounts payable                                                         19,753                    26,749
    Accrued liabilities                                                       1,100                    (1,672)
    Other, net                                                               (6,229)                    3,097
                                                                          ---------                 ---------
Total adjustments                                                           192,907                    53,996
                                                                          ---------                 ---------
Net cash provided by (used for) operating activities                        (18,230)                   28,403
                                                                          ---------                 ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions                                                                 (8,050)                  (10,233)
Increase in loans receivable                                                 (6,145)                       --
Additions to property and equipment                                          (2,857)                   (3,229)
Investments in and advances to unconsolidated subsidiaries                   (1,139)                   (1,819)
Proceeds on disposal of fixed assets                                          3,069                     1,494
                                                                          ---------                 ---------
Net cash used for investing activities                                      (15,122)                  (13,787)
                                                                          ---------                 ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in floor plan payable, net                                         (60,174)                  (29,124)
Repayment of long-term debt                                                    (440)                     (333)
Proceeds from Senior Notes                                                  145,821                        --
Purchase of Senior Notes                                                    (23,750)                       --
Proceeds from warehouse borrowings                                            2,103                        --
Increase in deferred financing costs                                         (3,266)                       --
Increase in restricted cash                                                 (35,572)                       --
Preferred stock issued, net                                                  23,810                        --
Common stock issued, net                                                      1,000                       590
                                                                          ---------                 ---------
Net cash provided by (used for) financing activities                         49,532                   (28,867)
                                                                          ---------                 ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         16,180                   (14,251)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                             69,456                    50,143
                                                                          ---------                 ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                $  85,636                 $  35,892
                                                                          =========                 =========

</TABLE>


See accompanying Notes to Consolidated Financial Statements.


                                                                    Page 4 of 40
<PAGE>


                           CHAMPION ENTERPRISES, INC.

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

1.  The Consolidated Financial Statements are unaudited, but in the opinion of
    management include all adjustments necessary for a fair presentation of the
    results of the interim period. All such adjustments are of a normal
    recurring nature except for the goodwill impairment charge discussed in Note
    2 and the deferred tax asset valuation allowance discussed in Note 3.
    Financial results of the interim period are not necessarily indicative of
    results that may be expected for any other interim period or for the fiscal
    year. The balance sheet as of December 29, 2001 was derived from audited
    financial statements. Certain prior period amounts have been reclassified to
    conform to the current period presentation. Accumulated other comprehensive
    income (loss) consists of foreign currency translation adjustments. The
    Company's total comprehensive loss for the three and six months ended June
    29, 2002 was $198.7 million and $210.6 million, respectively compared to its
    total comprehensive income of $0.6 million for the three months ended June
    30, 2001 and total comprehensive loss of $25.6 million for the six months
    then ended.

2.  During the quarter ending June 29, 2002 the Company's operating results were
    affected by continuing challenging industry conditions including reductions
    in chattel lending availability, the effects of Conseco Finance Corp.
    exiting the floor plan lending business, high industry repossession levels
    and the Texas legislation that limits the use of chattel financing to
    purchase a manufactured home. As a result of these conditions and their
    effects on our sales volume and operating results, in June 2002 the Company
    announced the closure or consolidation of 33 under-performing retail sales
    centers and one manufacturing facility. The continuation of these industry
    conditions through the month of July 2002, together with unfavorable changes
    in the economy, caused the Company to re-evaluate our manufacturing and
    retail capacity and overall cost structure. On August 8, 2002, the Company
    announced the closure or consolidation of 64 retail sales centers and seven
    manufacturing facilities. These additional closures bring the total retail
    closures in 2002 to 101 or

    46% of the sales centers we were operating at the beginning of 2002.

    As a result of the significant downsizing of our retail operations in
    reaction to continuing challenging industry conditions and in accordance
    with Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill
    and Other Intangible Assets," we performed a test for goodwill impairment
    using the present value of future cash flows method. The results of this
    test indicated that the fair value of the retail goodwill was less than its
    carrying value. Therefore, in the quarter ended June 29, 2002, we recorded
    non-cash goodwill impairment charges of $97 million.

    The change in the carrying amount of goodwill follows:

<TABLE>
<CAPTION>
                                                            Six Months Ended June 29, 2002
                                              ---------------------------------------------------------
                                              Manufacturing      Retail          Other          Total
                                              -------------      ------          -----          -----
                                                                     (In thousands)
 <S>                                             <C>            <C>             <C>            <C>
              Balance at December 29, 2001      $ 126,482      $ 131,571       $     914      $ 258,967
              Impairment charges                       --        (97,000)             --        (97,000)
              Goodwill acquired                        --             --           4,099          4,099
              Other changes                            31           (133)             --           (102)
                                                ---------      ---------       ---------      ---------
              Balance at June 29, 2002          $ 126,513      $  34,438       $   5,013      $ 165,964
                                                =========      =========       =========      =========
</TABLE>

3.  SFAS No. 109, "Accounting for Income Taxes," requires the recording of a
    valuation allowance when it is "more likely than not that some portion or
    all of the deferred tax assets will not be realized." It further states,
    "forming a conclusion that a valuation allowance is not needed is difficult
    when there is negative evidence such as cumulative losses in recent years"
    and places considerably more weight on historical results and less weight on
    future projections. The Company incurred pretax losses in 2000 and 2001 and
    through the first half of 2002 totaling $391 million, including goodwill
    impairment charges of $97 million in 2002 and $190 million in 2000. The
    industry continues to be challenged by limited availability of consumer
    chattel financing, high industry repossession levels and reductions in
    wholesale floor plan lending availability and a negative economic outlook
    resulting in a continued decline in wholesale shipments and retail sales. In
    the absence of specific favorable factors, application of SFAS No. 109
    requires a 100% valuation allowance for any net deferred tax asset when a
    company has cumulative financial accounting losses, excluding unusual items,
    over several years. Accordingly, after consideration of these factors, in
    the quarter ended June 29, 2002, the Company provided a 100% valuation
    allowance against deferred tax assets, which totaled $120 million. The
    valuation allowance will be reversed to income in future periods to the
    extent that the related deferred tax assets are realized as a reduction of
    taxes otherwise payable on any future earnings or a portion or all of the
    valuation allowance is otherwise no longer required.

    Because of provisions in the tax law which allow us to receive a carryback
    refund for taxable losses incurred in 2002, in determining the amount of the
    deferred tax asset valuation allowance we had to estimate the current tax
    deductibility of certain costs and charges. These estimates are subject to
    change. Any differences between these current estimates and actual values
    determined at the end of this fiscal year will result in a change to the
    valuation allowance which will be reflected in results of operations in the
    third or fourth quarter of the year.

    The income tax provision or benefit differs from the amount of income tax
    determined by applying the applicable U.S. statutory federal income tax rate
    to pretax loss as a result of the following differences:

<TABLE>
<CAPTION>
                                                                                     Six Months Ended
                                                                                --------------------------
                                                                                 June 29,        June 30,
                                                                                  2002             2001
                                                                                --------        ----------
                                                                                       (In thousands)
<S>                                                                             <C>             <C>
              Statutory U.S. tax rate                                           $ (45,200)      $ (13,800)
              Change in rate resulting from
                Deferred tax valuation allowance                                  120,000              --
                State taxes, net of federal benefit                                (3,700)         (1,000)
                Nondeductible goodwill amortization and impairment charges         10,300             800
                Other                                                                 600             200
                                                                                ---------       ---------
              Total income tax provision (benefit)                              $  82,000       $ (13,800)
                                                                                =========       =========

</TABLE>




                                                                    Page 5 of 40
<PAGE>
4.       A summary of inventories by component follows:

<TABLE>
<CAPTION>
                                                                              June 29,            December 29,
                                                                                 2002                 2001
                                                                             -----------          ------------
                                                                                       (In thousands)
<S>                                                                          <C>                  <C>
           New manufactured homes                                            $   102,187          $   102,090
           Raw materials                                                          33,175               32,207
           Work-in-process                                                         7,810                8,130
           Other inventory                                                        28,285               29,849
                                                                             -----------          -----------
                                                                             $   171,457          $   172,276
                                                                             ===========          ===========

</TABLE>

         Other inventory consists of pre-owned manufactured homes, land and park
         spaces and improvements.

5.       A summary of other current and non-current assets by component follows:

<TABLE>
<CAPTION>
                                                                               June 29,                 December 29,
                                                                                 2002                      2001
                                                                             -----------                -----------
                                                                                            (In thousands)
<S>                                                                          <C>                        <C>
           Other Current Assets
             Refundable income taxes                                         $    18,840                $    21,700
             Deposits                                                             15,558                      2,708
             Other current assets                                                 12,025                     12,229
                                                                             -----------                -----------
                                                                             $    46,423                $    36,637
                                                                             ===========                ===========

           Other Non-Current Assets
             Investment in unconsolidated subsidiaries                       $     9,057                $     8,955
             Other non-current assets                                             17,133                     11,476
                                                                             -----------                -----------
                                                                             $    26,190                $    20,431
                                                                             ===========                ===========

</TABLE>

         Deposits consist primarily of cash collateral deposited for surety
         bonds and insurance purposes.


                                                                    Page 6 of 40

<PAGE>

6.       Reconciliations of segment sales to consolidated sales and segment
         EBITA (earnings (loss) before interest, taxes, goodwill amortization
         and impairment charges, general corporate expenses and certain gains)
         to consolidated operating income (loss) follow. Finance EBITA (loss)
         includes operating costs and net interest income earned on loans
         receivable.

<TABLE>
<CAPTION>
                                                                                   Three Months Ended
                                                                             --------------------------
                                                                               June 29,        June 30,
                                                                                2002            2001
                                                                             -----------      ---------
                                                                                     (In thousands)
<S>                                                                          <C>              <C>
             Net sales
                Manufacturing                                                $   313,699      $ 351,199
                Retail                                                            96,607        129,403
                Less: intercompany                                               (48,800)       (52,400)
                                                                             -----------      ---------
                Consolidated net sales                                       $   361,506      $ 428,202
                                                                             ===========      =========

             Operating income (loss)
                Manufacturing EBITA                                          $    10,426      $  19,372
                Retail EBITA (loss)                                              (13,802)        (1,817)
                Finance EBITA (loss)                                              (1,927)             -
                Gain on debt retirement                                            5,870              -
                General corporate expenses                                        (7,111)        (7,101)
                Goodwill impairment charges                                      (97,000)             -
                Goodwill amortization                                                  -         (2,882)
                                                                             -----------      ---------
                Consolidated operating income (loss)                         $  (103,544)     $   7,572
                                                                             ===========      =========

</TABLE>


<TABLE>
<CAPTION>
                                                                                   Six Months Ended
                                                                             -------------------------
                                                                              June 29,        June 30,
                                                                                2002            2001
                                                                             -----------      ---------
                                                                                    (In thousands)
<S>                                                                          <C>              <C>
             Net sales
                Manufacturing                                                $   580,351      $ 611,709
                Retail                                                           176,732        237,805
                Less: intercompany                                               (89,200)       (95,000)
                                                                             -----------      ---------
                Consolidated net sales                                       $   667,883      $ 754,514
                                                                             ===========      =========

             Operating loss
                Manufacturing EBITA                                          $    11,729      $   8,916
                Retail EBITA (loss)                                              (21,880)       (16,655)
                Finance EBITA (loss)                                              (1,927)             -
                Gain on debt retirement                                            5,870              -
                General corporate expenses                                       (14,065)       (13,683)
                Goodwill impairment charges                                      (97,000)             -
                Goodwill amortization                                                  -         (5,761)
                                                                             -----------      ---------
                Consolidated operating loss                                  $  (117,273)     $ (27,183)
                                                                             ===========      =========
</TABLE>


    For the three and six months ended June 29, 2002, retail EBITA (loss)
    includes $1.9 million of non-cash fixed asset impairment charges and $3.0
    million of lease termination and other costs associated with closures of
    retail sales centers. For the quarter ended June 30, 2001, manufacturing
    EBITA includes $1.0 million of non-cash fixed asset impairment charges
    related to closed plants. For the six month period ended June 30, 2001,
    manufacturing EBITA includes $3.3 million of non-cash fixed asset impairment
    charges related to closed plants, and retail EBITA (loss) includes $3.2
    million of non-cash fixed asset impairment charges and $2.2 million of lease
    termination and other costs associated with closures of retail sales
    centers. Retail floor plan interest expense not charged to retail EBITA
    (loss) totaled $0.9 million and $2.3 million for the three and six months
    ended June 29, 2002 and $2.2 million and $4.9 million for the three and six
    months ended June 30, 2001, respectively.


                                                                    Page 7 of 40
<PAGE>



7.  As is customary in the manufactured housing industry, the majority of
    Champion's manufacturing sales to independent retailers are made in
    connection with repurchase agreements with lending institutions that provide
    wholesale floor plan financing to the retailers. Pursuant to these
    agreements, for a period of either 12 or 15 months from invoice date of the
    sale of the homes and upon default by the retailer and repossession by the
    financial institution, the Company is obligated to purchase the related
    floor plan loans or repurchase the homes from the lender. The maximum
    potential contingent repurchase obligation at June 29, 2002 was estimated to
    be $270 million, without reduction for the resale value of the homes. This
    amount compares to $300 million at the beginning of the year and $320
    million a year ago. Repurchase losses incurred totaled $0.2 million and $0.5
    million for the three and six months ended June 29, 2002, respectively, and
    $1.3 million and $3.3 million for the three and six months ended June 30,
    2001, respectively.

    At June 29, 2002 the Company was contingently obligated for additional
    purchase price of up to $42 million related to its 1999 acquisitions.
    Management currently believes that none of this contingent purchase price
    will require payment.

    At June 29, 2002 Champion was contingently obligated for approximately $35
    million under letters of credit and $43 million under surety bonds,
    generally to support insurance, industrial revenue bond financing, and
    license and service bonding requirements. The $35 million of letters of
    credit and $21 million of the surety bonds support insurance reserves and
    long-term debt that are reflected as liabilities in the Company's
    consolidated balance sheet. As of June 29, 2002, the Company had fully
    collateralized its letters of credit with restricted cash including $17.8
    million to support insurance reserves and $18.4 million to support long-term
    debt. In addition, the Company has deposited $9.6 million to secure surety
    bonds.

    At June 29, 2002, the Company is contingently liable for up to $15 million
    under an unconditional guaranty of a $150 million warehouse facility of a
    third party special purpose entity (which is included in our consolidated
    financial statements). The warehouse facility, which has an outstanding
    balance of $2.1 million at June 29, 2002, supports the Company's finance
    company's operations and is included in the Company's consolidated balance
    sheet.

    At June 29, 2002 certain of the Company's subsidiaries were guarantors of
    $6.6 million of debt of unconsolidated subsidiaries.

8.  On April 2, 2002 the Company issued $25 million of Series C cumulative
    convertible preferred stock and a warrant which was initially exercisable
    based on approximately 1.1 million shares of common stock at a strike price
    of $12.04 per share. In accordance with the terms of the warrant, on August
    6, 2002 the number of shares under warrant and the strike price per share
    were reset at 2.2 million shares and $10.02 per share, respectively.
    Beginning on March 29, 2003, the warrant strike price will increase annually
    by $0.75 per share. The warrant expires on April 2, 2009. The warrant is
    exercisable only on a non-cash, net basis, whereby the warrant holder would
    receive shares of common stock as payment for the net gain upon exercise.
    The Series C preferred stock has a seven-year term and a 5% annual dividend
    that is payable quarterly, at the Company's option, in cash or common stock.
    The initial conversion price is $9.63 per share. On June 29, 2003, the
    conversion price will be adjusted to 115% of the common stock's then market
    value (subject to certain limitations), provided that such conversion price
    shall not be greater than $10.83 per share or less than $5.66 per share.
    Commencing March 29, 2004, this preferred stock is redeemable by the holder
    for common stock, and, at the Company's option, partially for cash. The net
    proceeds of this issuance of $23.8 million were used to fund a portion of
    the cash collateral for the letters of credit discussed above. The preferred
    stock is presented net of issuance costs which are amortized over a period
    of two years from the date of issuance by charges to paid-in-capital.

    The rights and preferences of the Company's Series B-1 cumulative
    convertible preferred stock, which was issued in July 2001 and of which $20
    million is outstanding, were amended on March 29, 2002 to provide, among
    other things, for mandatory redemption on March 29, 2004. Such redemption
    may be made for either common stock or cash, at the Company's option.
    Additionally, the commencement date of the holder's optional redemption
    period for the Series B-1 preferred stock was changed to April 2, 2002, from
    July 2003, and the expiration date of the holder's rights to purchase an
    additional $12 million of Series B-1 preferred stock was extended to
    December 31, 2004 from March 2003. Optional redemptions may be made only for
    common stock.

                                                                    Page 8 of 40

<PAGE>


    On June 30, 2002 Champion paid quarterly dividends on the preferred stock by
    issuing 77,000 shares of the company's common stock. These shares are
    included in issued and outstanding shares at June 29, 2002.

9.  The numerators used in the Company's basic earnings per share (EPS)
    calculations consist of net income (loss) as reported in the financial
    statements less the effect of preferred stock dividends. The numerator for
    diluted EPS calculations is the numerator of basic EPS adjusted by adding
    back the preferred stock dividend. In loss periods the dividend is not added
    back because the effect would be antidilutive. The denominators used in the
    Company's EPS calculations are as follows: weighted average shares
    outstanding are used in calculating basic EPS. Weighted average shares
    outstanding plus the effect of dilutive securities are used in calculating
    diluted EPS. The Company's potential dilutive securities consist of
    outstanding stock options, convertible preferred stock, warrants and $22
    million of deferred purchase price which is payable, at the Company's
    option, in cash or common stock. Dilutive securities were not considered in
    determining the denominator for diluted EPS in either six-month period
    presented and for the three months ended June 29, 2002 because the effect on
    the net loss would be antidilutive. Calculations of basic and diluted EPS
    follow:

<TABLE>
<CAPTION>
                                                                                 Three Months Ended
                                                                          ------------------------------------
                                                                            June 29,                 June 30,
                                                                             2002                      2001
                                                                          -----------              ----------
                                                                         (In thousands, except per share amounts)
<S>                                                                       <C>                      <C>
          Numerator:
          Net income (loss)                                               $  (199,291)             $     490
          Less: preferred stock dividend                                          563                      -
                                                                          -----------              ---------
          Income (loss) available to common shareholders                  $  (199,854)             $     490
                                                                          ===========              =========

          Denominator:
          Weighted average shares outstanding                                  48,729                 47,847
          Effect of dilutive securities - options                                   -                  1,661
                                                                          -----------              ---------
          Shares for diluted EPS                                               48,729                 49,508
                                                                          ===========              =========

          Basic earnings (loss) per share                                 $     (4.10)             $    0.01
                                                                          ===========              =========
          Diluted earnings (loss) per share                               $     (4.10)             $    0.01
                                                                          ===========              =========

</TABLE>


<TABLE>
<CAPTION>
                                                                                  Six Months Ended
                                                                          ----------------------------------
                                                                           June 29,                  June 30,
                                                                             2002                     2001
                                                                          -----------              ----------
                                                                      (In thousands, except per share amounts)
<S>                                                                       <C>                      <C>
          Numerator:
          Net loss                                                        $  (211,137)             $ (25,593)
          Less: preferred stock dividend                                          813                      -
                                                                          -----------              ---------
          Loss available to common shareholders                           $  (211,950)             $ (25,593)
                                                                          ===========              =========
          Denominator:
          Weighted average shares outstanding                                  48,617                 47,672
                                                                          ===========              ==========

          Basic and diluted loss per share                                $    (4.36)              $   (0.54)
                                                                          ===========              =========
</TABLE>


10. During the quarter ended June 29, 2002, the Company terminated its revolving
    credit agreement for a $75 million secured line of credit. As a result of
    the termination of this credit facility, the guarantees by the Company's
    subsidiaries of the Senior Notes due 2009 terminated. However, Champion Home
    Builders Co. ("CHB"), a wholly-owned subsidiary of the Company, has agreed
    to be a guarantor and substantially all of CHB's subsidiaries have agreed to
    be guarantors, on a basis subordinated to their guarantees of the Senior
    Notes due 2007, of the $170 million Senior Notes due 2009. Additionally, the
    Company arranged to have a bank provide $35 million of letters of credit on
    a fully cash collateralized basis.

    In April 2002, CHB issued $150 million of Senior Notes due 2007 with
    interest payable semi-annually at an

                                                                    Page 9 of 40

<PAGE>


    annual rate of 11.25%. The net proceeds, net of deferred financing costs, of
    approximately $145 million from the offering were used to acquire the
    manufactured housing loan origination business of CIT Group/Sales Financing,
    Inc. ("CIT"), to repay a portion of the Company's debt, including a
    significant portion of the Company's floor plan payable, to provide working
    capital for the Company's existing business segments and the Company's new
    consumer financing business, and for general corporate purposes. The Notes
    contain covenants, which among other things limit the Company's ability to
    incur additional indebtedness, issue additional redeemable preferred stock,
    pay dividends on or repurchase common stock, make certain investments and
    incur liens on assets. Substantially all of CHB's wholly owned subsidiaries
    are guarantors and the Company is a subordinated guarantor of the Senior
    Notes due 2007. The Senior Notes due 2007 are effectively senior to the
    Senior Notes due 2009.

    A covenant in the Senior Notes due 2007 currently limits additional debt to
    a working capital line of credit up to a borrowing base equal to 60% of
    otherwise unencumbered inventories and 75% of otherwise unencumbered
    accounts receivable; warehouse financing meeting certain parameters up to
    $200 million; other debt up to $30 million; and ordinary course indebtedness
    that includes non-speculative hedging obligations, floor plan financing,
    letters of credit, surety bonds, bankers' acceptances, repurchase agreements
    related to retailer floor plan financing and guaranties of additional debt
    otherwise permitted to be incurred.

    In April 2002, the Company arranged a $150 million warehouse facility for a
    consolidated third party special purpose entity to support the finance
    company's operations. Interest on borrowings under the warehouse facility is
    at LIBOR plus 80 basis points and there is a facility fee that is payable
    monthly based on an annual rate of 40 basis points of the entire facility.
    The warehouse facility has a term of one year and contains covenants that
    require the Company's maintenance of minimum interest coverage ratios and
    tangible net worth, as defined therein; certain minimum unsecured debt
    ratings from two of the national ratings agencies; and that the Company
    perform certain other duties thereunder. Subsequent to quarter-end, the
    consolidated third party special purpose entity entered into waiver
    agreements to cure noncompliance with the minimum interest coverage ratio
    covenant for the quarter ended June 29, 2002 and to cure noncompliance with
    the minimum tangible net worth covenant as of June 29, 2002 and provide for
    a lower minimum tangible net worth requirement through August 30, 2002.

    During the third quarter of 2002, the Company will seek and will need to
    obtain amendments to the performance covenants of the $150 million warehouse
    facility in order to ensure our continuing compliance therewith. If the
    Company cannot obtain such amendments, it would be in default under the
    facility. Also, if the Company's operating results do not improve it may
    again become noncompliant with one or more of the covenants, which, if not
    cured or amended, would result in default under the facility. In an event of
    default, the agent bank could discontinue making further advances under the
    facility and enact alternate "waterfall" provisions thereunder that would
    reduce or eliminate current payments to the consolidated third party special
    purpose entity from the underlying consumer loans. If the agent were to
    discontinue further advances, the Company would seek other sources of
    capital for its consumer finance operations.

    The Company has a $15 million floor plan financing facility that contains a
    covenant requiring it to maintain minimum earnings before interest, taxes,
    depreciation and amortization (EBITDA), as defined. If the Company's
    operating results do not improve, it may not be in compliance with this
    covenant, which could result in the lender terminating the credit line and
    causing such debt to become immediately due and payable. As of June 29,
    2002, the Company had approximately $2 million outstanding under this
    facility.

    In August 2002, Moody's Investors Service ("Moody's") and Standard & Poor's
    announced that they have placed under review, for possible downgrade, the
    Company's senior implied credit ratings and the ratings on the Company's
    Senior Notes due 2007 and Senior Notes due 2009. Because the $150 million
    warehouse facility arranged by the Company in April 2002 requires that we
    maintain certain minimum unsecured debt ratings, a negative ratings action
    by Moody's or Standard & Poor's could cause a default under that facility. A
    negative ratings action also could affect the Company's ability to obtain or
    maintain various forms of business credit, including but not limited to
    letters of credit, surety bonds, trade payables and floor plan financing, or
    could result in the Company having to place additional collateral related
    thereto.

    During the quarter ended June 29, 2002, the Company purchased and retired
    $30 million of its Senior Notes due


                                                                   Page 10 of 40
<PAGE>


         2009 for $23.8 million, resulting in a gain of $5.9 million before tax
         or $3.6 million after tax. At June 29, 2002, the Company's outstanding
         notes payable balance due 2009 totaled $170 million.

         During the quarter and year-to-date periods ended June 29, 2002, the
         Company repaid approximately $53 million and $60 million of its floor
         plan borrowings, respectively.

11.      In April 2002 the Company acquired CIT's manufactured housing consumer
         loan origination business and entered into certain related agreements
         for approximately $5 million. Through June 29, 2002 the Company's newly
         acquired financing segment had originated $6.1 million of loans and had
         applied $2.4 million of these loans to the warehouse facility,
         resulting in $2.1 million of proceeds. The Company structures sales of
         originated consumer loans to the warehouse facility, and intends to
         structure asset-backed securitizations in the capital markets, as
         collateralized financing transactions under generally accepted
         accounting principles. The consolidated balance sheet reflects the
         related consumer loans as receivables, and reflects proceeds from the
         sales of consumer loans through the warehouse facility, and will
         reflect securitization proceeds, as indebtedness. Finance segment EBITA
         (loss) for the three months ended June 29, 2002 primarily represent
         operating costs and are included in selling, general and administrative
         expenses.

12.      During the three and six months ended June 29, 2002, the Company
         recorded charges totaling $4.9 million for fixed asset impairments and
         lease termination and other costs related to closed retail sales
         centers. During the quarter ended June 30, 2001, the Company closed two
         homebuilding facilities, resulting in non-cash fixed asset impairment
         charges of $1.0 million. For the year-to-date period ended June 30,
         2001, non-cash fixed asset impairment charges and lease termination and
         other costs related to closed operations totaled $8.7 million.

13.      In June 2001 the Financial Accounting Standards Board ("FASB") issued
         SFAS No. 142, "Goodwill and Other Intangible Assets," which requires
         that goodwill and other intangible assets with indefinite lives not be
         amortized but instead be tested annually for impairment based on a
         reporting unit's fair value versus its carrying value. The Company
         adopted SFAS No. 142 in January 2002, which resulted in the cessation
         of the amortization of goodwill commencing on the first day of our
         fiscal year 2002. Following is a reconciliation, for the 2001 periods
         presented, of the Company's net income (loss) and earnings (loss) per
         share adjusted to exclude goodwill amortization expense, net of tax:



<TABLE>
<CAPTION>


                                                    Three Months Ended        Six Months Ended
                                                         June 30,                 June 30,
                                                           2001                     2001
                                                    ------------------        ----------------
                                                      (In thousands except per share amounts)
<S>                                                <C>                       <C>
Reported net income (loss)                               $     490               $  (25,593)
Add back:  Goodwill amortization
   (net of taxes of $720 and $1,400, respectively)           2,165                    4,361
                                                         ---------               ----------

Adjusted net income (loss)                               $   2,655               $  (21,232)
                                                         =========               ==========

Basic earnings (loss) per share as reported              $    0.01               $    (0.54)
Goodwill amortization                                         0.05                     0.09
                                                         ---------               ----------
Adjusted basic earnings (loss) per share                 $    0.06               $    (0.45)
                                                         =========               ==========

Diluted earnings (loss) per share as reported            $    0.01               $    (0.54)
Goodwill amortization                                         0.04                     0.09
                                                         ---------               ----------
Adjusted diluted earnings (loss) per share               $    0.05               $    (0.45)
                                                         =========               ==========
</TABLE>

         In April 2002 the FASB issued SFAS No. 145, "Rescission of FASB
         Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
         Technical Corrections," which no longer requires extinguishment of debt
         to be characterized as an extraordinary gain. As a result of the
         issuance of SFAS 145, the gain on debt retirement totaling $5.9 million
         is included in the Company's operating loss for the three and six
         months ended June 29, 2002 rather than as an extraordinary gain as
         previously required under SFAS No.4.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal


                                                                   Page 11 of 40
<PAGE>


         Activities," which requires recognition of a liability for a cost
         associated with an exit or disposal activity when the liability is
         incurred rather than recognized at the date of an entity's commitment
         to an exit plan as currently required in accordance with Emerging
         Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for
         Certain Employee Termination Benefits and Other Costs to Exit an
         Activity (including Certain Costs Incurred in a Restructuring)." The
         Statement also establishes that fair value is the objective for initial
         measurement of the liability. The provisions of SFAS No. 146 are
         effective for exit or disposal activities that are initiated after
         December 31, 2002. The adoption by the Company of SFAS No. 146 at the
         beginning of fiscal 2003 will impact the manner in which the Company
         reports certain restructuring activities, including facility closures,
         employee severance and other exit activities. These charges will
         generally be recognized when the liability is incurred.

14.      In response to continued negative information about the economy,
         consumer and floor plan financing availability for the industry, high
         industry repossession levels, recent reductions in industry shipments
         and incoming order rates at the Company's manufacturing facilities, the
         Company, on August 8, 2002, announced the closing or consolidation of
         64 retail sales centers and seven homebuilding facilities across the
         country. These closures represent 35% of its current retail operations
         and 15% of its manufacturing facilities. The closure of 64 additional
         retail locations reduces the total number of retail locations it is
         operating to 117. Third quarter pre-tax charges for the retail and
         manufacturing closures will total approximately $44.1 million,
         consisting primarily of non-cash fixed asset impairment charges of
         $24.5 million, inventory write downs of $6.8 million, severance costs
         of $4.3 million, additional warranty costs of $3.5 million, and retail
         lease termination and other costs of $5.0 million. As a result of these
         closures, employee reductions are estimated at 1,500, or 15% of the
         total workforce.

15.      Prior to April 2002, most of the subsidiaries included in the Company's
         consolidated financial statements were directly wholly owned by
         Champion Enterprises, Inc. In April 2002, CHB became the sole wholly
         owned subsidiary of the Company and CHB became the sole shareholder of
         almost all the other subsidiaries. At June 29, 2002, substantially all
         of CHB's subsidiaries were guarantors of the $150 million Senior Notes
         due 2007. Additionally, CHB has agreed to be a guarantor and
         substantially all of CHB's subsidiaries have agreed to be guarantors,
         on a basis subordinated to their guarantees of the Senior Notes due
         2007, of the $170 million Senior Notes due 2009. The non-guarantor
         subsidiaries include the Company's foreign operations and its
         development companies.

         Separate financial statements for each guarantor subsidiary are not
         included in this filing because each guarantor subsidiary is
         wholly-owned and was fully, unconditionally, jointly and severally
         liable for the Senior Notes due 2007. There were no significant
         restrictions on the ability of the parent company or any guarantor
         subsidiary to obtain funds from its subsidiaries by dividend or loan.

         The following condensed consolidating financial information presents
         the financial position, results of operations and cash flows of (i) the
         Company and CHB, as parents, as if they accounted for their
         subsidiaries on the equity method; (ii) the guarantor subsidiaries, and
         (iii) the non-guarantor subsidiaries.


                                                                   Page 12 of 40
<PAGE>


                           CHAMPION ENTERPRISES, INC.
                 Condensed Consolidating Statement of Operations
                    For the Three Months Ended June 29, 2002



<TABLE>
<CAPTION>

                                                             Guarantor    Non-guarantor   Consolidating
                                     Parent        CHB      Subsidiaries  Subsidiaries     Eliminations    Consolidated
                                    ---------    ---------  ------------  ------------    -------------    ------------
                                                                    (In thousands)
<S>                                 <C>          <C>        <C>           <C>             <C>              <C>
Net sales                           $       -    $  74,508    $ 326,463    $   9,335        $ (48,800)       $ 361,506
Cost of sales                               -       63,994      278,544        7,562          (48,800)         301,300
                                    ---------    ---------    ---------    ---------        ---------        ---------
Gross margin                                -       10,514       47,919        1,773                -           60,206
Selling, general and
  administrative expenses                   -       13,421       52,242        2,057                -           67,720
Goodwill impairment charges                 -            -       97,000            -                -           97,000
Closing-related expenses                    -            -        4,900            -                -            4,900
Gain on debt retirement                (5,870)           -            -            -                -           (5,870)
                                    ---------    ---------    ---------    ---------        ---------        ---------
Operating income (loss)                 5,870       (2,907)    (106,223)        (284)               -         (103,544)
Interest income                         3,329            -          299           33           (3,060)             601
Interest expense                       (3,329)      (3,179)      (4,151)         (49)           3,060           (7,648)
                                    ---------    ---------    ---------    ---------        ---------        ---------
Income (loss) before income taxes       5,870       (6,086)    (110,075)        (300)               -         (110,591)
Income taxes                            2,230       10,537       72,524        3,409                -           88,700
                                    ---------    ---------    ---------    ---------        ---------        ---------

Income (loss) before equity
  in income (loss) of
  consolidated subsidiaries             3,640      (16,623)    (182,599)      (3,709)               -         (199,291)

Equity in income (loss) of
  consolidated subsidiaries          (202,931)    (186,308)           -            -          389,239                -
                                    ---------    ---------    ---------    ---------        ---------        ---------
Net loss                            $(199,291)   $(202,931)   $(182,599)   $  (3,709)       $ 389,239        $(199,291)
                                    =========    =========    =========    =========        =========        =========

</TABLE>



                                                                   Page 13 of 40
<PAGE>


                           CHAMPION ENTERPRISES, INC.
                 Condensed Consolidating Statement of Operations
                     For the Six Months Ended June 29, 2002


<TABLE>
<CAPTION>


                                                                 Guarantor    Non-guarantor   Consolidating
                                         Parent        CHB      Subsidiaries  Subsidiaries     Eliminations     Consolidated
                                        ---------    ---------  ------------  ------------    --------------    ------------
                                                                          (In thousands)
<S>                                     <C>          <C>        <C>           <C>             <C>               <C>
Net sales                               $       -    $ 139,845    $ 600,614    $  16,624         $ (89,200)       $ 667,883
Cost of sales                                   -      121,975      516,776       13,617           (89,200)         563,168
                                        ---------    ---------    ---------    ---------         ---------        ---------

Gross margin                                    -       17,870       83,838        3,007                 -          104,715

Selling, general and
  administrative expenses                       -       29,024       92,730        4,204                 -          125,958
Goodwill impairment charges                     -            -       97,000            -                 -           97,000
Closing-related expenses                        -            -        4,900            -                 -            4,900
Gain on debt retirement                    (5,870)           -            -            -                 -           (5,870)
                                        ---------    ---------    ---------    ---------         ---------        ---------

Operating income (loss)                     5,870      (11,154)    (110,792)      (1,197)                -         (117,273)

Interest income                             7,193            -          832          205            (7,011)           1,219
Interest expense                           (7,193)      (3,201)      (9,585)        (115)            7,011          (13,083)
                                        ---------    ---------    ---------    ---------         ---------        ---------

Income (loss) before income taxes           5,870      (14,355)    (119,545)      (1,107)                -         (129,137)

Income taxes                                2,230        7,467       69,203        3,100                 -           82,000
                                        ---------    ---------    ---------    ---------         ---------        ---------
Income (loss) before equity
  in income (loss) of
  consolidated subsidiaries                 3,640      (21,822)    (188,748)      (4,207)                -         (211,137)
Equity in income (loss) of
  consolidated subsidiaries              (214,777)    (192,955)           -            -           407,732                -
                                        ---------    ---------    ---------    ---------         ---------        ---------
Net loss                                $(211,137)   $(214,777)   $(188,748)   $  (4,207)        $ 407,732        $(211,137)
                                        =========    =========    =========    =========         =========        =========
</TABLE>


                                                                   Page 14 of 40
<PAGE>


                           CHAMPION ENTERPRISES, INC.
                      Condensed Consolidating Balance Sheet
                               As of June 29, 2002


<TABLE>
<CAPTION>

                                                                         Guarantor   Non-guarantor   Consolidating
                                                Parent         CHB     Subsidiaries  Subsidiaries     Eliminations   Consolidated
                                               ---------    ---------  ------------  -------------   --------------  ------------
                   Assets                                                     (In thousands)
<S>                                            <C>          <C>        <C>           <C>             <C>             <C>
Current assets
  Cash and cash equivalents                    $       -    $  72,908    $   2,882      $   9,846     $        -      $  85,636
  Restricted cash                                      -       16,500          624            653              -         17,777
  Accounts receivable, trade                           -       12,044       47,246          2,346        (12,200)        49,436
  Inventories                                          -       13,151      159,705          2,020         (3,419)       171,457
  Other current assets                             9,600       11,719       94,767          1,540        (71,203)        46,423
                                               ---------    ---------    ---------      ---------      ---------      ---------
     Total current assets                          9,600      126,322      305,224         16,405        (86,822)       370,729
                                               ---------    ---------    ---------      ---------      ---------      ---------

Loans receivable                                       -            -        6,145              -              -          6,145
Property and equipment, net                            -       41,717      119,881          2,969              -        164,567
Goodwill, net                                          -            -      164,410          1,554              -        165,964
Investment in consolidated
   subsidiaries                                  278,957      388,811       91,768          4,828       (764,364)             -
Restricted cash                                        -       18,443            -              -              -         18,443
Other non-current assets                           2,094        9,472        4,956          9,668              -         26,190
                                               ---------    ---------    ---------      ---------      ---------      ---------
                                               $ 290,651    $ 584,765    $ 692,384      $  35,424      $(851,186)     $ 752,038
                                               =========    =========    =========      =========      =========      =========
Liabilities and Shareholders' Equity
Current liabilities
  Floor plan payable                           $       -    $       -    $  10,345      $     400      $       -      $  10,745
  Accounts payable                                     -       14,033       52,343          1,736           (800)        67,312
  Warehouse borrowings                                 -            -        2,103              -              -          2,103
  Accrued warranty obligations                         -        5,523       34,975            750              -         41,248
  Accrued volume rebates                               -        9,150       23,170            925           (100)        33,145
  Other current liabilities                        1,576      104,467       63,212          1,542        (71,503)        99,294
                                               ---------    ---------    ---------      ---------      ---------      ---------
     Total current liabilities                     1,576      133,173      186,148          5,353        (72,403)       253,847
                                               ---------    ---------    ---------      ---------      ---------      ---------

Long-term liabilities
Long-term debt                                   170,000      157,572       14,330          2,965              -        344,867
Deferred portion of purchase price                     -            -       14,000              -              -         14,000
Other long-term liabilities                            -       17,027       14,114            150              -         31,291
                                               ---------    ---------    ---------      ---------      ---------      ---------
                                                 170,000      174,599       42,444          3,115              -        390,158
                                               ---------    ---------    ---------      ---------      ---------      ---------
Intercompany balances                              9,620     (122,727)     445,585          3,268       (335,746)             -
Redeemable convertible
  preferred stock                                 43,959            -            -              -              -         43,959
Shareholders' equity
  Common stock                                    48,822            1           60              3            (64)        48,822
  Capital in excess of par value                  39,362      613,336      225,646         30,022       (869,004)        39,362
  Retained earnings (deficit)                    (22,688)    (213,617)    (207,499)        (4,915)       426,031        (22,688)
  Accumulated other
   comprehensive income (loss)                         -            -            -         (1,422)             -         (1,422)
                                               ---------    ---------    ---------      ---------      ---------      ---------
      Total shareholders' equity                  65,496      399,720       18,207         23,688       (443,037)        64,074
                                               ---------    ---------    ---------      ---------      ---------      ---------
                                               $ 290,651    $ 584,765    $ 692,384      $  35,424      $(851,186)     $ 752,038
                                               =========    =========    =========      =========      =========      =========

</TABLE>







                                                                   Page 15 of 40
<PAGE>

                           CHAMPION ENTERPRISES, INC.
                 Condensed Consolidating Statement of Cash Flows
                     For the Six Months Ended June 29, 2002
<TABLE>
<CAPTION>
                                                                          Guarantor     Non-guarantor  Consolidating
                                               Parent          CHB       Subsidiaries   Subsidiaries   Eliminations   Consolidated
                                              ---------     ---------    ------------   -------------  -------------  ------------
<S>                                           <C>           <C>           <C>           <C>            <C>            <C>
                                                                               (In thousands)
Net cash provided by (used
  for) operating activities:                  $  (9,609)    $  (2,734)    $  (7,389)     $   1,502       $      --     $ (18,230)
                                              ---------     ---------     ---------      ---------       ---------     ---------
Cash flows from investing activities:
  Acquisitions                                       --            --        (8,050)            --              --        (8,050)
  Increase in loans receivable                       --            --        (6,145)            --              --        (6,145)
  Additions to property and equipment                --          (362)       (2,359)          (136)             --        (2,857)
  Investments in and advances to
    unconsolidated subsidiaries                      --            --            --         (1,139)             --        (1,139)
  Investments in and advances
    to consolidated subsidiaries                (51,762)      (33,134)       81,711          3,185              --            --
  Proceeds on disposal of fixed assets               --            --         3,069             --              --         3,069
                                              ---------     ---------     ---------      ---------       ---------     ---------
    Net cash provided by (used
       for) investing activities                (51,762)      (33,496)       68,226          1,910              --       (15,122)
                                              ---------     ---------     ---------      ---------       ---------     ---------


Cash flows from financing activities:
  Increase (decrease) in floor
    plan payable, net                                --            --       (60,251)            77              --       (60,174)
  Payment of other long-term debt                    --           (25)         (389)           (26)             --          (440)
  Proceeds from Senior Notes                         --       145,821            --             --              --       145,821
  Purchase of Senior Notes                      (23,750)           --            --             --              --       (23,750)
  Proceeds from warehouse borrowings                 --            --         2,103             --              --         2,103
  Increase in deferred financing costs               --        (1,466)       (1,800)            --              --        (3,266)
  Increase in restricted cash                                 (34,943)         (624)            (5)             --       (35,572)
  Preferred stock issued, net                    23,810            --            --             --              --        23,810
  Common stock issued, net                        1,000            --            --             --              --         1,000
                                              ---------     ---------     ---------      ---------       ---------     ---------
     Net cash provided by (used
       for) financing activities                  1,060       109,387       (60,961)            46              --        49,532
                                              ---------     ---------     ---------      ---------       ---------     ---------
Net increase (decrease) in
  cash and cash equivalents                     (60,311)       73,157          (124)         3,458              --        16,180
Cash and cash equivalents at
  beginning of period                            60,311          (249)        3,006          6,388              --        69,456
                                              ---------     ---------     ---------      ---------       ---------     ---------
Cash and cash equivalents at
  End of period                               $      --     $  72,908     $   2,882      $   9,846       $      --     $  85,636
                                              =========     =========     =========      =========       =========     =========
</TABLE>


                                                                   Page 16 of 40
<PAGE>


                           CHAMPION ENTERPRISES, INC.
                 Condensed Consolidating Statement of Operations
                    For the Three Months Ended June 30, 2001
<TABLE>
<CAPTION>
                                                                          Guarantor     Non-guarantor   Consolidating
                                             Parent           CHB        Subsidiaries   Subsidiaries    Eliminations    Consolidated
                                            ---------      ---------     ------------   -------------   -------------   ------------
                                                                               (In thousands)
<S>                                         <C>            <C>            <C>           <C>             <C>             <C>
Net sales                                   $      --      $  74,712      $ 396,948       $   8,942       $ (52,400)      $ 428,202
Cost of sales                                      --         64,628        332,137           7,426         (52,400)        351,791
                                            ---------      ---------      ---------       ---------       ---------       ---------
Gross margin                                       --         10,084         64,811           1,516              --          76,411
Selling, general and
  administrative expenses                          --         13,324         52,379           2,136              --          67,839
Closing-related expenses                           --             --          1,000                              --           1,000
                                            ---------      ---------      ---------       ---------       ---------       ---------
Operating income (loss)                            --         (3,240)        11,432            (620)             --           7,572

Interest income                                 3,965             --            869              50          (4,118)            766
Interest expense                               (3,965)           (61)        (6,554)            (86)          4,118          (6,548)
                                            ---------      ---------      ---------       ---------       ---------       ---------

Income (loss) before income taxes                  --         (3,301)         5,747            (656)             --           1,790

Income taxes (benefits)                            --         (1,210)         2,776            (266)             --           1,300
                                            ---------      ---------      ---------       ---------       ---------       ---------
Income (loss) before equity in
  income (loss) of
  consolidated subsidiaries                        --         (2,091)         2,971            (390)             --             490
Equity in income (loss) of
  consolidated subsidiaries                       490             --             --              --            (490)             --
                                            ---------      ---------      ---------       ---------       ---------       ---------

Net income (loss)                           $     490      $  (2,091)     $   2,971       $    (390)      $    (490)      $     490
                                            =========      =========      =========       =========       =========       =========
</TABLE>


                                                                   Page 17 of 40
<PAGE>


                           CHAMPION ENTERPRISES, INC.
                 Condensed Consolidating Statement of Operations
                     For the Six Months Ended June 30, 2001
<TABLE>
<CAPTION>
                                                                      Guarantor     Non-guarantor    Consolidating
                                         Parent           CHB        Subsidiaries   Subsidiaries     Eliminations    Consolidated
                                        ---------      ---------     ------------   -------------    -------------   ------------
                                                                            (In thousands)
<S>                                     <C>            <C>            <C>           <C>              <C>             <C>
Net sales                               $      --      $ 135,102      $ 699,077       $  15,335       $ (95,000)       $ 754,514
Cost of sales                                  --        122,077        593,194          13,024         (95,000)         633,295
                                        ---------      ---------      ---------       ---------       ---------        ---------

Gross margin                                   --         13,025        105,883           2,311              --          121,219

Selling, general and
  administrative expenses                      --         24,685        110,669           4,348              --          139,702
Closing-related expenses                       --          1,000          7,700                              --            8,700
                                        ---------      ---------      ---------       ---------       ---------        ---------

Operating loss                                 --        (12,660)       (12,486)         (2,037)             --          (27,183)

Interest income                             7,693             --          1,449             110          (7,909)           1,343
Interest expense                           (7,693)          (148)       (13,445)           (176)          7,909          (13,553)
                                        ---------      ---------      ---------       ---------       ---------        ---------

Loss before income taxes                       --        (12,808)       (24,482)         (2,103)             --          (39,393)

Income tax benefit                             --         (4,730)        (8,270)           (800)             --          (13,800)
                                        ---------      ---------      ---------       ---------       ---------        ---------
Loss before equity in
  income (loss) of
  consolidated subsidiaries                    --         (8,078)       (16,212)         (1,303)             --          (25,593)
Equity in income (loss) of
 consolidated subsidiaries                (25,593)            --             --              --          25,593               --
                                        ---------      ---------      ---------       ---------       ---------        ---------
Net loss                                $ (25,593)     $  (8,078)     $ (16,212)      $  (1,303)      $  25,593        $ (25,593)
                                        =========      =========      =========       =========       =========        =========
</TABLE>



                                                                   Page 18 of 40
<PAGE>


                           CHAMPION ENTERPRISES, INC.
                      Condensed Consolidating Balance Sheet
                             As of December 29, 2001
<TABLE>
<CAPTION>
                                                                         Guarantor     Non-guarantor   Consolidating
                                                Parent        CHB       Subsidiaries   Subsidiaries    Eliminations    Consolidated
                                              ---------    ---------    ------------   -------------   -------------   ------------
<S>                                           <C>          <C>          <C>            <C>             <C>             <C>
                  Assets                                                        (In thousands)
Current assets
  Cash and cash equivalents                   $  60,311    $    (249)    $   3,006       $   6,388      $      --       $  69,456
  Restricted cash                                    --           --            --             648             --             648
  Accounts receivable, trade                         --        8,446        30,457           1,204        (12,600)         27,507
  Inventories                                        --       13,694       158,138           2,263         (1,819)        172,276
  Deferred taxes and other current assets           479       12,091       127,102           1,857        (65,792)         75,737
                                              ---------    ---------     ---------       ---------      ---------       ---------
     Total current assets                        60,790       33,982       318,703          12,360        (80,211)        345,624
                                              ---------    ---------     ---------       ---------      ---------       ---------

Property and equipment, net                          --       44,793       129,633           3,004             --         177,430
Goodwill, net                                        --           --       257,444           1,523             --         258,967
Investment in consolidated
subsidiaries                                    440,786            1       130,900           4,438       (576,125)             --
Deferred taxes and other assets                   3,143        6,834        53,581          12,573             --          76,131
                                              ---------    ---------     ---------       ---------      ---------       ---------
                                              $ 504,719    $  85,610     $ 890,261       $  33,898      $(656,336)      $ 858,152
                                              =========    =========     =========       =========      =========       =========
Liabilities and Shareholders' Equity
Current liabilities
  Floor plan payable                          $      --    $      --     $  70,596       $     323      $      --       $  70,919
  Accounts payable                                   --       10,839        35,929             791             --          47,559
  Accrued warranty obligations                       --        5,888        35,955             697             --          42,540
  Accrued volume rebates                             --       12,082        26,801           1,043           (500)         39,426
  Other current liabilities                       2,280       90,053        64,112             917        (65,292)         92,070
                                              ---------    ---------     ---------       ---------      ---------       ---------
     Total current liabilities                    2,280      118,862       233,393           3,771        (65,792)        292,514
                                              ---------    ---------     ---------       ---------      ---------       ---------

Long-term liabilities
Long-term debt                                  200,000        7,597        14,338           2,991             --         224,926
Deferred portion of purchase price                   --           --        18,000              --             --          18,000
Other long-term liabilities                          --       16,012        14,569              97             --          30,678
                                              ---------    ---------     ---------       ---------      ---------       ---------
                                                200,000       23,609        46,907           3,088             --         273,604
                                              ---------    ---------     ---------       ---------      ---------       ---------

Intercompany balances                             8,434      (87,936)      414,301             949       (335,748)             --

Redeemable convertible
  preferred stock                                20,000           --            --              --             --          20,000

Shareholders' equity
  Common stock                                   48,320            1           259              13           (273)         48,320
  Capital in excess of par value                 36,423       29,914       214,152          28,756       (272,822)         36,423
  Retained earnings                             189,262        1,160       (18,751)           (708)        18,299         189,262
  Accumulated other
    comprehensive income (loss)                      --           --            --          (1,971)            --          (1,971)
                                              ---------    ---------     ---------       ---------      ---------       ---------
       Total shareholders' equity               274,005       31,075       195,660          26,090       (254,796)        272,034
                                              ---------    ---------     ---------       ---------      ---------       ---------
                                              $ 504,719    $  85,610     $ 890,261       $  33,898      $(656,336)      $ 858,152
                                              =========    =========     =========       =========      =========       =========
</TABLE>

                                                                   Page 19 of 40
<PAGE>


                           CHAMPION ENTERPRISES, INC.
                 Condensed Consolidating Statement of Cash Flows
                     For the Six Months Ended June 30, 2001
<TABLE>
<CAPTION>
                                                                        Guarantor    Non-guarantor    Consolidating
                                               Parent        CHB      Subsidiaries   Subsidiaries     Eliminations     Consolidated
                                              --------     --------   ------------   -------------    -------------    ------------
<S>                                           <C>          <C>        <C>            <C>               <C>             <C>
                                                                             (In thousands)
Net cash provided by (used
  for) operating activities:                  $  1,894     $  1,327     $ 26,723       $ (1,541)      $         --      $ 28,403
                                              --------     --------     --------       --------       ------------      --------
Cash flows from investing activities:
  Acquisitions                                      --           --      (10,233)            --                 --       (10,233)
  Additions to property and equipment               --         (386)      (2,614)          (229)                --        (3,229)
  Investments in and advances to
    unconsolidated subsidiaries                     --           --           --         (1,819)                --        (1,819)
  Investments in and advances
    to consolidated subsidiaries               (13,467)         441       11,985          1,041                 --            --
  Proceeds on disposal of fixed assets              --           --        1,494             --                 --         1,494
                                              --------     --------     --------       --------       ------------      --------
    Net cash provided by (used
       for) investing activities               (13,467)          55          632         (1,007)                --       (13,787)
                                              --------     --------     --------       --------       ------------      --------

Cash flows from financing activities:
  Decrease in floor plan payable, net               --           --      (29,101)           (23)                --       (29,124)
  Increase (decrease) in other
    long-term debt                                  --          (22)        (348)            37                 --          (333)
  Common stock issued, net                         590           --           --             --                 --           590
                                              --------     --------     --------       --------       ------------      --------
     Net cash provided by (used
        for) financing  activities                 590          (22)     (29,449)            14                 --       (28,867)
                                              --------     --------     --------       --------       ------------      --------

Net increase (decrease) in
  cash and cash equivalents                    (10,983)       1,360       (2,094)        (2,534)                --       (14,251)
Cash and cash equivalents at
  beginning of period                           41,152       (1,413)       3,124          7,280                 --        50,143
                                              --------     --------     --------       --------       ------------      --------
Cash and cash equivalents at
  End of period                               $ 30,169     $    (53)    $  1,030       $  4,746       $         --      $ 35,892
                                              ========     ========     ========       ========       ============      ========
</TABLE>


                                                                   Page 20 of 40

<PAGE>
                 Item 2. Management's Discussion and Analysis of
                 Financial Condition and Results of Operations.

                           CHAMPION ENTERPRISES, INC.

                              RESULTS OF OPERATIONS
                    THREE AND SIX MONTHS ENDED JUNE 29, 2002
               VERSUS THE THREE AND SIX MONTHS ENDED JUNE 30, 2001


CONSOLIDATED
<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                 --------------------------------
                                                                  June 29,               June 30,                %
                                                                    2002                   2001                Change
                                                                 ---------             ----------            ----------
<S>                                                              <C>                   <C>                   <C>
Net sales                                                                (Dollars in millions)
   Manufacturing                                                 $   313.7             $    351.2               (11%)
   Retail                                                             96.6                  129.4               (25%)
   Less: intercompany                                                (48.8)                 (52.4)
                                                                 ---------             ----------
   Total net sales                                               $   361.5             $    428.2               (16%)
                                                                 =========             ==========

Gross margin                                                     $    60.2             $     76.4               (21%)
SG&A                                                                  67.7                   67.8
Goodwill impairment charges                                           97.0                      -
Closing-related expenses                                               4.9                    1.0
Gain on debt retirement                                               (5.9)                     -
                                                                 ---------             ----------
Operating income (loss)                                          $  (103.5)            $      7.6
                                                                 =========             ==========

As a percent of sales
  Gross margin                                                        16.7%                  17.8%
  SG&A                                                                18.7%                  15.8%
  Operating income (loss)                                            (28.6%)                  1.8%


<CAPTION>
                                                                        Six Months Ended
                                                                 --------------------------------
                                                                  June 29,               June 30,                %
                                                                    2002                   2001                Change
                                                                 ---------             ----------            ----------
<S>                                                              <C>                   <C>                   <C>
Net sales
   Manufacturing                                                 $   580.4             $    611.7                (5%)
   Retail                                                            176.7                  237.8               (26%)
   Less: intercompany                                                (89.2)                 (95.0)
                                                                 ---------             ----------
   Total net sales                                               $   667.9             $    754.5               (11%)
                                                                 =========             ==========

Gross margin                                                     $   104.7             $    121.2               (14%)
SG&A                                                                 126.0                  139.7               (10%)
Goodwill impairment charges                                           97.0                      -
Closing-related expenses                                               4.9                    8.7
Gain on debt retirement                                               (5.9)                     -
                                                                 ---------             ----------
Operating loss                                                   $  (117.3)            $    (27.2)
                                                                 =========             ==========

As a percent of sales
  Gross margin                                                        15.7%                  16.1%
  SG&A                                                                18.9%                  18.5%
  Operating loss                                                     (17.6%)                 (3.6%)
</TABLE>


Net sales for the quarter and year-to-date periods ended June 29, 2002 decreased
from the same periods in 2001 due primarily to our operating fewer retail sales
centers and decreasing manufacturing and retail sales volumes due to industry
conditions, partially offset by sales price increases in both the manufacturing
and retail segments. Sales in the first half of 2002 were affected by the
continuing reduction in chattel lending availability, the effects of Conseco
Finance Corp.




                                                                   Page 21 of 40
<PAGE>

("Conseco") withdrawing from the wholesale floor plan lending business,
continuing high industry repossession levels and Texas legislation, effective in
2002, which limits consumer use of chattel financing to purchase a manufactured
home. During the quarter we closed 33 retail sales centers and consolidated one
manufacturing facility. At June 29, 2002 we were operating 46 manufacturing
facilities and 181 sales centers compared to 49 manufacturing facilities and 230
sales centers at June 30, 2001.

Gross margin dollars for the three months ended June 29, 2002 declined $16.2
million from the comparable quarter of 2001, primarily due to lower sales volume
in the second quarter of 2002 versus the prior year. Gross margin declined as a
percent of sales due to a higher manufacturing overhead rate related to fixed
costs and inefficiencies from lower production volumes and lower backlogs, and
increased manufacturing material costs, partially offset by increased wholesale
and retail average sales prices. Gross margin dollars for the six months ended
June 29, 2002 declined $16.5 million from the comparable period of 2001
primarily due to the $87 million decline in consolidated net sales. Gross margin
for the six month period declined as a percent of sales due to the same factors
that affected the second quarter, as discussed above.

Second quarter 2002 selling, general and administrative expenses ("SG&A")
remained constant despite the decrease in sales volume, causing SG&A as a
percentage of sales to increase from 15.8% in 2001 to 18.7% in 2002. Expenses
from our newly acquired finance operation added $1.9 million to SG&A expense.
SG&A as a percentage of sales increased due to stable fixed costs versus lower
sales volumes. SG&A in 2001 included $2.9 million of goodwill amortization which
was not incurred in 2002 as a result of implementing SFAS No. 142 in January
2002. SG&A for the six-month period ended June 29, 2002 decreased 10% versus the
prior year. Lower SG&A is primarily due to the reduction in sales and operating
fewer manufacturing facilities and sales centers and the $5.8 million reduction
of goodwill amortization, which was eliminated in 2002 due to the implementation
of SFAS No. 142.

For the three and six months ended June 29, 2002, our operating loss includes
$1.9 million for fixed asset impairment charges and $3.0 million for lease
termination and other costs related to the closing of 33 retail sales centers in
the second quarter 2002. In the comparable quarter last year, our operating loss
included $1.0 million for fixed asset impairment charges. For the six months
ended June 30, 2001, operating loss included $6.5 million of fixed asset
impairment charges and $2.2 million of lease termination and other costs related
to the closing of four homebuilding facilities and 30 retail sales centers. In
the second quarter 2002, the Company purchased and retired $30 million of our
Senior Notes due 2009 for approximately $23.8 million plus accrued interest of
$1.0 million and recognized a gain on extinguishment of debt totaling $5.9
million.

During the quarter ended June 29, 2002, we re-evaluated our goodwill and
deferred tax assets and as a result recorded non-cash charges of $97 million
pre-tax for retail goodwill impairments and $120 million for a deferred tax
asset valuation allowance. See additional discussion under "Accounting Estimates
and Assumptions."

MANUFACTURING OPERATIONS
<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                 --------------------------------
                                                                  June 29,               June 30,                %
                                                                    2002                   2001                Change
                                                                 ---------             ----------            ----------
<S>                                                              <C>                   <C>                   <C>
Net sales (in millions)                                          $   313.7                $  351.2              (11%)
EBITA (in millions)                                              $    10.4                $   19.4              (46%)
EBITA margin %                                                         3.3%                    5.5%
Homes sold                                                           9,124                  10,918              (16%)
Floors sold                                                         16,778                  19,516              (14%)
Multi-section mix                                                       80%                     76%
Average home price                                               $  33,000                $ 30,800                7%

<CAPTION>
                                                                        Six Months Ended
                                                                 --------------------------------
                                                                  June 29,               June 30,                %
                                                                    2002                   2001                Change
                                                                 ---------             ----------            ----------
<S>                                                              <C>                   <C>                   <C>
Net sales (in millions)                                          $   580.4                $  611.7               (5%)
EBITA (in millions)                                              $    11.7                $    8.9               32%
EBITA margin %                                                         2.0%                    1.5%
Homes sold                                                          16,869                  19,128              (12%)
Floors sold                                                         31,213                  34,212               (9%)
Multi-section mix                                                       81%                     76%
Average home price                                               $  33,100                $ 30,700                8%
Manufacturing facilities at period end                                  46                      49               (6%)
</TABLE>




                                                                   Page 22 of 40
<PAGE>


Manufacturing net sales for the quarter ended June 29, 2002 decreased 11%
compared to the second quarter of 2001 as a result of selling 16% fewer homes
partially offset by a 7% increase in average selling prices. For the quarter,
shipments of HUD code homes declined 18% and shipments of non-HUD code homes
increased 8% from shipments in the second quarter of 2001. Wholesale shipments
of homes to our company-owned retailers and independent retailers were off 6%
and 18%, respectively, from shipment levels in the second quarter of 2001.
Manufacturing sales for the six months ended June 29, 2002 decreased 5% compared
to the same period last year due to a 12% decrease in the number of homes sold
partially offset by an 8% increase in average home selling price. Sales from our
four manufacturing facilities in Texas declined approximately $15 million and
$24 million, respectively, in the quarter and six month period ended June 29,
2002, as compared to the comparable periods of 2001. Manufacturing sales volume
was affected by the continuing reduction of chattel lending available to
consumers, the Texas legislation which limits consumer use of chattel financing
to purchase a manufactured home, a reduced number of company-owned retail sales
centers and the effects of Conseco withdrawing from the floor plan lending
business. Conseco had been the manufactured housing industry's largest floor
plan lender. In April 2002, Conseco stopped approving and funding new floor plan
requests. In May 2002, Conseco announced its intention to withdraw from the
floor plan lending business by December 31, 2002, and asked its retail customers
to pay off their floor plan balances by mid-July 2002, or enter into
arrangements to pay off their balances by December 31, 2002. We believe our
wholesale shipments in the quarter were impacted as independent retailers
transitioned to alternative floor plan lenders.

According to data reported by the National Conference of States on Building
Codes and Standards, U.S. industry wholesale shipments of HUD code homes for the
first and second quarters of 2002 were comparable to and declined 9.6% from,
respectively, shipments in the comparable 2001 periods. Of our total wholesale
shipments for the quarter, 85% were to independent retailers and
builders/developers and 15% were to our company-owned sales centers. Due to
market conditions, during the second quarter of 2002 we closed one manufacturing
facility.

Manufacturing EBITA in the second quarter of 2002 decreased $9 million from the
prior year, primarily due to reduced gross margin dollars, as a result of
reduced sales and increased material costs that were only partially offset by
increased selling prices. For the quarter ending June 29, 2002, manufacturing
EBITA as a percent of sales declined 2.2% from the comparable quarter of 2001
due to a higher overhead rate related to fixed costs and inefficiencies from
lower production volumes and lower backlogs, and SG&A which only declined
slightly from prior year levels.

Although retailer orders can be cancelled at any time without penalty, and
unfilled orders are not necessarily an indication of future business, our
unfilled wholesale orders for housing at June 29, 2002 totaled approximately $26
million at the 46 plants operated, compared to $43 million at 49 plants at June
30, 2001.

RETAIL OPERATIONS
<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                 --------------------------------
                                                                  June 29,               June 30,                %
                                                                    2002                   2001                Change
                                                                 ---------             ----------            ----------
<S>                                                              <C>                   <C>                   <C>
Net sales (in millions)                                          $   96.6                  $  129.4            (25%)
EBITA (loss) (in millions)                                       $  (13.8)                 $   (1.8)          (660%)
EBITA (loss) margin %                                              (14.3%)                    (1.4%)
New homes sold                                                      1,430                     2,183            (34%)
Pre-owned homes sold                                                  376                       529            (29%)
Total homes sold                                                    1,806                     2,712            (33%)
% Champion-produced new homes sold                                    96%                       86%
New home multi-section mix                                            78%                       72%
Average new home price                                           $ 62,600                  $ 55,900             12%
Average number of new homes sold per
  sales center per month                                              2.4                       3.2            (25%)
</TABLE>





                                                                   Page 23 of 40
<PAGE>


<TABLE>
<CAPTION>
                                                                        Six Months Ended
                                                                 --------------------------------
                                                                  June 29,               June 30,                %
                                                                    2002                   2001                Change
                                                                 ---------             ----------            ----------
<S>                                                              <C>                   <C>                   <C>
Net sales (in millions)                                             $  176.7           $  237.8                 (26%)
EBITA (loss) (in millions)                                          $  (21.9)          $  (16.7)                (31%)
EBITA (loss) margin %                                                 (12.4%)             (7.0%)
New homes sold                                                         2,624              4,007                 (35%)
Pre-owned homes sold                                                     723              1,042                 (31%)
Total homes sold                                                       3,347              5,049                 (34%)
% Champion-produced new homes sold                                       95%                85%
New home multi-section mix                                               78%                71%
Average new home price                                              $ 62,100           $ 55,700                  11%
Average number of new homes sold per
  sales center per month                                                 2.1                2.8                 (25%)
Average number of new homes in inventory
  per sales center at period end                                          16                 15                   7%
Sales centers at period end                                              181                230                 (21%)
</TABLE>

Retail sales for the three and six months ended June 29, 2002 decreased 25% and
26%, respectively versus the same periods last year due to our operating fewer
retail sales centers and selling fewer homes per sales center, partially offset
by higher average selling prices. In the second quarter of 2002 we operated an
average of 198 sales centers, 14% lower than the average of 230 sales centers
operated in the second quarter of 2001. Sales per sales center through the first
six months of 2002 were affected by the continuing reduction of chattel lending
availability, the high level of competing repossession sales, the lengthening of
the sales cycle because of the industry shift to more real estate mortgages, and
the Texas legislation, effective in 2002, that limits consumer use of chattel
financing to purchase a manufactured home. Approximately 25% of our
company-owned retail sales centers are located in Texas. Our retail sales in
Texas declined approximately $15 million and $29 million, respectively, in the
quarter and six month periods ended June 29, 2002, versus the comparable periods
of 2001. Average selling prices increased due in part to selling a greater
proportion of higher priced, multi-section homes. Based on data reported by
Statistical Surveys, Inc., and our estimates, we believe that industry retail
sales of new homes in the first five months of 2002 dropped approximately 7%
from prior year levels.

Retail EBITA (loss) for the quarter ended June 29, 2002 worsened by $12.0
million compared to the second quarter of 2001. Approximately $4.9 million of
this change was comprised of $1.9 million for fixed asset impairment charges and
$3.0 million for lease termination and other costs related to the closing of 33
retail sales centers. Gross margin dollars declined by $6 million due to the
reduction in retail sales volume.

The 97 retail sales centers that we closed or consolidated in the quarter ended
June 29, 2002, or whose closure or consolidation was announced on August 8,
2002, incurred operating losses, excluding floor plan interest charges,
totaling $8.5 million in the six months ended June 29, 2002.

CONTINGENT REPURCHASE OBLIGATIONS

We are contingently obligated under repurchase agreements with certain lending
institutions that provide wholesale floor plan financing to independent
retailers. At June 29, 2002 the maximum contingent repurchase obligation was
approximately $270 million, without reduction for the resale value of the homes.
For the six months ended June 29, 2002, Champion paid $2.9 million and incurred
losses of $0.5 million for the repurchase of 100 homes. In the same period last
year, the Company paid $17.0 million and incurred losses of $3.3 million for the
repurchase of 562 homes. Our maximum contingent repurchase obligation has
declined $30 million since year end and $50 million from a year ago due to
reduced inventory at our independent retailers and due to an estimated 34% of
independent retailer inventory being financed at local banks, from whom we have
historically suffered only negligible repurchase losses.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totaled $85.6 million at June 29, 2002. For the six
months ended June 29, 2002, $145 million was provided by the net proceeds from
the issuance of the Senior Notes due 2007, $23.8 million from the net proceeds
of the preferred stock issuance and $2 million from proceeds on the Company's
warehouse facility placements. Expenditures during the first six months of 2002
included $18 million of net cash used for operations, $60 million to reduce
floor plan borrowings, $35 million to cash collateralize our letters of credit,
$24 million for the repurchase of Senior Notes due 2009, $8 million for
acquisition related payments, $6 million in finance loans receivable, $3 million
for




                                                                   Page 24 of 40
<PAGE>

capital improvements and $1 million for investments in and advances to
unconsolidated subsidiaries.

During 2002, accounts receivable and accounts payable increased due to year-end
levels generally being low due to seasonality, holidays and vacations. Other
current assets increased due to cash collateral deposits totaling $12.9 million
made for insurance and surety bond requirements. Refundable income taxes related
to the tax benefit of our current year to date operating loss were offset by the
$17.5 million income tax refund received during the second quarter of 2002.
Other non-current assets increased due to the increase in deferred financing
costs associated with the Senior Notes due 2007 and the warehouse credit
facility.

During the quarter ended June 29, 2002, the following transactions were
completed:

         -        We received net proceeds of $23.8 million from the issuance of
                  $25 million of redeemable convertible preferred stock. The net
                  proceeds were used to cash collateralize a portion of our $35
                  million of letters of credit in connection with the
                  termination of our revolving credit agreement, as discussed
                  below.

         -        On April 22, 2002 we terminated our revolving credit agreement
                  for a $75 million secured line of credit.

         -        We arranged to have a bank provide $35 million of letters of
                  credit on a fully cash collateralized basis.

         -        One of our subsidiaries issued $150 million of Senior Notes
                  due 2007 with interest payable semi-annually at an annual rate
                  of 11.25%. The net proceeds from the offering of approximately
                  $145 million were used to finance the acquisition of the
                  manufactured housing loan origination business of CIT
                  Group/Sales Financing, Inc. ("CIT"), to repay a portion of our
                  debt, including a significant portion of our floor plan
                  payable, to provide working capital for our existing business
                  segments and our new consumer financing business, and for
                  general corporate purposes. The Senior Notes due 2007 contain
                  covenants, which among other things limit the Company's
                  ability to incur additional indebtedness, issue additional
                  redeemable preferred stock, pay dividends on or repurchase
                  common stock, make certain investments and incur liens on
                  assets. The debt incurrence covenant in the Notes currently
                  limits additional debt to a working capital line of credit up
                  to a borrowing base equal to 60% of otherwise unencumbered
                  inventories and 75% of otherwise unencumbered accounts
                  receivable; warehouse financing meeting certain parameters up
                  to $200 million; other debt up to $30 million; and ordinary
                  course indebtedness that includes non-speculative hedging
                  obligations, floor plan financing, letters of credit, surety
                  bonds, bankers' acceptances, repurchase agreements related to
                  retailer floor plan financing and guaranties of additional
                  debt otherwise permitted to be incurred.

         -        We completed the acquisition of the manufactured housing loan
                  origination business of CIT for approximately $5 million.

         -        We arranged a $150 million warehouse facility to support our
                  finance company's future operations. Consumer loans originated
                  by our finance company will be sold in exchange for cash
                  proceeds under the warehouse line.

         -        We purchased and retired $30 million of our Senior Notes due
                  2009 for approximately $23.8 million plus accrued interest of
                  $1.0 million.

         -        We repaid approximately $53 million of our floor plan
                  borrowings, including substantially all amounts with Conseco.

We have used demand borrowings from floor plan lenders to finance a significant
portion of our retail inventory of new homes. We intend to maintain floor plan
lines of credit totaling approximately $30 million with three floor plan
lenders. Our outstanding balance of floor plan borrowings at June 29, 2002
totaled approximately $11 million.

We plan to spend less than $10 million in 2002 on capital expenditures.

The warehouse facility has been extended to a consolidated third party special
purpose entity, has a one year term and will provide for up to $150 million of
revolving credit availability based on, and secured by, manufactured home loans
and contracts acquired from us by the consolidated third party special purpose
entity. The consolidated third party entity functions to ensure that the
warehouse facility provider takes clear title to the loans it acquires. Proceeds
from the




                                                                   Page 25 of 40
<PAGE>

warehouse facility will be used to fund a portion of the purchase price of these
loans and contracts by the consolidated third party entity from a consolidated
special purpose subsidiary owned by the Company. The remainder of the purchase
price will be financed by a subordinated note from the consolidated third party
entity to our consolidated special purpose subsidiary. Our special purpose
subsidiary will, in turn, use the cash proceeds received from the consolidated
third party entity to pay a portion of the purchase price of the loans and
contracts from our finance company. Our finance company will use these proceeds
and other cash from operations as well as a portion of the proceeds from the
issuance of the Senior Notes due 2007 to purchase manufactured home loans and
contracts from company-owned and independent retailers.

The warehouse facility contains covenants requiring the Company to maintain
minimum interest coverage ratios and tangible net worth, as defined therein;
maintain certain minimum unsecured debt ratings from two of the national ratings
agencies; and perform certain other duties thereunder. Subsequent to quarter
end, the consolidated third party special purpose entity entered into waiver
agreements to cure its noncompliance with the minimum interest coverage ratio
covenant for the quarter ended June 29, 2002 and to cure noncompliance with the
minimum tangible net worth covenant as of June 29, 2002 and provide for a lower
minimum tangible net worth requirement through August 30, 2002.

During the third quarter of 2002, we are seeking and will need to obtain
amendments to the performance covenants of the $150 million warehouse facility
in order to ensure our continuing compliance therewith. Also, if our operating
results do not improve we may again become noncompliant with one or more of the
covenants, which, if not cured or amended, would result in default under the
facility. In an event of default, the agent bank could discontinue making
further advances under the facility and enact alternate "waterfall" provisions
thereunder that would reduce or eliminate current payments to the consolidated
third party special purpose entity from the underlying consumer loans. If the
agent were to discontinue further advances, we would seek other sources of
capital for our consumer finance operations.

We also have a $15 million floor plan financing facility that contains a
covenant requiring us to maintain minimum earnings before interest, taxes,
depreciation and amortization (EBITDA), as defined. If our operating results do
not improve, we may not be in compliance with this covenant, which could result
in the lender terminating the credit line and causing such debt to become
immediately due and payable. As of June 29, 2002, the Company had approximately
$2 million outstanding under this facility.

In August 2002, Moody's Investors Service and Standard & Poor's announced that
they have placed under review, for possible downgrade, the Company's senior
implied credit ratings and the ratings on the Company's Senior Notes due 2007
and Senior Notes due 2009. Because the $150 million warehouse facility arranged
by the Company in April 2002 requires that we maintain certain minimum unsecured
debt ratings, a negative ratings action by Moody's or Standard & Poor's could
cause a default under that facility. A negative ratings action also could affect
the Company's ability to obtain or maintain various forms of business credit,
including but not limited to letters of credit, surety bonds, trade payables and
floor plan financing, or could result in the Company having to place additional
collateral related thereto.

From time to time, as a sufficient amount of manufactured home loans and
contracts that satisfy established underwriting guidelines are accumulated, we
expect the warehouse facility will be repaid, in whole or in part, with proceeds
from the sale of debt obligations or other securities in the asset-backed
securities markets. We expect these debt obligations or other securities will be
secured by the underlying manufactured home loans and contracts purchased by the
consolidated special purpose entities from our new consumer finance business.

We believe that our cash balances, cash flows from operations, availability
under our floor plan arrangements, proceeds under our warehouse facility from
sales of consumer loans originated by our new finance business, and proceeds
from expected asset-backed securitizations in the capital markets of loans
originated, will be adequate to meet our anticipated financing needs, operating
requirements and capital expenditures for the next twelve months. In the event
one or more of our capital resources were to become unavailable, we would revise
our operating strategies accordingly.

The restructuring actions announced in August 2002 result in estimated cash
charges totaling approximately $13 million pretax. These closures and the
expected operating losses should result in a tax refund of greater than $40
million in 2003.

We had significant contingent obligations at June 29, 2002, including a maximum
potential wholesale repurchase obligation of approximately $270 million, surety
bonds and letters of credit totaling $33 million (net of $45 million of cash
collateral) and guarantees by certain of our consolidated subsidiaries of $6.6
million of debt of unconsolidated



                                                                   Page 26 of 40
<PAGE>

subsidiaries. In addition, the Company is contingently liable under an
unconditional guaranty of a consolidated third party special purpose entity's
$150 million warehouse facility to support our finance company's operations in
an amount limited to $15 million. At June 29, 2002, $2.1 million was outstanding
under the warehouse facility and is reflected in our consolidated balance sheet.
If we were required to fund a material amount of these contingent obligations,
our liquidity would be adversely affected.

SUBSEQUENT EVENTS

In response to continued negative information about the economy, consumer and
floor plan financing availability for the industry, high industry repossession
levels, recent reductions in industry shipments and incoming order rates at the
Company's manufacturing facilities, the Company, on August 8, 2002, announced
the closing or consolidation of 64 retail sales centers and seven homebuilding
facilities across the country. These closures represent 35% of our current
retail operations and 15% of our manufacturing facilities. The closure of 64
additional retail locations reduces the total number of retail locations we
operate to 117. Third quarter pre-tax charges for the retail and manufacturing
closures will total approximately $44.1 million, consisting primarily of
non-cash fixed asset impairment charges of $24.5 million, inventory write downs
of $6.8 million, severance costs of $4.3 million, additional warranty costs of
$3.5 million, and retail lease termination and other costs of $5.0 million. As a
result of these closures, employee reductions are estimated at 1,500, or 15% of
the total workforce.

ENTRY INTO CONSUMER FINANCE BUSINESS

In April 2002, we acquired CIT's manufactured housing consumer loan origination
business and certain related agreements for approximately $5 million. This
business operates as HomePride Finance Corp. ("HPFC"), an indirect wholly owned
subsidiary of the Company. With this transaction we acquired $0.5 million of
fixed assets, we were assigned two office leases and we obtained the operating
procedures and policies and the customer lists for the business. We did not
purchase any of the loan portfolios or related obligations of CIT's loan
origination business. The CIT loan origination platform has technologically
advanced systems, with nearly 100% of loan applications received through the
Internet. We have entered into agreements whereby, for a period of three years,
CIT is providing its loan origination and servicing systems to us and is
servicing the loans we originate. We have agreed to pay CIT $249,000 annually
plus a monthly servicing fee based on 8.33 basis points of loans receivable up
to $200 million and 6.25 basis points on loans receivable in excess of $200
million and a monthly loan origination fee based on 25 to 50 basis points of the
amount of loans originated, subject to a minimum fee of $100,000 per month.

Entry into consumer finance complements both our manufacturing and retail
operations. We have been assessing our entry into consumer finance since
expanding our manufactured housing retail operations in 1998. We believe that
the departure of several industry consumer chattel lenders during the past three
years and other conditions resulting from the recent industry downturn present
us the opportunity to capitalize on reduced competition, enhanced underwriting
practices and other favorable trends in the manufactured home consumer lending
industry. We are building upon CIT's manufactured housing loan origination
platform by integrating CIT's disciplined underwriting practices with our retail
resources and industry knowledge under the direction of a senior management team
with over 16 years of manufactured home consumer lending experience.

HPFC is headquartered in Overland Park, Kansas, has an office in Sacramento,
California, and employs approximately 50 people. We are funding loans to
consumers who purchase manufactured homes from both company-owned and
independent retailers. We also plan to originate some loans for purchases of
high quality pre-owned manufactured homes. We have implemented a finance
participation model under which our company-owned retailers will participate in
the management of delinquent loans they originate and the remarketing of
repossessed homes to improve loan performance and mitigate loan losses. This
finance participation model is also intended to produce higher quality loans and
stronger retail location manager retention.

The loan origination team performs monthly quality and audit loan reviews. We
subject independent retailers to a thorough approval process before accepting
loan applications from them. We use the credit bureau score provided by at least
one of the three major credit reporting agencies to determine pricing and help
assess credit risk. Additionally, each application is evaluated for borrower
stability, collateral value, willingness to repay, and ability to pay.



                                                                   Page 27 of 40
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We require a down payment in the form of cash, the trade-in value of a
previously-owned manufactured home, and/or the fair market value of equity in
real property pledged as additional collateral. The balance of the purchase
price is financed using installment sales contracts or mortgage instruments
providing for a purchase money security interest in the manufactured home and a
mortgage on any real property pledged as additional collateral. Generally, the
contracts provide for equal monthly payments over a period of seven to 30 years
at fixed rates of interest. We believe that disciplined loan origination
policies, plus the alignment of the interests of our company-owned retailers and
our retail finance company will result in higher quality loans, reduced loan
delinquencies from higher consumer satisfaction, improved collections and
greater recovery on repossessed homes.

We have used a portion of the proceeds of the April 2002 issuance of $150
million Senior Notes due 2007, together with cash from operations and proceeds
from the sale of manufactured home loans and contracts in connection with the
warehouse facility, to provide working capital for our consumer finance
business. We expect long-term financing to be provided by asset-backed
securitization transactions in the capital markets.

We intend to structure sales of originated consumer loans under our warehouse
facility and asset-backed securitizations in the capital markets as
collateralized financing transactions under generally accepted accounting
principles ("GAAP"). Under GAAP, our consolidated balance sheet reflects the
related consumer loans as receivables, and proceeds from the sales of consumer
loans through the warehouse facility and securitizations as indebtedness. Our
consolidated income statement will reflect interest income and other income
earned from holding the consumer loans as finance revenues. Finance costs and
expenses include interest expense from indebtedness under the warehouse facility
and securitizations, credit losses and operating costs.

ACCOUNTING ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Assumptions and estimates of future earnings and cash flow are used
in the periodic analyses of the recoverability of goodwill, deferred tax assets,
and property, plant and equipment. Historical experience and trends are used to
estimate reserves, including reserves for self-insured risks, warranty costs and
wholesale repurchase losses. With the recently announced restructuring, each of
these reserves are being evaluated. Following is a description of each
accounting policy requiring significant judgments and estimates:

Goodwill

The Company tests for goodwill impairment in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets". The Company evaluates each reporting unit's fair value versus its
carrying value annually or more frequently if events or changes in circumstances
indicate that the carrying value may exceed the fair value of the reporting
unit. When estimating a unit's fair value, the Company calculates the present
value of future cash flows based on forecasted sales volumes, the number of
retail sales centers and homebuilding facilities in operation, current industry
and economic conditions, historical results and inflation. As a result of the
continued downturn in the manufactured housing industry in June 2002 we
announced the closure of 33 retail sales centers and one manufacturing facility
and in August 2002 we announced the closure or consolidation of 64 retail sales
centers and seven manufacturing facilities. In connection with the significant
reduction in our retail operations, the Company re-evaluated the fair value of
its retail goodwill in accordance with SFAS No. 142. As a result, we recorded a
non-cash impairment charge of $97 million for retail goodwill in the quarter
ended June 29, 2002. Significant changes in the estimates and assumptions used
in calculating the fair value of goodwill or differences between estimates and
actual results could continue to have a material adverse impact on future
operating results.

Deferred Tax Assets

Deferred tax assets and liabilities are determined based on the differences
between the financial statement balances and the tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. The Company periodically evaluates the
realizability of its deferred tax assets based on the requirements established
in SFAS No. 109, "Accounting for Income Taxes," which requires the recording of
a valuation allowance when it is "more likely than not that some portion or all
of the deferred tax assets will not be realized." It further states, "forming a
conclusion that a valuation allowance is not needed is difficult when there is
negative evidence such as cumulative losses in recent years."



                                                                   Page 28 of 40
<PAGE>
We incurred pretax losses in 2000 and 2001 and through the first half of 2002
totaling $391 million, including goodwill impairment charges of $97 million in
2002 and $190 million in 2000. Our industry continues to be challenged by
limited availability of consumer chattel financing, high industry repossession
levels, and reductions in wholesale floor plan lending availability and a
negative economic outlook resulting in a continued decline in wholesale
shipments and retail sales. In the absence of specific favorable factors,
application of SFAS No. 109 require a 100% valuation allowance for any net
deferred tax asset when a company has cumulative financial accounting losses,
excluding unusual items, over several years. Accordingly, after consideration of
these factors in the quarter ended June 29, 2002, we provided a 100% valuation
allowance against our deferred tax assets, which totaled $120 million. The
valuation allowance will be reversed to income in future periods to the extent
that the related deferred tax assets are realized as a reduction of taxes
otherwise payable on any future earnings or a portion or all of the valuation
allowance is otherwise no longer required.

Because of provisions in the tax law which will allow us to receive a carryback
refund for taxable losses incurred in 2002, in determining the amount of
the deferred tax asset valuation allowance we had to estimate the current tax
deductibility of certain costs and charges. These estimates are subject to
change. Any differences between these current estimates and actual values
determined at the end of this fiscal year will result in a change to the
valuation allowance which will be reflected in results of operations in the
third or fourth quarter of the year.

Property, Plant and Equipment

The recoverability of long-lived assets is evaluated whenever events or changes
in circumstances indicate that the carrying amount of the assets may not be
recoverable, primarily based on estimated selling price, appraised value or
projected undiscounted cash flows. Our cash flow estimates are based on
historical results adjusted for estimated current industry trends, the economy
and operating conditions. A significant change in these estimates and
assumptions could have a material adverse impact on future operating results.

Reserves for Self-Insured Risks

The Company is self-insured for a significant portion of its workers'
compensation, general and products, auto liability, health and property
insurance. Estimated insurance costs are accrued for incurred claims and claims
incurred but not yet reported. Factors considered in estimating our insurance
reserves are the nature of outstanding claims including the severity of the
claims, estimated costs to settle existing claims, loss history, and inflation
as well as estimates provided by the Company's outside insurance carriers, which
historically have been greater than the Company's own estimates. Although the
Company believes that its estimates are reasonable based on its evaluation of
the factors listed above, the Company plans to obtain, by year end, a review of
such estimates by an independent third party. A revision of the Company's
estimated insurance costs based on such a review or a significant change in the
factors described above could have a material adverse impact on future operating
results. We maintain excess liability insurance with outside insurance carriers
to minimize our risks related to catastrophic claims.

Warranty Reserves

Champion's manufacturing operations provide the retail homebuyer with a
twelve-month warranty from the date of retail purchase. Estimated warranty costs
are accrued as cost of sales at the time the manufacturing segment records the
sale. Our warranty reserve is based on estimates of the amounts necessary to
settle existing and future claims on homes sold by the manufacturing operations
as of the balance sheet date. Factors used to calculate the warranty obligation
are the estimated number of homes still under warranty, including homes in
retailer inventories and homes purchased by consumers still within the 12 month
warranty period, and the historical average costs incurred to service a home. A
significant change in these factors could have a material adverse impact on
future operating results.

Wholesale Repurchase Reserves

The majority of the Company's manufacturing sales to independent retailers are
made pursuant to repurchase agreements. Potential losses under repurchase
obligations are determined by calculating the difference between the repurchase
price and the estimated net resale value of the homes. Probable losses under
repurchase agreements are accrued based on the historical number of homes
repurchased and the cost of such repurchases and the historical losses incurred
as well as the current inventory levels held at Champion's independent
retailers. In addition, the Company monitors the risks associated with its
independent retailers and considers these risks in its evaluation of the
wholesale repurchase reserve. A significant change in any of these factors could
have a material adverse impact on future operating results.

FORWARD LOOKING STATEMENTS AND RISK FACTORS

Certain statements contained in this Report, including our plans and beliefs
regarding goals, ability to implement retail, manufacturing and finance
strategies and the effect of those strategies, availability of liquidity and
financing, new market initiatives and strategies, anticipated capital
expenditures, outlook for the manufactured housing industry in particular and



                                                                   Page 29 of 40
<PAGE>

the economy in general, availability of wholesale and consumer financing,
characterization of and our ability to control our contingent liabilities,
demographic trends, and our ability to maintain supply and distribution networks
could be construed to be forward looking statements within the meaning of the
Securities Exchange Act of 1934. In addition, we may or persons acting on our
behalf may from time to time publish or communicate other items that could also
be construed to be forward looking statements. Statements of this sort are or
will be based on our estimates, assumptions and projections, and are subject to
risks and uncertainties, including those specifically listed below that could
cause actual results to differ materially from those included in the forward
looking statements. We do not undertake to update our forward looking statements
or risk factors to reflect future events or circumstances. The following risk
factors could affect our operating results or financial condition.

SIGNIFICANT LEVERAGE - OUR SIGNIFICANT DEBT COULD ADVERSELY AFFECT OUR FINANCIAL
HEALTH AND PREVENT US FROM FULFILLING OUR DEBT OBLIGATIONS. IF WE ARE UNABLE TO
PAY OUR DEBT OBLIGATIONS WHEN DUE, WE COULD BE IN DEFAULT UNDER OUR DEBT
AGREEMENTS AND OUR LENDERS COULD ACCELERATE OUR DEBT OR TAKE OTHER ACTIONS WHICH
COULD RESTRICT OUR OPERATIONS.

         As of June 29, 2002, we had long-term debt of approximately $345
million, floor plan payables of approximately $11 million and warehouse
borrowings of approximately $2 million. This indebtedness could, among other
things:

         -        limit our ability to obtain future financing for working
                  capital, capital expenditures, acquisitions, debt service
                  requirements, surety bonds or other requirements;

         -        require us to dedicate a substantial portion of our cash flows
                  from operations to the payment of principal and interest on
                  our indebtedness and reduce our ability to use our cash flows
                  for other purposes;

         -        limit our flexibility in planning for, or reacting to, changes
                  in our business and the manufactured housing industry;

         -        place us at a competitive disadvantage to some of our
                  competitors with less indebtedness; and

         -        make us more vulnerable in the event of a continued downturn
                  in our business or in general economic conditions.

         In addition, our future cash flows may be insufficient to meet our debt
service and other obligations. Our business may not generate sufficient cash
flows from operations and proceeds may not be available to us from sales of
manufactured home loans and contracts in connection with the warehouse facility
and asset-backed securitization transactions in an amount sufficient to enable
us to pay our debt or to fund other liquidity needs. The factors that affect our
ability to generate cash can also affect our ability to raise additional funds
through the sale of equity securities, the refinancing of debt or the sale of
assets.

         We may need to refinance all or a portion of our debt on or before
maturity. We may not be able to refinance any of our debt on commercially
reasonable terms or at all. If we are unable to refinance our debt obligations,
we could be in default under our debt agreements and our lenders could
accelerate our debt or take other actions which could restrict our operations.

GENERAL INDUSTRY CONDITIONS - THE CURRENT DOWNTURN IN THE MANUFACTURED HOUSING
INDUSTRY HAS ADVERSELY AFFECTED OUR OPERATING RESULTS. IF THE CURRENT DOWNTURN
DOES NOT REVERSE, OUR SALES COULD DECLINE AND WE MAY SUFFER FURTHER LOSSES.

         Since mid-1999 the manufactured housing industry has experienced
declining wholesale shipments, tightened consumer credit standards, excess
retail locations and inventory, reduced consumer financing availability, high
consumer repossession levels and higher interest rates on manufactured housing
loans. Based on reports published by the National Conference of States on
Building Codes and Standards, or NCSBCS, industry wholesale shipments of
manufactured housing decreased 5.3% for the first six months of 2002 versus
2001, 23% from 2000 to 2001 and 28% from 1999 to 2000. Based on data reported by
Statistical Surveys, Inc. and other sources, we estimate that industry retail
sales of new homes declined 7% for the first five months of 2002 versus 2001,
25% from 2000 to 2001 and 17% from 1999 to 2000. In addition, we estimate
approximately 3,500 retail locations, or approximately 37% of industry
locations, and 100 manufacturing facilities, or approximately 30% of industry
manufacturing facilities, have closed since mid-1999. Largely



                                                                   Page 30 of 40
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as a result of these industry conditions, since mid-1999 and including the
restructuring actions announced in August 2002, we have closed 29 homebuilding
facilities in an attempt to return to profitability. Since June 2000, we have
closed 196 retail sales centers. These downsizing efforts have resulted in
closing-related expenses and fixed asset impairment charges. Additionally, in
2000 and 2002 we recorded goodwill impairment charges totaling $287 million and
in 2002 recorded a valuation allowance for 100% of our deferred tax assets, or
$120 million. For the first six months of 2002, we have reported pretax losses
of $32.1 million excluding goodwill impairment charges. In 2001 and 2000, we
reported pretax losses of $41.3 million and $30.6 million, respectively,
excluding goodwill impairment charges. If the current downturn in the industry
continues, our sales could continue to decline and we may incur further losses
including additional closures or consolidations of existing operations, fixed
asset impairment charges and goodwill impairment charges.

OUR COMMON STOCK MARKET PRICE IS DEPRESSED AND MAY CONTINUE TO DECLINE OR BE
HIGHLY VOLATILE GIVEN CURRENT INDUSTRY AND ECONOMIC CONDITIONS.

         Our Company's closing common stock price was $27.38 on January 2, 1999,
before the industry downturn in mid-1999. The trading value of our stock has
declined to $2.88 as of August 14, 2002. The market price of our common stock is
affected by many factors including: general economic and market conditions,
interest rates, current manufactured housing industry forecasts, Champion's and
our competitors' operating results, our ability to pay our debt obligations,
consumer and wholesale financing availability, the market's perception of our
strategies and the overall market fluctuations unrelated to our company or the
manufactured housing industry. All of these factors may adversely impact our
common stock market price in the future.

FLUCTUATIONS IN OPERATING RESULTS - THE CYCLICAL AND SEASONAL NATURE OF THE
MANUFACTURED HOUSING MARKET CAUSES OUR REVENUES AND OPERATING RESULTS TO
FLUCTUATE. WE EXPECT THIS FLUCTUATION TO CONTINUE IN THE FUTURE, WHICH COULD
RESULT IN OPERATING LOSSES DURING DOWNTURNS.

         The manufactured housing industry is highly cyclical and is influenced
by many national and regional economic and demographic factors, including:

         - availability of financing for homebuyers and retailers;
         - consumer confidence;
         - interest rates;
         - population and employment trends;
         - income levels;
         - housing demand; and
         - general economic conditions, including inflation and recessions.

         In addition, the manufactured housing industry is affected by
seasonality. Sales during the period from March to November are traditionally
higher than in other months. As a result of the foregoing economic, demographic
and seasonal factors, our revenues and operating results fluctuate, and we
expect them to continue to fluctuate in the future. Moreover, we may experience
operating losses during cyclical and seasonal downturns in the manufactured
housing market.

CONSUMER FINANCING AVAILABILITY - TIGHTENED CREDIT STANDARDS, CURTAILED LENDING
ACTIVITY AND INCREASED INTEREST RATES AMONG CHATTEL, OR HOME-ONLY, RETAIL
LENDERS HAVE REDUCED OUR SALES. IF CHATTEL FINANCING WERE TO BECOME FURTHER
CURTAILED OR UNAVAILABLE, WE MAY EXPERIENCE FURTHER SALES DECLINES.

         The consumers who buy our homes have historically secured retail
financing from third party lenders. The availability, terms and costs of retail
financing depend on the lending practices of financial institutions,
governmental policies and economic and other conditions, all of which are beyond
our control. A consumer seeking to finance the purchase of a manufactured home
without land will generally pay a higher interest rate and have a shorter loan
maturity than a consumer seeking to finance the purchase of land and the home.
Manufactured home chattel financing is at times more difficult to obtain than
financing for site-built homes. Since 1999, home-only lenders have tightened the
credit underwriting standards and increased interest rates for loans to purchase
manufactured homes, which has reduced lending volumes and caused our sales to
decline. On August 9, 2002, Conseco, the parent company of Conseco Finance,
announced that a "radical change" in its capital structure is required. Conseco
Finance has historically been one of the



                                                                   Page 31 of 40
<PAGE>

largest chattel finance companies in the manufactured housing industry. While
Conseco stated that Conseco Finance will not be directly involved in the planned
restructuring, we do not know what impact the restructuring may have on Conseco
Finance's manufactured home chattel lending business, or the related impact on
our retail and manufacturing operations. If chattel financing were to become
further curtailed or unavailable, we may experience further retail and
manufacturing sales declines.

WHOLESALE FINANCING AVAILABILITY - REDUCED NUMBER OF FLOOR PLAN LENDERS AND
REDUCED AMOUNT OF CREDIT ALLOWED TO INDUSTRY RETAILERS MAY RESULT IN LOWER
INVENTORY LEVELS AND LOWER SALES AT OUR INDEPENDENT RETAILERS AND FEWER SALES
CENTERS, WHICH COULD ALSO AFFECT OUR LEVEL OF WHOLESALE SHIPMENTS TO THESE
RETAILERS.

Independent retailers of our manufactured homes generally finance their
inventory purchases with wholesale floor plan financing provided by lending
institutions. Primarily the number of floor plan lenders and their lending
limits affects the availability of wholesale financing. During the past five
years some wholesale lenders have exited the industry or curtailed their floor
plan operations while a smaller number have entered or expanded their floor plan
operations. Conseco Finance has historically been the largest floor plan lender,
previously providing about 25% of the industry's wholesale financing. Conseco
Finance discontinued approving and funding new floor plan loan requests
commencing April 2002. In May 2002, Conseco Finance announced its intention to
withdraw from the floor plan lending business by December 31, 2002, and asked
its retail customers to pay off their floor plan balances by mid-July 2002, or
enter into an arrangement to pay off their balances by December 31, 2002.
Reduced availability of floor plan lending may affect our independent retailers'
inventory levels of new homes, their number of retail sales centers and related
wholesale demand. Retail sales to consumers at our independent retailers could
also be affected by reduced retail inventory levels or reduced number of sales
centers.

CONTINGENT LIABILITIES - WE HAVE, AND WILL CONTINUE TO HAVE, SIGNIFICANT
CONTINGENT REPURCHASE AND OTHER OBLIGATIONS, SOME OF WHICH MAY BECOME ACTUAL
OBLIGATIONS THAT WE MUST REPAY.

         In connection with a floor plan arrangement for our wholesale shipments
to independent retailers, the financial institution that provides the retailer
financing customarily requires us to enter into a separate repurchase agreement
with the financial institution. Under this separate agreement, for a period of
12 to 15 months from the date of our sale to the retailer, upon default by the
retailer and repossession of the home by the financial institution, we are
generally obligated to purchase from the lender the related floor plan loan or
the home at a price equal to the unpaid principal amount of the loan, plus
certain administrative and handling expenses, reduced by the amount of any
damage to the home and any missing appliances. Our maximum aggregate potential
contingent repurchase obligation at June 29, 2002 was approximately $270
million, before any resale value of the homes. This amount compares to $300
million at the beginning of the year and $320 million a year earlier. During the
first six months of 2002, we paid $2.9 million and incurred losses of $0.5
million under repurchase agreements related to 100 homes. We may be required to
honor some or all of our contingent repurchase obligations in the future and we
may suffer additional losses with respect to, and as a consequence of, these
repurchase agreements.

         At June 29, 2002, we also had contingent debt obligations, surety bonds
and letters of credit totaling $33 million (net of $45 million of cash
collateral) and guarantees by certain of our consolidated subsidiaries of $6.6
million of debt of unconsolidated subsidiaries. In addition, the Company is
contingently liable under an unconditional guaranty of a consolidated third
party special purpose entity's $150 million warehouse facility to support our
finance company's operations in an amount limited to $15 million. If we were
required to fund a material amount of these contingent obligations, our
liquidity would be adversely affected.

DEPENDENCE UPON INDEPENDENT RETAILERS - IF WE ARE UNABLE TO ESTABLISH OR
MAINTAIN RELATIONSHIPS WITH INDEPENDENT RETAILERS WHO SELL OUR HOMES, OUR SALES
COULD DECLINE.

         During 2001, approximately 79% of our wholesale shipments of homes were
made to independent retail locations throughout the United States and western
Canada. As is common in the industry, independent retailers may sell
manufactured homes produced by competing manufacturers. We may not be able to
establish relationships with new independent retailers or maintain good
relationships with independent retailers that sell our homes. Even if we do
establish and maintain relationships with independent retailers, these retailers
are not obligated to sell our manufactured homes exclusively, and may choose to
sell our competitors' homes instead. The independent retailers with whom we have
relationships can cancel these relationships on short notice. In addition, these
retailers may not remain financially


                                                                   Page 32 of 40
<PAGE>

solvent as they are subject to the same industry, economic, demographic and
seasonal trends that we face. If we do not establish and maintain relationships
with solvent independent retailers in one or more of our markets, sales in those
markets could decline.

EFFECT ON LIQUIDITY - CURRENT INDUSTRY CONDITIONS AND OUR RECENT OPERATING
RESULTS HAVE LIMITED OUR SOURCES OF CAPITAL. IF THIS SITUATION DOES NOT IMPROVE
AND IF WE ARE UNABLE TO LOCATE ALTERNATIVE SOURCES OF CAPITAL, WE MAY BE UNABLE
TO EXPAND OR MAINTAIN OUR BUSINESS.

         We depend on our cash balances, cash flows from operations, floor plan
facilities, surety bond and insurance programs, and proceeds from sales of
manufactured home loans and contracts in connection with the warehouse facility,
and will depend on anticipated proceeds of asset-backed securitization
transactions, to finance our operating requirements, capital expenditures and
other needs. The downturn in the manufactured housing industry combined with our
recent operating results and other changes have decreased sources of floor plan
financing and required us to cash collateralize a portion of our surety bond and
insurance program needs and our letters of credit.

         If the availability under our floor plan facilities, anticipated
proceeds from sales of manufactured home loans and contracts in connection with
the warehouse facility and asset-backed securitization transactions or cash flow
from operations is insufficient to finance our operations and alternative
capital is not available or surety bonds become unavailable to us, we may be
unable to expand or maintain our operations, and our business, results of
operations and financial position could suffer.

ENTRY INTO CONSUMER FINANCE BUSINESS - WE FACE RISKS AS A NEW ENTRANT TO THE
CONSUMER FINANCE BUSINESS.

         Although CIT has operated a consumer finance business in the
manufactured home sector for over 50 years, and we have obtained the services of
substantially all of CIT's former loan origination personnel in this business,
we have limited experience operating a consumer finance business and are largely
depending on these former CIT personnel. Our previous loan origination business,
which we operated through our subsidiary, HomePride Finance Corp., experienced
operational control inadequacies, which resulted in the origination of some
loans that did not qualify for sale to intended third party institutions. Our
ability to increase our loan portfolio in connection with our new consumer
finance business depends in part upon our ability to effectively market our
consumer finance services to buyers of our manufactured homes and in the same
general economic conditions affecting the consumer finance and manufactured
housing industries. We may incur losses as we develop our loan portfolio and
integrate our consumer finance business into our existing operations. Moreover,
due to our limited operating history and non-participation in the securitization
market to date, the manufactured home loans and contracts that we seek to
securitize may receive lower ratings and may be subject to stricter underwriting
standards than those of our competitors that have an established consumer
finance record. As a result, we may be required to bear a larger portion of the
risk of loss on the financing agreements and may pay higher interest rates than
our competitors. If we are unable to operate our consumer finance business
profitably, we may be unable to recover accumulated operating losses, which
could have a material adverse effect on our results and financial position.

FUNDING FOR OUR NEW CONSUMER FINANCE BUSINESS - WE FACE NUMEROUS RISKS
ASSOCIATED WITH THE SECURITIZATION PROGRAMS THROUGH WHICH WE INTEND PRIMARILY TO
FUND OUR NEW FINANCE OPERATIONS.

         In connection with our new business as an originator of consumer
financing for factory-built homes, we require continual access to significant,
long- and short-term sources of cash to fund our originations of these
manufactured home loans and contracts, interest payments, over-collateralization
requirements for loan securitizations and other expenses.

         We are funding our consumer finance business with a portion of the
proceeds from the April 2002 issuance of $150 million of Senior Notes due 2007,
cash from operations, proceeds from sales of manufactured home loans and
contracts in connection with the warehouse facility and, ultimately, from
asset-backed securitization transactions in the capital markets. Adverse changes
in the securitization market, interest rates, the market for factory-built homes
or general economic conditions could impair our ability to originate, borrow
against, purchase and sell manufactured home loans and contracts on a favorable
or timely basis. This could prevent the accumulation of a sufficient number of
manufactured home loans and contracts on terms required to securitize the
manufactured home loans and contracts in asset-backed securitization
transactions, in which case we could be forced to sell at a significant discount
or hold manufactured home loans and contracts. Our inability to sell the
manufactured home loans and contracts would increase our exposure to the risk of
default and delinquency by the borrowers thereunder. The occurrence of any of
the foregoing



                                                                   Page 33 of 40
<PAGE>

could require us to make cash payments in excess of the funds generated by our
loan originations and under loans otherwise acquired by our consumer finance
business, which could have a material adverse effect on our results and
financial position. If we were unable to make such payments, our business and
operations could be severely disrupted.

         If our cash requirements increase beyond those generated by our
business and we are unable to increase proceeds available from sales of
manufactured home loans and contracts in connection with the warehouse facility
or access the securitization markets, we may be unable to maintain or increase
the volume of our consumer finance business. Our warehouse facility has a
one-year term. Although we expect to be able to obtain a replacement facility or
renew the facility when it expires, such facility may not be available on
favorable terms, if at all. To the extent that we are unable to arrange any
facility or other financing, our loan origination activities would be curtailed,
which could have a material adverse effect on our results and financial
position.

OPERATION OF OUR CONSUMER FINANCE BUSINESS - WE FACE RISKS OF LOSS RELATED TO
MANUFACTURED HOME LOANS AND CONTRACTS, INCLUDING RISKS ASSOCIATED WITH DEFAULTS,
DELINQUENCIES AND PREPAYMENTS, MANY OF WHICH WILL BE OUTSIDE OUR CONTROL.

         We expect to face numerous additional risks in connection with our
finance operations, many of which will be outside our control. Many purchasers
of manufactured homes may be deemed to be relatively high credit risks due to
various factors, including the lack of or impaired credit histories and limited
financial resources. Accordingly, the loans we originate may bear relatively
high interest rates and may involve higher default and delinquency rates and
servicing costs. In the event that we foreclose on delinquent loans, our ability
to sell the underlying collateral to recover or mitigate our loan losses will be
subject to market valuations of the collateral. These values may be affected by
factors such as the amount of available inventory of manufactured homes on the
market and general economic conditions.

         Prepayments of our managed receivables, whether due to refinancing,
repayments or foreclosures, in excess of management's estimates could adversely
affect our future cash flow as a result of the resulting loss of any servicing
fee revenue and net interest income on such prepaid receivables. Prepayments can
result from a variety of factors, many of which are beyond our control,
including changes in interest rates and general economic conditions.

         The foregoing risks become more acute in any economic slowdown or
recession. Periods of economic slowdown or recession may be accompanied by
decreased demand for consumer credit and declining asset values. In the home
equity mortgage and factory-built housing businesses, any material decline in
real estate values reduces the ability of borrowers to use home equity to
support borrowing and increases the loan-to-value ratios of loans previously
made, thereby weakening collateral coverage and increasing the possibility of a
loss in the event of a default. Delinquencies, foreclosures and losses generally
increase during economic slowdowns or recessions. Loss of employment, increases
in cost-of-living or other adverse economic conditions would likely impair the
ability of our consumer borrowers to meet their payment obligations, which could
impair our ability to continue to fund our finance operations.

COMPETITION - THE MANUFACTURED HOUSING INDUSTRY IS VERY COMPETITIVE. IF WE ARE
UNABLE TO EFFECTIVELY COMPETE, OUR GROWTH COULD BE LIMITED AND OUR SALES COULD
DECLINE.

         The manufactured housing industry is highly competitive at both the
manufacturing and retail levels, with competition based upon several factors,
including price, product features, reputation for service and quality,
merchandising, terms of retailer promotional programs and the terms of retail
customer financing. Numerous companies produce manufactured homes in our
markets. A number of our manufacturing competitors also have their own retail
distribution systems and consumer finance operations. In addition, there are
many independent manufactured housing retail locations in most areas where we
have retail operations. Because barriers to entry for manufactured housing
retailers are low, we believe that it is easy for new retailers to enter into
our markets as competitors. In addition, our products compete with other forms
of low to moderate-cost housing, including site-built homes, panelized homes,
apartments, townhouses and condominiums. If we are unable to effectively compete
in this environment, our retail sales and wholesale shipments could be reduced.
As a result, our growth could be limited and our sales could decline.

ZONING - IF THE MANUFACTURED HOUSING INDUSTRY IS NOT ABLE TO SECURE FAVORABLE
LOCAL ZONING ORDINANCES, OUR SALES COULD DECLINE AND OUR BUSINESS, RESULTS OF
OPERATIONS AND FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED.


                                                                   Page 34 of 40
<PAGE>

         Limitations on the number of sites available for placement of
manufactured homes or on the operation of manufactured housing communities could
reduce the demand for manufactured homes and our sales. Manufactured housing
communities and individual home placements are subject to local zoning
ordinances and other local regulations relating to utility service and
construction of roadways. In the past, property owners often have resisted the
adoption of zoning ordinances permitting the location of manufactured homes in
residential areas, which we believe has restricted the growth of the industry.
Manufactured homes may not receive widespread acceptance and localities may not
adopt zoning ordinances permitting the development of manufactured home
communities. If the manufactured housing industry is unable to secure favorable
local zoning ordinances, our sales could decline and our business, results of
operations and financial condition could be materially adversely affected.

DEPENDENCE UPON WALTER R. YOUNG AND OTHER KEY PERSONNEL - THE LOSS OF ANY OF OUR
EXECUTIVE OFFICERS COULD REDUCE OUR ABILITY TO ACHIEVE OUR BUSINESS PLAN AND
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS.

         We depend on the continued services and performance of our executive
officers, including our Chairman, President and Chief Executive Officer, Walter
R. Young. If we lose the service of Mr. Young or any of our executive officers,
it could limit our ability to achieve our business plan and could have a
material adverse effect on our business and operating results.

CERTAIN ELEMENTS OF OUR BUSINESS STRATEGY MAY NOT SUCCEED - OUR BUSINESS
STRATEGY MAY NOT ADEQUATELY ADDRESS THE ISSUES CURRENTLY FACING OUR COMPANY AND
THE MANUFACTURED HOUSING INDUSTRY OR CORRECTLY IDENTIFY FUTURE TRENDS IN THE
INDUSTRY. ANY FAILURE OF OUR BUSINESS STRATEGY COULD CAUSE OUR SALES TO DECLINE.

         Since mid-1999, retail sales and wholesale shipments of new
manufactured homes have decreased as a result of high consumer repossession
levels, tightened consumer credit standards, excess retail locations and
inventory, a reduced number of consumer lenders in the traditional chattel
lending portion of the industry, higher interest rates on chattel loans and a
reduced number of wholesale lenders in the industry. As a result, our operating
results have been adversely affected and we have closed a significant number of
manufacturing facilities and retail sales centers. We are implementing
strategies designed to address these issues. These strategies may not be
successful because the reasons for the decline in demand or future trends in the
industry may not be correctly identified, and our operating results may not
improve. In addition, factors beyond our control, such as increased competition,
reductions in consumer demand or continued economic downturn, may offset any
improved operating results that are attributable to our strategy. Any failure of
our business strategy could cause our sales to decline.

RESTRICTIVE COVENANTS - THE TERMS OF OUR DEBT PLACE RESTRICTIONS ON US AND OUR
SUBSIDIARIES, REDUCING OPERATIONAL FLEXIBILITY.

         The documents governing the terms of substantially all of our
indebtedness contain covenants that place restrictions on us and our
subsidiaries. The terms of our debt agreements include covenants that, to
varying degrees, restrict our and our subsidiaries' ability to:

         -  incur additional indebtedness, contingent liabilities and liens;
         -  issue additional preferred stock;
         -  pay dividends or make other distributions on our common stock;
         -  redeem or repurchase common stock and redeem, repay or repurchase
            subordinated debt;
         -  make investments in subsidiaries that are not restricted
            subsidiaries;
         -  enter into joint ventures;
         -  use assets as security in other transactions;
         -  sell certain assets or enter into sale and leaseback transactions;
         -  engage in new lines of business;
         -  guarantee or secure indebtedness;
         -  consolidate with or merge with or into other companies; and
         -  enter into transactions with affiliates.

         If we fail to comply with any of these covenants, the trustees could
cause our debt to become due and payable prior to maturity. If this debt were to
be accelerated, our assets might not be sufficient to repay our debt in full.


                                                                   Page 35 of 40
<PAGE>

         The $150 million of Senior Notes due 2007 contain covenants, which
among other things limit the Company's ability to incur additional indebtedness,
issue additional redeemable preferred stock, pay dividends on or repurchase
common stock, make certain investments and incur liens on assets. The debt
incurrence covenant in the Notes currently limits additional debt to a working
capital line of credit up to a borrowing base equal to 60% of otherwise
unencumbered inventories and 75% of otherwise unencumbered accounts receivable;
warehouse financing meeting certain parameters up to $200 million; other debt up
to $30 million; and ordinary course indebtedness that includes non-speculative
hedging obligations, floor plan financing, letters of credit, surety bonds,
bankers' acceptances, repurchase agreements related to retailer floor plan
financing and guaranties of additional debt otherwise permitted to be incurred.

         The $150 million warehouse facility we arranged in April 2002 contains
covenants requiring the Company to maintain minimum interest coverage ratios and
tangible net worth, as defined therein; maintain certain minimum unsecured debt
ratings from two of the national ratings agencies; and perform certain other
duties thereunder. Subsequent to quarter end, the consolidated special purpose
third party entity entered into waiver agreements to cure noncompliance with the
minimum interest coverage ratio covenant for the quarter ended June 29, 2002 and
to cure noncompliance with the minimum tangible net worth covenant as of June
29, 2002 and provide for a lower minimum tangible net worth requirement through
August 30, 2002.

         We also have a $15 million floor plan financing facility that contains
a covenant requiring us to maintain minimum earnings before interest, taxes,
depreciation and amortization (EBITDA), as defined. If our operating results do
not improve, we may not be in compliance with this covenant, which could result
in the lender terminating the credit line and causing such debt to become
immediately due and payable. As of June 29, 2002, the Company had approximately
$2 million outstanding under this facility.

         In August 2002, Moody's Investors Service and Standard & Poor's
announced that they have placed under review, for possible downgrade, our senior
implied credit ratings and the ratings on our Senior Notes due 2007 and Senior
Notes due 2009. Because the $150 million warehouse facility we arranged in April
2002 requires that we maintain certain minimum unsecured debt ratings, a
negative ratings action by Moody's or Standard & Poor's could cause a default
under that facility. A negative ratings action also could affect our ability to
obtain or maintain various forms of business credit, including but not limited
to letters of credit, surety bonds, trade payables and floor plan financing, or
could result in us having to place additional collateral related thereto.

         During the third quarter of 2002, we are seeking and will need to
obtain amendments to the performance covenants of the $150 million warehouse
facility in order to ensure our continuing compliance therewith. Also, if our
operating results do not improve we may again become noncompliant with one or
several of the covenants, which, if not cured or amended, would result in
default under the facility. In an event of default, the agent bank could
discontinue making further advances under the facility and enact alternate
"waterfall" provisions thereunder that would reduce or eliminate current
payments to the consolidated third party special purpose entity from the
underlying consumer loans. If the agent were to discontinue further advances, we
may not have sufficient capital resources to fund our consumer finance
operations.

POTENTIAL DILUTION - OUTSTANDING PREFERRED STOCK THAT IS CONVERTIBLE INTO COMMON
STOCK AND REDEEMABLE FOR COMMON STOCK (AND AT THE COMPANY'S OPTION FOR CASH),
AND A DEFERRED PURCHASE PRICE OBLIGATION THAT IS PAYABLE, AT THE COMPANY'S
OPTION, IN CASH OR COMMON STOCK, COULD RESULT IN POTENTIAL DILUTION AND IMPAIR
THE PRICE OF OUR COMMON STOCK.

         We currently have outstanding $20 million of Series B-1 cumulative
convertible preferred stock which is convertible into common stock at a rate of
$13.85 per share. The preferred shareholder has the right, through March 29,
2004, to redeem this preferred stock for common stock. We have the mandatory
obligation to redeem any remaining outstanding Series B-1 preferred stock on
March 29, 2004, for cash or common stock, at our option. The preferred
shareholder has the right until December 31, 2004 to purchase an additional $12
million of Series B preferred stock. From July 3, 2003 until its maturity on
July 3, 2008 the holder will have the right to redeem the additional $12 million
of Series B preferred stock in common stock at the then market price or in cash
at our option. The conversion rate for any future issuance of this preferred
stock would be 120% of the market value of the common stock at the time of
purchase


                                                                   Page 36 of 40
<PAGE>

(subject to certain limitations) but could not be less than $7.50 per share.

         We currently have outstanding $25 million of Series C cumulative
convertible preferred stock with a seven year term, which is currently
convertible into common stock at a rate of $9.63 per share. On June 29, 2003,
the conversion price will be adjusted to 115% of the common stock's then market
value (subject to certain limitations), provided that such conversion price
shall not be greater than $10.83 per share or less than $5.66 per share.
Commencing March 29, 2004, the preferred shareholder has the right to redeem
this preferred stock for common stock, and, at our option, partially for cash.

         We also pay a quarterly dividend on the preferred stock at a rate of 5%
per annum. The dividend is payable in cash or shares of our common stock, at our
option. The number of shares issuable in payment of these dividends depends on
the market value of the common stock at the time of issuance (subject to certain
limitations). As a result, assuming we elected to pay any dividend in shares of
common stock, the preferred shareholder would receive a greater number of shares
of common stock in payment of those dividends if our common stock price
decreases.

         We currently have outstanding a warrant which was initially exercisable
based on approximately 1.1 million shares of common stock at a strike price of
$12.04 per share. In accordance with the terms of the warrant, on August 6, 2002
the number of shares under warrant and the strike price per share were reset at
2.2 million shares and $10.02 per share, respectively. Beginning on March 29,
2003, the warrant strike price will increase annually by $0.75 per share. The
warrant expires on April 2, 2009. The warrant is exercisable only on a non-cash,
net basis, whereby the warrant holder would receive shares of common stock as
payment for the net gain upon exercise.

         As of June 29, 2002, we had outstanding $22 million of a deferred
purchase price obligation which is payable in quarterly payments of $2 million
through January 3, 2005. Quarterly payments may be made in cash or shares of
common stock at our option. The number of shares to be issued in any quarterly
payment depends on the market value of the common stock at the time of issuance.
As a result, assuming we elected to pay any quarterly installment in shares of
common stock, the recipients would receive a greater number of shares of common
stock in payment of those installments if our common stock price decreases.

         To the extent that the preferred shareholder elects to convert the
preferred stock into common stock or we elect to make preferred dividend
payments or the deferred purchase price obligation payments in common stock, our
then existing common shareholders would experience dilution in their percentage
ownership interests. If the $25 million of outstanding Series C preferred stock
were converted at its conversion price of $9.63 per share, the $20 million of
Series B-1 outstanding preferred stock were redeemed at its current redemption
floor of $5.66 per share, the $12 million of additional Series B preferred stock
were assumed to be issued and converted at 120% of the June 29, 2002 market
price, at a minimum of $7.50 per share, and the $22 million deferred purchase
price obligation were assumed to be paid in common stock using the June 29, 2002
market price, dilution of approximately 19.3% would occur based on the number of
shares of common stock outstanding at June 29, 2002. If all of these securities
were assumed to be converted at the June 29, 2002 market price rather than at
the current respective conversion or redemption prices, additional dilution of
approximately 3.1% would occur.

         The additional shares of common stock that could be available for sale
upon conversion or redemption of the preferred stock, as dividends on the
preferred stock or in payment of the deferred purchase price obligation may have
a negative impact on the market price of our common stock. In addition, sale of
substantial amounts of our common stock in the public market by the preferred
shareholder or the recipients of the deferred purchase price payments, or the
perception that these sales might occur, could depress the price of our common
stock. Such selling shareholders may determine the timing, structure and all
terms of any disposition of our common stock, all of which could affect the
market price of our common stock.

         We may seek additional sources of capital and financing in the future,
the terms of which may result in additional potential dilution.


                                                                   Page 37 of 40
<PAGE>



       Item 3. Quantitative and Qualitative Disclosures About Market Risk.

         The Company's floor plan borrowings are subject to interest primarily
based on the U.S. prime interest rate. A 100 basis point increase in the prime
rate would result in additional annual interest cost of $0.1 million, assuming
average floor plan borrowings of $11 million, the amount of outstanding
borrowings at June 29, 2002.




















                                                                   Page 38 of 40
<PAGE>

                           PART II. OTHER INFORMATION


          ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         On April 30, 2002 the registrant held its 2002 Annual Meeting of
Shareholders at which the following matters were submitted to a vote of security
holders with results as follows:

         1. Election of Directors
<TABLE>
<CAPTION>
                              Nominee                              Votes For                 Votes Withheld
           ---------------------------------------------  --------------------------  ---------------------------
<S>                                                       <C>                         <C>
           Robert W. Anestis                                      43,829,727                    283,805

           Eric S. Belsky                                         43,802,539                    310,993

           Selwyn Isakow                                          43,819,643                    293,889

           Brian D. Jellison                                      43,822,763                    290,769

           Ellen R. Levine                                        43,812,187                    301,345

           George R. Mrkonic                                      43,793,902                    319,630

           Walter R. Young                                        37,878,521                  6,235,011
</TABLE>

                    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

         (a) The following exhibits are filed as part of this report:

 Exhibit No                      Description

      10.1        Receivables Purchase Agreement dated as of April 18, 2002
                  among GSS HomePride Corp., HomePride Finance Corp., The CIT
                  Group/Sales Financing, Inc., Greenwich Funding Corp., the
                  financial institutions named therein and Credit Suisse First
                  Boston, New York Branch.

      10.2        Amendment Agreement No. 1, dated as of May 23, 2002 to the
                  Receivables Purchase Agreement, dated as of April 18, 2002,
                  among HomePride Finance Corp., GSS HomePride Corp., The CIT
                  Group/Sales Financing, Inc., Greenwich Funding Corp., the
                  financial institutions named therein as Banks and Credit
                  Suisse First Boston, New York Branch.

      10.3        Amendment and Waiver Agreement No. 2, dated as of June 17,
                  2002, to the (i) Fee Letter Agreement, dated as of April 18,
                  2002, among GSS HomePride Corp., a Delaware corporation,
                  HomePride Finance Corp., a Michigan corporation and Credit
                  Suisse First Boston, New York Branch, and (ii) Receivables
                  Purchase Agreement, dated as of April 18, 2002, among GSS
                  HomePride Corp., HomePride Finance Corp., The CIT/Group Sales
                  Financing, Inc., a Delaware corporation, Greenwich Funding
                  Corp., the financial institutions set forth on the signature
                  page thereto and Credit Suisse First Boston, New York Branch.

      10.4        Amendment Agreement No. 3, dated as of June 21, 2002, to the
                  Receivables Purchase Agreement, dated as of April 18, 2002,
                  among HomePride Finance Corp., GSS HomePride Corp., The CIT
                  Group/Sales Financing, Inc., Greenwich Funding Corp., the
                  financial institutions named therein as Banks and Credit
                  Suisse First Boston, New York Branch.

      11          Statement Regarding Computation of Earnings (Loss) Per Share.

         (b)      On April 5, 2002 (three filings), April 17, 2002 (two
                  filings), April 25, 2002, May 16, 2002, May 23, 2002, June 18
                  2002, June 27, 2002, July 17, 2002, August 8, 2002 and August
                  14, 2002, Champion filed current reports on Form 8-K. On
                  August 19, 2002 Champion filed a Form 8-K/A to amend its Form
                  8-K dated August 8, 2002 and a Form 8-K/A to amend its Form
                  8-K dated July 17, 2002.


                                                                   Page 39 of 40
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                            CHAMPION ENTERPRISES, INC.

                                      By:   /s/ ANTHONY S. CLEBERG
                                            ------------------------------------
                                            Anthony S. Cleberg
                                            Executive Vice President and
                                            Chief Financial Officer
                                            (Principal Financial Officer)



                                      And:  /s/ RICHARD HEVELHORST
                                            ------------------------------------
                                            Richard Hevelhorst
                                            Vice President and Controller
                                            (Principal Accounting Officer)



Dated: August 19, 2002


                                                                   Page 40 of 40
<PAGE>
                                 Exhibit Index

 Exhibit No                      Description

      10.1        Receivables Purchase Agreement dated as of April 18, 2002
                  among GSS HomePride Corp., HomePride Finance Corp., The CIT
                  Group/Sales Financing, Inc., Greenwich Funding Corp., the
                  financial institutions named therein and Credit Suisse First
                  Boston, New York Branch.

      10.2        Amendment Agreement No. 1, dated as of May 23, 2002 to the
                  Receivables Purchase Agreement, dated as of April 18, 2002,
                  among HomePride Finance Corp., GSS HomePride Corp., The CIT
                  Group/Sales Financing, Inc., Greenwich Funding Corp., the
                  financial institutions named therein as Banks and Credit
                  Suisse First Boston, New York Branch.

      10.3        Amendment and Waiver Agreement No. 2, dated as of June 17,
                  2002, to the (i) Fee Letter Agreement, dated as of April 18,
                  2002, among GSS HomePride Corp., a Delaware corporation,
                  HomePride Finance Corp., a Michigan corporation and Credit
                  Suisse First Boston, New York Branch, and (ii) Receivables
                  Purchase Agreement, dated as of April 18, 2002, among GSS
                  HomePride Corp., HomePride Finance Corp., The CIT/Group Sales
                  Financing, Inc., a Delaware corporation, Greenwich Funding
                  Corp., the financial institutions set forth on the signature
                  page thereto and Credit Suisse First Boston, New York Branch.

      10.4        Amendment Agreement No. 3, dated as of June 21, 2002, to the
                  Receivables Purchase Agreement, dated as of April 18, 2002,
                  among HomePride Finance Corp., GSS HomePride Corp., The CIT
                  Group/Sales Financing, Inc., Greenwich Funding Corp., the
                  financial institutions named therein as Banks and Credit
                  Suisse First Boston, New York Branch.

      11          Statement Regarding Computation of Earnings (Loss) Per Share.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>k71231exv10w1.txt
<DESCRIPTION>RECEIVABLES PURCHASE AGREEMENT
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.1

================================================================================


                         RECEIVABLES PURCHASE AGREEMENT

                           dated as of April 18, 2002

                                      among

                              GSS HOMEPRIDE CORP.,

                                   as Seller,

                            HOMEPRIDE FINANCE CORP.,

                                  as Servicer,

                      THE CIT GROUP/SALES FINANCING, INC.,

                                as Sub-Servicer,

                             GREENWICH FUNDING CORP,

                                 as an Investor,

                    THE FINANCIAL INSTITUTIONS NAMED HEREIN,

                                    as Banks,

                                       and

                  CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,

                                    as Agent


================================================================================




<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                   <C>                                                                                      <C>
ARTICLE I             DEFINITIONS.................................................................................1
                      SECTION 1.01.      Certain Defined Terms....................................................1
                      SECTION 1.02.      Other Terms.............................................................45

ARTICLE II            AMOUNTS AND TERMS OF THE PURCHASES.........................................................45
                      SECTION 2.01.      Purchase Facility.......................................................45
                      SECTION 2.02.      Making Purchases........................................................45
                      SECTION 2.03.      Receivable Interest Calculation.........................................46
                      SECTION 2.04.      Take-Outs...............................................................47
                      SECTION 2.05.      Servicer Take-Outs......................................................47
                      SECTION 2.06       Optional Reductions.....................................................48

ARTICLE III           YIELD, FEES, ETC...........................................................................48
                      SECTION 3.01.      Yield Payment Dates.....................................................48
                      SECTION 3.02.      Fees....................................................................48
                      SECTION 3.03.      Computation of Yield and Fees...........................................48

ARTICLE IV            CAPITAL INVESTMENT REPAYMENTS..............................................................48
                      SECTION 4.01.      Repayments of Capital Investment........................................48

ARTICLE V             PAYMENTS...................................................................................49
                      SECTION 5.01.      Making of Payments......................................................49
                      SECTION 5.02.      Distributions...........................................................49

ARTICLE VI            INCREASED COSTS; TAXES.....................................................................53
                      SECTION 6.01.      Increased Costs.........................................................53
                      SECTION 6.02.      Additional Yield on Receivable Interests Bearing a Eurodollar
                                         Rate....................................................................54
                      SECTION 6.03.      Taxes...................................................................54

ARTICLE VII           CONDITIONS OF PURCHASES....................................................................55
                      SECTION 7.01.      Conditions Precedent to Initial Purchase................................55
                      SECTION 7.02.      Conditions Precedent to All Purchases...................................59

ARTICLE VIII          REPRESENTATIONS AND WARRANTIES.............................................................61
                      SECTION 8.01.      Representations and Warranties of the Seller............................61
</TABLE>



                                       i
<PAGE>

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                   <C>                                                                                      <C>
ARTICLE IX            COVENANTS..................................................................................65
                      SECTION 9.01.      Records.................................................................65
                      SECTION 9.02.      Other Liens or Interests................................................65
                      SECTION 9.03.      Costs and Expenses......................................................66
                      SECTION 9.04.      Compliance with Laws, Etc...............................................66
                      SECTION 9.05.      Offices, Records, Name and Organization.................................66
                      SECTION 9.06.      Performance and Compliance with Contracts and Credit and
                                         Collection Policy.......................................................66
                      SECTION 9.07.      Change in Business or Credit and Collection Policy......................66
                      SECTION 9.08.      Extension or Amendment of Receivables...................................66
                      SECTION 9.09.      Marking of Records......................................................67
                      SECTION 9.10.      Further Assurances......................................................67
                      SECTION 9.11.      Reporting Requirements..................................................67
                      SECTION 9.12.      Corporate Separateness..................................................70
                      SECTION 9.13.      Purchase and Contribution Agreement; Purchase and Sale
                                         Agreement; Custodial Agreement; Global Servicing
                                         Agreement...............................................................73
                      SECTION 9.14.      Nature of Business......................................................73
                      SECTION 9.15.      Mergers, Etc............................................................73
                      SECTION 9.16.      Distributions, Etc......................................................73
                      SECTION 9.17.      Debt....................................................................73
                      SECTION 9.18.      Certificate of Incorporation and By-Laws................................73
                      SECTION 9.19.      Inspections.............................................................74
                      SECTION 9.20.      Take-Out Securitization.................................................74
                      SECTION 9.21.      Shadow Rating...........................................................75
                      SECTION 9.22.      Intentionally Omitted...................................................75
                      SECTION 9.23.      Changes in Payment Instructions to Obligors.............................75
                      SECTION 9.24.      Deposits to Specified Accounts..........................................75
                      SECTION 9.25.      Lock-Box Accounts; Lock-Box Banks.......................................75

ARTICLE X             GRANT OF SECURITY INTEREST.................................................................76
                      SECTION 10.01.     Seller's Grant of Security Interest; Assignment of Purchase
                                         and Sale Agreement......................................................76
                      SECTION 10.02.     Characterization of Transaction.  ......................................77
                      SECTION 10.03.     Seller Remains Liable...................................................77

ARTICLE XI            ADMINISTRATION AND SERVICING OF RECEIVABLES................................................78
                      SECTION 11.01.     Designation of Servicer Parties.........................................78
                      SECTION 11.02.     Duties of the Servicer Parties..........................................79
                      SECTION 11.03.     Collection of Receivable Payments; Modification and
                                         Amendment of Receivables................................................81
</TABLE>



                                       ii

<PAGE>



<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                   <C>                                                                                      <C>
                      SECTION 11.04.     Realization Upon Receivables............................................83
                      SECTION 11.05.     Insurance and Dealer Recourse...........................................84
                      SECTION 11.06.     Covenants, Representations and Warranties of Servicer
                                         Parties.................................................................86
                      SECTION 11.07.     Servicing and Sub-Servicing Fee; Payment of Certain
                                         Expenses by Servicer and Sub-Servicer...................................91
                      SECTION 11.08.     Servicer's Certificate..................................................92
                      SECTION 11.09.     Annual Statement as to Compliance; Notice of Servicer
                                         Termination Event.......................................................92
                      SECTION 11.10.     Annual Independent Accountant's Report..................................92
                      SECTION 11.11.     Access to Certain Documentation and Information Regarding
                                         Receivables.............................................................93
                      SECTION 11.12.     Fidelity Bond...........................................................93
                      SECTION 11.13.     Insurance...............................................................93
                      SECTION 11.14.     Accounts................................................................93

ARTICLE XII           THE SERVICER...............................................................................95
                      SECTION 12.01.     Liability of Servicer Parties; Indemnities..............................95
                      SECTION 12.02.     Consolidations, Mergers and Sales of Assets.............................96
                      SECTION 12.03.     Limitation on Liability of Servicer Parties and Others..................97
                      SECTION 12.04.     Delegation of Duties....................................................97
                      SECTION 12.05.     Servicer Parties Not to Resign..........................................97

ARTICLE XIII          SERVICER TERMINATION EVENTS................................................................98
                      SECTION 13.01.     Servicer Termination Event..............................................98
                      SECTION 13.02.     Consequences of a Servicer Termination Event............................99
                      SECTION 13.03.     Appointment of Successor Servicer......................................102
                      SECTION 13.04.     Certain Rights of the Agent............................................103

ARTICLE XIV           TERMINATION EVENTS........................................................................104
                      SECTION 14.01.     Termination Events.....................................................104
                      SECTION 14.02.     Effect of Termination Event............................................105
                      SECTION 14.03.     Events of Default......................................................106

ARTICLE XV            THE AGENT.................................................................................109
                      SECTION 15.01.     Authorization and Action...............................................109
                      SECTION 15.02.     Exculpation............................................................109
                      SECTION 15.03.     CSFB and Affiliates....................................................110
                      SECTION 15.04.     Bank's Purchase Decision...............................................110
                      SECTION 15.05.     Notice by Agent........................................................110
</TABLE>


                                      iii

<PAGE>

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                   <C>                                                                                      <C>
ARTICLE XVI           INDEMNIFICATION...........................................................................110
                      SECTION 16.01.     Indemnities by the Seller..............................................110

ARTICLE XVII          MISCELLANEOUS.............................................................................113
                      SECTION 17.01.     No Waiver; Remedies....................................................113
                      SECTION 17.02.     Amendments.............................................................113
                      SECTION 17.03.     Notices, Etc...........................................................113
                      SECTION 17.04.     Assignability..........................................................113
                      SECTION 17.05.     Costs, Expenses and Taxes..............................................114
                      SECTION 17.06.     No Proceedings.........................................................115
                      SECTION 17.07.     Confidentiality........................................................115
                      SECTION 17.08.     Captions and Cross References..........................................115
                      SECTION 17.09.     Severability...........................................................116
                      SECTION 17.10.     GOVERNING LAW..........................................................116
                      SECTION 17.11.     Execution in Counterparts..............................................116
                      SECTION 17.12.     WAIVER OF JURY TRIAL...................................................116
                      SECTION 17.13.     Survival of Termination................................................116
                      SECTION 17.14.     ENTIRE AGREEMENT.......................................................117
                      SECTION 17.15.     Consent to Jurisdiction................................................117
                      SECTION 17.16.     Lienholder Nominee.....................................................117
</TABLE>


SCHEDULE I            -      Agent's Account
SCHEDULE II           -      Credit and Collection Policy
SCHEDULE III          -      Non-Permitted Assignees


ANNEXES
ANNEX A               -      Form of Assignment and Acceptance Agreement
ANNEX B               -      Form of Control Agreement
ANNEX C               -      Form of Purchase Request
ANNEX D               -      Form of Transfer Certificate
ANNEX E               -      Intentionally Omitted
ANNEX F               -      Intentionally Omitted
ANNEX G               -      Intentionally Omitted
ANNEX H               -      Form of Funds Transfer Letter


                                       iv

<PAGE>



                         RECEIVABLES PURCHASE AGREEMENT


         THIS RECEIVABLES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of April 18, 2002, among GSS HOMEPRIDE CORP., a Delaware
corporation (the "Seller"), HOMEPRIDE FINANCE CORP., a Michigan corporation
("HomePride"), as servicer (the "Servicer"), THE CIT GROUP/SALES FINANCING,
INC., a Delaware corporation (the "Sub-Servicer"), GREENWICH FUNDING CORP, a
Delaware corporation ("Conduit"), THE FINANCIAL INSTITUTIONS SET FORTH ON THE
SIGNATURE PAGES HERETO and their permitted assigns, as banks (the "Banks") and
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH ("CSFB"), as agent (in such capacity
the "Agent") for the Investors (as hereinafter defined) and the Banks.

         PRELIMINARY STATEMENT. The Seller may acquire, from time to time,
Receivables from HomePride Funding Corp., a Delaware corporation ("HomePride
SPV"), by purchasing such Receivables, as determined, from time to time, by the
Seller and HomePride SPV. The Seller is prepared to sell undivided fractional
ownership interests (referred to herein as "Receivable Interests") in the
Receivables. Conduit may, in its sole discretion, purchase such Receivable
Interests, and the Banks are prepared to purchase such Receivable Interests, in
each case on the terms set forth herein. Accordingly, the parties agree as
follows:

                                    ARTICLE I

                                   DEFINITIONS

                  SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):

                  "Accountant's Report" has the meaning set forth in Section
11.10(a).

                  "Acquired Property" means property acquired by either Servicer
Party or Seller by foreclosure, repossession, replevin, deed in lieu of
foreclosure, or otherwise in respect of a Receivable.

                  "Acquired Property Mortgage" means, with respect to any
Acquired Property, any mortgage, deed of trust or similar security instrument
from the holder of title of such Acquired Property to the custodian which (i)
encumbers such Acquired Property and (ii) secures all amounts which were due on
the related contract up to the date of acquisition of such Acquired Property.

                  "Adjusted Consolidated Tangible Net Worth" means, as of any
date, the sum of (i) the Consolidated Tangible Net Worth as of such date, (ii)
the outstanding amount of any Preferred Stock as of such date and (iii) the
outstanding amount of any Term Debt as of such date.



<PAGE>
                  "Advance Rate" means on the Closing Date, a percentage equal
to 85% and thereafter as adjusted, in the discretion of the Agent, on any
Take-Out Date and any day on which there is an increase in Capital Investment;
provided, that, at all times after the Shadow Rating has been obtained the
Advance Rate shall be such percentage as shall be determined by the Agent to be
consistent with the criteria deemed by the Rating Agencies to be necessary for
the provision of the Shadow Rating so obtained.

                  "Affected Person" has the meaning set forth in Section
6.01(a).

                  "Affiliate" means, as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person or is a director or officer of such Person.

                  "Agent" has the meaning set forth in the Preamble.

                  "Agent's Account" means the account of the Agent set forth on
Schedule I hereto or such other account as the Agent shall designate in writing
to the Seller, the Servicer and the Custodian.

                  "Aggregate Outstanding Balance" means, with respect to any
group of Receivables as of any date, the sum of the Outstanding Balances of all
such Receivables as of the opening of business on such date.

                  "Aggregate Required Reserve Account Amount" means, with
respect to any date of determination, (a) the sum of the Required Reserve
Account Amounts for all Purchases made on or prior to such date minus (b) the
sum of the Required Reserve Account Amounts for all Receivables which are or
have been the subject of a Take-Out on or prior to such date.

                  "Alternate Base Rate" means a fluctuating rate per annum as
shall be in effect from time to time, which rate shall be at all times equal to
the highest of:

                           (a) the rate of interest announced publicly by CSFB
                  in New York, New York, from time to time as CSFB's base
                  commercial lending rate;

                           (b) 1/2 of one percent above the latest three-week
                  moving average of secondary market morning offering rates in
                  the United States for three-month certificates of deposit of
                  major United States money market banks, such three-week
                  moving average being determined weekly on each Monday (or, if
                  such day is not a Business Day, on the next succeeding
                  Business Day) for the three-week period ending on the previous
                  Friday by CSFB on the basis of such rates reported by
                  certificate of deposit dealers to and published by the Federal
                  Reserve Bank of New York or, if such publication shall be
                  suspended or terminated, on the basis of quotations for such
                  rates received by CSFB from three New York, New York
                  certificate of deposit dealers of


                                        2

<PAGE>



                  recognized standing selected by CSFB, in either case adjusted
                  to the nearest 1/4 of one percent or, if there is no nearest
                  1/4 of one percent, to the next higher 1/4 of one percent; and

                           (c) the Federal Funds Rate.

                  "Amount Financed" means, with respect to a Receivable, the
aggregate amount initially extended under the related Contract toward the
purchase price of the related Manufactured Home and/or Mortgaged Property and
related costs.

                  "Applicable Spread" shall have the meaning ascribed thereto in
the Fee Letter.

                  "Appraised Value" means the market value of any Manufactured
Home and/or Mortgaged Property as set forth in the appraisal made for the
originator of the related Contract by a licensed independent professional
appraiser at the time of the origination of the related Contract.

                  "Asset Purchase Agreement" means (a) in the case of any Bank
other than CSFB, the asset purchase agreement entered into by such Bank
concurrently with the Assignment and Acceptance pursuant to which it became
party to this Agreement and (b) in the case of CSFB, the secondary market
agreement, asset purchase agreement or other similar liquidity agreement entered
into by CSFB for the benefit of Conduit, to the extent relating to the sale or
transfer of interests in Receivable Interests.

                  "Assignee Rate" for any Fixed Period for any Receivable
Interest funded by a Bank or an Investor that is not funding such Receivable
Interest through the issuance of commercial paper or other promissory notes,
means an interest rate per annum equal to the Eurodollar Rate for such Fixed
Period plus the Applicable Spread; provided, however, that in case of:

                  (i) any Fixed Period on or prior to the first day of which a
Bank or Investor shall have notified the Agent that (A) the introduction of or
any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for such Bank or Investor to fund such Receivable Interest at the
Assignee Rate set forth above or (B) it is unable to obtain U.S. Dollars in the
London interbank market to fund or maintain any Receivable Interest (and such
Bank or Investor shall not have subsequently notified the Agent that such
circumstances no longer exist), or

                  (ii) any Fixed Period for a Receivable Interest, the Capital
Investment of which allocated to such Investor or Bank is less than $500,000,
the "Assignee Rate" for such Fixed Period shall be an interest rate per annum
equal to the Alternate Base Rate in effect from time to time during such Fixed
Period; provided further that the Agent and the Seller may agree in writing from
time to time upon a different "Assignee Rate."



                                        3

<PAGE>
                  "Assignment and Acceptance" means an assignment and acceptance
agreement entered into by a Bank, an assignee of such Bank and the Agent,
pursuant to which such assignee may become a party to this Agreement, in
substantially the form of Annex A hereto.

                  "Bank Account" means any of the Collection Account, the Excess
Collections Account or the Reserve Account.

                  "Bank Commitment" of any Bank means, (a) with respect to CSFB,
$150,000,000; or (b) with respect to a Bank that has entered into an Assignment
and Acceptance, the amount set forth therein as such Bank's Bank Commitment, in
each case as such amount may be reduced by an Assignment and Acceptance entered
into between such Bank and its assignee, and as may be further reduced (or
terminated) pursuant to the next sentence. Any termination of the Purchase Limit
pursuant to the terms of this Agreement shall terminate the Bank Commitment of
each Bank.

                  "Banks" has the meaning set forth in the Preamble.

                  "Bi-Weekly Contract" means any Contract pursuant to which the
scheduled level payment of interest and principal is due every 14 days.

                  "Business Day" shall mean any day on which (a) commercial
banks in New York City are not authorized or required to be closed, and (b) in
the case of a Business Day which relates to calculation of a Eurodollar Rate,
dealings are carried on in the London interbank Eurodollar market.

                  "Buy-For Contract" means a Contract under which the related
Obligor is not a resident of the related Manufactured Home and such Manufactured
Home was purchased primarily for use by some party other than the Obligor.

                  "California Weighted Average FICO Score" means, as of any date
of determination, the weighted average (weighted solely based upon the
Outstanding Balances of the Eligible Receivables owed by the applicable Obligors
as of such date of determination) of the FICO Scores of the Obligors related to
all Eligible Receivables originated in California as of such date of
determination.

                  "Capital Deficiency" means, with respect to any time of
determination, the amount, if any, by which aggregate Capital Investment at such
time plus all accrued and unpaid Yield and Fees at such time shall exceed the
product of (x) the then Advance Rate and (y) the Net Receivables Pool Balance at
such time.

                  "Capital Investment" of any Receivable Interest means the
original amount paid to the Seller for such Receivable Interest at the time of
its purchase by an Investor or a Bank pursuant to this Agreement or such amount
divided or combined in accordance with Section 2.03, in each case reduced from
time to time by Collections distributed on account of such Capital Investment
pursuant to Section 5.02 ; provided that if such Capital Investment shall have
been reduced by any payment and


                                        4

<PAGE>
thereafter all or a portion of such distribution is rescinded or must otherwise
be returned for any reason, such Capital Investment shall be increased by the
amount of such rescinded or returned payment, as though it had not been made.

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

                  "Change of Control" means (i) (a) the Parent shall cease to
own, directly or indirectly, 100% of the outstanding Capital Stock of HomePride;
(b) HomePride shall cease to own 100% of the Capital Stock of HomePride SPV; or
(c) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended), shall become, or obtain
rights (whether by means of warrants, options or otherwise, to become, the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of more than 50% of the outstanding Capital Stock of the
Parent, (ii) a "Change of Control" as defined in the 1999 Indenture shall have
occurred or (iii) a "Change of Control" as defined in the 2002 Indenture shall
have occurred.

                  "CIT" means CIT Group Inc., a Nevada corporation, or any
successor thereto.

                  "CIT Group/Sales" means The CIT Group/Sales Financing, Inc., a
Delaware corporation, or any successor thereto.

                  "CIT Group/Sales Termination Date" has the meaning set forth
in Section 11.01(c).

                  "CIT Guaranty" means the Guaranty, dated as of the Closing
Date, executed by CIT in favor of the Agent in respect of the obligations of CIT
Group/Sales, in its capacity as Sub-Servicer under this Agreement, as such
Guaranty may be amended, supplemented or otherwise modified from time to time.

                  "Closing Date" means April 18, 2002.

                  "Code" means the Internal Revenue Code of 1986, as amended.

                  "Collection Account" has the meaning set forth in Section
11.03.

                  "Collection Account Bank" has the meaning set forth in Section
11.03.

                  "Collection Period" means, with respect to a Distribution
Date, the calendar month immediately preceding such Distribution Date (or
portion thereof following the Closing Date or the most recent Take-Out Date).


                                        5

<PAGE>

                  "Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of Related Security with respect to such
Receivable received in respect of such Receivable after the related Cut-Off Date
(but excluding any fees occasioned by the making of expedited payments by the
related Obligor by means of telephonic communication) and all amounts paid under
or in connection with any Interest Rate Hedge purchased in accordance with the
provisions of this Agreement.

                  "Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Parent within the meaning
of Section 4001 of ERISA or is part of a group which includes the Parent and
which is treated as a single employer under Section 414 of the Code.

                  "Computer Tape" means, with respect to Pool Receivables, a
computer tape or other electronic medium in a format reasonably acceptable to
the Agent containing data specifications approved by the Agent on or prior to
the date of the initial Purchase hereunder.

                  "Conduit" has the meaning set forth in the Preamble.

                  "Consolidated EBIT" shall mean for any date of determination
hereunder, an amount equal to (A) the sum of Consolidated Net Income (Loss) as
calculated for the most recently concluded fiscal quarter plus, (B) to the
extent deducted in determining Consolidated Net Income (Loss) for such period,
(i) provisions for taxes based on income and state single business taxes and
(ii) Consolidated Interest Expense.

                  "Consolidated Interest Expense" means, for any date of
determination hereunder, total interest expense (including without limitation,
interest expense attributable to capital leases in accordance with GAAP) of the
Parent and its Subsidiaries on a consolidated basis as calculated for the most
recently concluded fiscal quarter.

                  "Consolidated Net Income (Loss)" means, for any fiscal period
of the Parent and its consolidated Subsidiaries, the net income (or loss) of the
Parent and such Subsidiaries on a consolidated basis for such period (taken as a
single accounting period) determined in conformity with GAAP; provided, however,
that there shall be excluded therefrom the income (or loss) of any Person
accrued prior to the date such Person becomes such a consolidated Subsidiary of
the Parent or is merged into or consolidated with the Parent or such a
consolidated Subsidiary of the Parent, or such Person's assets are acquired by
the Parent or one of such consolidated Subsidiaries.

                  "Consolidated Tangible Net Worth" means, at any date, all
amount calculated in accordance with GAAP as to (i) the consolidated net worth
of the Parent and its consolidated Subsidiaries minus (ii) the consolidated
intangibles of the Parent and such consolidated Subsidiaries, including, without
limitation, goodwill, trademarks, tradenames, copyrights, patents, patent
applications,


                                        6

<PAGE>



licenses and rights in any of the foregoing and other items treated as
intangibles in accordance with GAAP.

                  "Contract" means a Manufactured Housing Contract, a Land and
Home Contract or a Mortgage Loan.

                  "Control Agreement" means a control agreement, in the form of
Annex B hereto, among the Collection Account Bank, the Agent, the Servicer and
the Seller, dated as of the Closing Date, with respect to each of the Bank
Accounts, as the same may be amended, modified, restated or supplemented from
time to time in accordance with its terms.

                  "Coupon Rate" means, with respect to any Receivable, the per
annum rate of interest for such Receivable set forth in the related Contract.

                  "Credit and Collection Policy" means (i) those manufactured
housing loan credit policies and practices of the Servicer and (ii) those
manufactured housing loan servicing policies and practices of the Sub-Servicer,
as such manufactured loan servicing policies and practices shall have been
adopted by the Servicer, all as in effect on the date of this Agreement as set
forth in Schedule II attached hereto, as modified from time to time in
compliance with this Agreement.

                  "CSFB" has the meaning set forth in the Preamble.

                  "Custodial Agreement" means the Custodial Agreement, dated as
of the Closing Date, among the Custodian, the Agent, the Seller, the Servicer
and the Sub-Servicer, including all amendments, modifications and supplements
thereto.

                  "Custodial Fees" means the fees and expenses owed to the
Custodian under the Custodial Agreement.

                  "Custodian" means JPMorgan Chase Bank, as custodian under the
Custodial Agreement and any successor appointed pursuant to the terms thereof.

                  "Cut-Off Date" means, with respect to any Pool Receivable, the
date specified as such in the Purchase Request for such Receivables and as
approved by the Agent.

                  "Dealer" means a dealer who sold a Manufactured Home to an
Obligor and who originated and assigned the Contract relating to such
Manufactured Home to HomePride under a Dealer Agreement, and any successor to
such Dealer.

                  "Dealer Agreement" means any agreement between HomePride and a
Dealer with respect to the origination and assignment of Contracts,
substantially in the form previously delivered to and approved by the Agent, and
as such may be amended, modified and supplemented from time to


                                        7

<PAGE>

time with the consent of the Agent (in the case of amendments, modifications and
supplements other than those of an inconsequential nature), such consent not to
be unreasonably withheld.

                  "Dealer Recourse" means, with respect to a Contract, all of
HomePride's rights arising under the related Dealer Agreement or otherwise
against the Dealer which originated such Contract.

                  "Debt" means, without duplication, (a) indebtedness for
borrowed money, whether evidenced by bonds, debentures, notes or other similar
instruments, (b) obligations to pay the deferred purchase price of property or
services, (c) obligations as lessee under leases which shall have been or should
be, in accordance with GAAP, recorded as capital leases, (d) obligations under
direct or indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (a) through (c) above and (e) Restricted Contingent
Liabilities.

                  "Deemed AAA Advance Percentage" means as of any date of
determination, an advance percentage determined by the Agent to be consistent
with the criteria deemed by the Rating Agencies to be necessary for the facility
contemplated by this Agreement to receive a Shadow Rating of "AAA" from S&P and
"Aaa" from Moody's; it being understood that such determination shall be made by
the Agent without actually obtaining such a Shadow Rating from S&P and Moody's.

                  "Deemed AAA Capital Investment Amount" means as of any date of
determination, the product of (i) the Net Receivables Pool Balance and (ii) the
Deemed AAA Advance Percentage as of such date.

                  "Deemed AAA Credit Enhancement Amount" means as of any date of
determination, an amount equal to the excess, if any, of (i) the Capital
Investment as of such date of determination over (ii) the Deemed AAA Capital
Investment Amount as of such date of determination.

                  "Defaulted Receivable" means a Receivable with respect to
which:

                           (a) the related Manufactured Home or Mortgaged
                  Property has been repossessed or foreclosed upon;

                           (b) all or any portion greater than $65 of any
                  Scheduled Payment is 90 days or more past due;

                           (c) such Receivable has been partially or wholly
                  charged-off for any reason because the Servicer or
                  Sub-Servicer has made a good faith determination that payments
                  under the related Contract are not likely to be resumed;

                           (d) the related Obligor is involved in an Event of
                  Bankruptcy; or



                                        8

<PAGE>


                           (e) consistent with the Credit and Collection Policy,
                  such Receivable has been or should be written off as
                  uncollectible.

                  "Deferred Payment Receivable" means a Receivable with respect
to which the related Contract provides that the first Scheduled Payment thereon
is due on a date later than 60 days from the date of the origination of such
Contract.

                  "Delinquency/Repossession Ratio" means, as of any date of
determination, with respect to any group of Receivables, the ratio (expressed as
a percentage) computed by dividing:

                           (a) the sum, without duplication, of (i) the
                  Aggregate Outstanding Balance of such Receivables which were
                  Tier 2 Delinquent Receivables as of the last day of the
                  immediately preceding Collection Period and (ii) the Aggregate
                  Outstanding Balance of such Receivables which became
                  Repossessed Receivables during the immediately preceding
                  Collection Period;

                  by

                           (b) the Aggregate Outstanding Balance of all such
                  Receivables as of the last day of the immediately preceding
                  Collection Period.

                  "Delinquent Receivable" means a Receivable as to which any
Scheduled Payment, or part thereof greater than $65.00, remains unpaid for 30
days or more from the original due date for such Scheduled Payment.

                  "Determination Date" means, with respect to each Distribution
Date, that day which shall be two (2) Business Days prior to such Distribution
Date.

                  "Distribution Date" means, the 13th day of each calendar
month, or if such day is not a Business Day, the next succeeding Business Day.

                  "Dollars" and the sign "$" mean lawful money of the United
States of America.

                  "Eligible Account" means (a) a segregated, non-interest
bearing trust or custodial account or (b) a segregated direct deposit account,
in each case, maintained with a depository institution or trust company
organized under the laws of the United States of America, or any of the States
thereof, or the District of Columbia, having a certificate of deposit, short
term deposit or commercial paper rating of at least A-1+ by Standard & Poor's
and P-1 by Moody's.

                  "Eligible Assignee" means CSFB, any of its Affiliates, any
Person managed by CSFB or any of its Affiliates or any other financial or other
institution acceptable to the Agent other than the




                                        9

<PAGE>
financial or other institutions set forth on Schedule III hereto as amended from
time to time with the written consent of the Agent.

                  "Eligible Counterparty" means (A) CSFB or any of its
Affiliates, (B) any other nationally recognized financial institution that is in
the business of entering into interest rate hedging arrangements (i) the
long-term senior unsecured debt obligations of which are rated "AA" or better by
Standard & Poor's and "Aa2" or better by Moody's and (ii) which is otherwise
acceptable to the Agent or (C) any other financial institution that has been
approved in writing by the Agent.

                  "Eligible Receivable" means, at any time, a Receivable:

                           (a) the Obligor of which is a United States resident,
                  is not an Affiliate of any of the parties hereto, and is not a
                  government or a governmental subdivision or agency;

                           (b) is not a Defaulted Receivable or Delinquent
                  Receivable;

                           (c) which, according to the Contract related thereto,
                  is required to be paid in full within 360 months of the
                  original billing date therefor;

                           (d) which is an "eligible asset" as defined in Rule
                  3a-7 under the Investment Company Act of 1940, as amended;

                           (e) which is, and for which the related Contract and
                  Mortgage Note, if any, is, an "account," "instrument,"
                  "chattel paper," "general intangible" or "payment intangible"
                  within the meaning of Article 9 of the UCC of all applicable
                  jurisdictions;

                           (f) which is denominated and payable only in Dollars
                  in the United States;

                           (g) which arises under a Contract which, together
                  with such Receivable, is in full force and effect and
                  constitutes the legal, valid and binding obligation of the
                  Obligor of such Receivable and is not subject to any
                  litigation or any right of rescission, dispute, offset,
                  counterclaim or other defense of such Obligor;

                           (h) which, together with the related Contract, does
                  not contravene in any material respect any laws, rules or
                  regulations applicable thereto (including, without limitation,
                  laws, rules and regulations relating to usury, consumer
                  protection, truth in lending, fair credit billing, fair credit
                  reporting, equal credit opportunity, lender licensing, fair
                  debt collection practices and privacy) and with respect to
                  which no part of such Contract or none of the Seller,
                  HomePride, Servicer, Sub-Servicer or the Obligor is in
                  violation of any such law, rule or regulation in any material
                  respect;


                                       10
<PAGE>

                           (i) which arises under a Contract which (i) does not
                  require the Obligor thereunder to consent to the transfer,
                  sale or assignment of the rights and duties of the Seller,
                  HomePride, HomePride SPV or the Dealer thereunder, (ii) does
                  not contain a confidentiality provision that purports to
                  restrict the ability of the Investors, Banks or the Agent to
                  exercise their rights under this Agreement, including, without
                  limitation, their right to review the related Contract, and
                  (iii) does not require notice to the Obligor thereunder of any
                  transfer, sale or assignment of the rights and duties of the
                  Seller, HomePride, HomePride SPV or the Dealer thereunder;

                           (j) which (i) satisfies in all respects, other than
                  in an inconsequential respect, all applicable requirements of
                  the Credit and Collection Policy and (ii) was originated or
                  acquired by HomePride in the ordinary course of its business
                  and in accordance with HomePride's customary acquisition or
                  underwriting and originating policies and procedures;

                           (k) for which the related Manufactured Home is a
                  "single family residence" within the meaning of Section
                  25(e)(10) of the Code;

                           (l) which provides for level monthly, semi-monthly or
                  bi-weekly payments to the stated maturity thereof, and permits
                  either partial or full prepayment without penalty; and with
                  respect to which the interest thereon is calculated in
                  accordance with one of the methods commonly referred to as the
                  "Simple Interest Method", "Actuarial Method" or the "Rule of
                  78's Method" (with payments received applied first to interest
                  accrued);

                           (m) which, if the related Contract was not originated
                  by HomePride, was originated by a Dealer and such Dealer is
                  subject to a Dealer Agreement which is in full force and
                  effect;

                           (n) which arises under a Contract which shall
                  represent a first priority perfected security interest in the
                  related Manufactured Home and/or Mortgaged Property;

                           (o) which is serviced by the Servicer or the
                  Sub-Servicer, and with respect to which the related Contract
                  has not been compromised, adjusted or modified (including by
                  the extension of time for payment or the granting of any
                  discounts, allowances or credits) other than in a manner that
                  was, in the reasonable judgment of the Servicer, Sub-Servicer
                  or any prior servicer or holder of the related Contract,
                  necessary to maximize the amount to be received thereunder;

                           (p) with respect to which at all times since the
                  origination of the related Contract the related Manufactured
                  Home and Mortgaged Property, if any, is covered



                                       11
<PAGE>

                  by appropriate physical damage insurance or property insurance
                  (including for each Manufactured Home located in an area
                  identified in the Federal Register by the Federal Emergency
                  Management Agency as having special flood hazards, a flood
                  insurance policy meeting the requirements of the guidelines of
                  the Flood Insurance Administration as of the date of
                  origination), in each case in an amount at least equal to the
                  lesser of the maximum insurable value of the Manufactured Home
                  and the Amount Financed and otherwise satisfying the
                  provisions of Section 11.05;

                           (q) which the Seller acquired in good faith, for
                  value and without notice of any Lien and with respect to which
                  the Seller has good and marketable title, free and clear of
                  all Liens;

                           (r) which shall not have been originated in a
                  jurisdiction under which the assignment or sale of such
                  Receivable would be invalid or unlawful;

                           (s) with respect to which all information in the
                  Computer Tape and otherwise provided by HomePride, either
                  Servicer Party or the Seller to the Agent hereunder shall be
                  true and correct as of the date of the Purchase of a
                  Receivable Interest therein;

                           (t) with respect to which no adverse selection
                  process was used for selecting such Receivable for sale by
                  HomePride to HomePride SPV or by HomePride SPV to the Seller
                  and which has not been selected for inclusion in Receivables
                  Pool under this Agreement in a manner that is adverse to the
                  interests of the Investors or the Banks;

                           (u) with respect to which the Servicer or
                  Sub-Servicer has performed all acts required to preserve the
                  rights of the Agent, the Investors and the Banks in any
                  Insurance Policies in respect of such Receivable;

                           (v) with respect to which no error, omission,
                  misrepresentation, negligence or fraud in any respect, other
                  than in an inconsequential respect, occurred in connection
                  with the origination of such Receivable and the related
                  Contract;

                           (w) with respect to which the related Manufactured
                  Home and Mortgaged Property is free of damage and in good
                  repair;

                           (x) with respect to which there has been no fraud,
                  dishonesty, material misrepresentation or negligence on the
                  part of HomePride in connection with the origination or
                  acquisition of such Receivable;




                                       12
<PAGE>

                           (y) if such Receivable arises under a Land and Home
                  Contract or a Mortgage Loan, with respect to which the related
                  Mortgage constitutes a valid first priority lien upon and
                  security title to the related Mortgaged Property described
                  therein;

                           (z) if such Receivable arises under a Land and Home
                  Contract or a Mortgage Loan, with respect to which no part of
                  the Mortgaged Property purporting to secure the related
                  Contract has been, or shall have been, released from the lien
                  or security title of the Mortgage securing the related
                  Contract;

                           (aa) if such Receivable arises under a Land and Home
                  Contract or a Mortgage Loan, if the related Mortgage
                  constitutes a deed of trust, a trustee, duly qualified under
                  applicable law to act as such, is properly designated, serving
                  and named in such Mortgage;

                           (bb) if such Receivable arises under a Land and Home
                  Contract or a Mortgage Loan, with respect to which the related
                  Mortgaged Property is located in the United States;

                           (cc) if such Receivable arises under a Land and Home
                  Contract or a Mortgage Loan, with respect to which there is no
                  delinquent tax or assessment lien on the related Mortgaged
                  Property;

                           (dd) if such Receivable arises under a Land and Home
                  Contract or a Mortgage Loan, with respect to which no
                  improvement located on or being part of the related Mortgaged
                  Property is in violation of any applicable zoning law or
                  regulation in any material respect; and all material
                  inspections, licenses and certificates required to be made or
                  issued with respect to all occupied portions of such Mortgaged
                  Property and, with respect to the use and occupancy of the
                  same, including but not limited to certificates of occupancy
                  and fire underwriting certificates, have been made or obtained
                  from the appropriate authorities, and such Mortgaged Property
                  is lawfully occupied under the applicable law;

                           (ee) if such Receivable arises under a Land and Home
                  Contract or a Mortgage Loan, no hazardous substances,
                  hazardous wastes or solid wastes, as such terms are defined in
                  the Comprehensive Environmental Response Compensation and
                  Liability Act, the Resource Conservation and Recovery Act of
                  1976, or other federal, state or local environmental
                  legislation exist on, or affect, the related Mortgaged
                  Property;

                           (ff) if such Receivable arises under a Mortgage Loan
                  secured by real estate, such Mortgage Loan is evidenced by one
                  original promissory note which is secured by a valid and
                  perfected first lien on the related Mortgaged Property;




                                       13
<PAGE>

                           (gg) which arises under a Contract which contains
                  customary and enforceable provisions adequate for realization
                  of the benefits of the Related Security for such Contract;

                           (hh) which arises under a Contract which (together
                  with the Collections and Related Security related thereto) has
                  been the subject of either a valid transfer and assignment
                  from HomePride to HomePride SPV, and from HomePride SPV to the
                  Seller, of all of HomePride's and HomePride SPV's,
                  respectively, right, title and interest therein or the grant
                  of a first priority perfected security interest therein (and
                  in the Collections and Related Security related thereto);

                           (ii) which arises under a Contract with respect to
                  which each of HomePride, HomePride SPV and Seller has
                  performed all obligations required to be performed by it
                  thereunder;

                           (jj) which, together with the related Contract and
                  all agreements with respect thereto, was (i) prior to the sale
                  thereof to HomePride SPV pursuant to the Purchase and
                  Contribution Agreement, owned by HomePride free and clear of
                  any lien or other right that may impair the interest of the
                  Investors or the Banks or the Servicer's rights under this
                  Agreement and (ii) prior to the sale thereof to the Seller
                  pursuant to the Purchase and Sale Agreement, owned by
                  HomePride SPV free and clear of any lien or other right that
                  may impair the interest of the Investors or the Banks or the
                  Servicer's rights under this Agreement;

                           (kk) in which HomePride SPV, after the transfer from
                  HomePride pursuant to the Purchase and Contribution Agreement
                  (in the event the intent of the parties thereto that such
                  transfer constitutes a true sale is disregarded), shall have
                  acquired a valid and perfected first priority security
                  interest, along with the related Collections, following the
                  respective purchase date with respect thereto, free and clear
                  of any lien or other right that may impair the interest of the
                  Seller, the Investors, the Banks or the Servicer under this
                  Agreement;

                           (ll) in which the Seller, after transfer from
                  HomePride SPV pursuant to the Purchase and Sale Agreement (in
                  the event the intent of the parties thereto that such transfer
                  constitutes a true sale is disregarded), shall have acquired a
                  valid and perfected first priority security interest, along
                  with the related Collections, following the respective
                  purchase date with respect thereto, free and clear of any lien
                  or any other right that may impair the interest of the Seller,
                  Investors, Banks or Servicer under this Agreement;

                           (mm) as to which no effective financing statement or
                  other instrument similar in effect covering such Receivable,
                  the related Contract, any interest therein, or



                                       14
<PAGE>

                  Collections with respect thereto is on file in any recording
                  office except such as may be filed in favor of HomePride under
                  any Dealer Agreement, HomePride SPV under the Purchase and
                  Contribution Agreement, the Seller under the Purchase and Sale
                  Agreement or the Agent under this Agreement;

                           (nn) which arises under a Contract with respect to
                  which all costs, fees, intangible, documentary and recording
                  taxes and expenses incurred in making, closing and recording
                  such Contract have been paid;

                           (oo) if such Receivable arises under a Manufactured
                  Housing Contract, the related Manufactured Home is personal
                  property, was personal property at the time of the execution
                  and delivery of such 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;

                           (pp) the Obligor of which, if a natural person, is
                  living, is not a minor under the laws of his/her state of
                  residence, is competent to enter into a contract and incur
                  debt;

                           (qq) with respect to which all material consents,
                  licenses or authorizations of, or registrations with, any
                  governmental authority required to be obtained or given in
                  connection with the origination of such Receivable, the
                  execution and delivery of the related Contract, and the sale,
                  assignment and transfer of the related Contract to HomePride
                  SPV and the Seller, and the servicing of the related Contract
                  by the Servicer and Sub-Servicer have been duly obtained or
                  given and are in full force and effect;

                           (rr) which arises under a Contract which has a fixed
                  annual percentage rate and provides for level monthly,
                  bi-weekly or semi-monthly payments of principal and interest
                  and which fully amortize such Contract over its term and 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;

                           (ss) which has a Loan-to-Value Ratio not exceeding
                  100%;

                           (tt) with respect to which, (i) if the related
                  Manufactured Home is located in a state in which notation of a
                  security interest on the Title related to such Manufactured
                  Home is required or permitted to perfect (a) security interest
                  in such Manufactured Home, such Title shows HomePride, or if a
                  new or replacement Title with respect to such Manufactured
                  Home is being applied for, such Title will be issued within
                  180 days and will show, HomePride, as the holder of a first
                  priority security interest in such Manufactured Home; (ii) if
                  the related Manufactured Home is located in



                                       15
<PAGE>

                  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 HomePride
                  as secured party; (iii) 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 which itself,
                  or with an assignment of mortgage properly filed in such
                  office, names HomePride as mortgagee; provided, further that
                  in each such case, the Seller 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;

                           (uu) such Receivable is not a Deferred Payment
                  Receivable;

                           (vv) which is of a type which the Agent has not
                  provided notice to the Seller that such type of Receivable is
                  not permitted to be included in a pool of manufactured housing
                  loans which secures or is represented by interests in rated
                  securities by any of the Rating Agencies;

                           (ww) the Obligor of which has been directed to make
                  payments to the Specified Account (or to a Lock-Box Account as
                  and when required under this Agreement);

                           (xx) the Outstanding Balance of such Receivable at
                  the time of Purchase of a Receivable Interest therein does not
                  exceed $200,000;

                           (yy) such Receivable was originated by HomePride or a
                  Person (including, without limitation, an Affiliate of
                  HomePride, but excluding the Parent) which sold such
                  Receivable to HomePride and said Receivable which was
                  purchased by HomePride was, prior to the time of its purchase,
                  re-underwritten in accordance with the standards and criteria
                  set forth in the Credit and Collection Policy;

                           (zz) which is evidenced by one original executed
                  Contract;

                           (aaa) the originally executed Contract related to
                  such Receivable and related Receivable File is in the
                  possession of the Custodian;

                           (bbb) with respect to which the documents contained
                  in the related Receivable File are not defective in any
                  material respect;

                           (ccc) if such Receivable arises under a Land and Home
                  Contract or is a Mortgage Loan, such Land and Home Contract or
                  the related Mortgage Note, as applicable, is endorsed to
                  HomePride in blank;




                                       16
<PAGE>

                           (ddd) if such Receivable arises under a Land and Home
                  Contract or is a Mortgage Loan, the original related Land and
                  Home Contract or Mortgage Note, as applicable, is in the
                  possession of the Custodian;

                           (eee) if such Receivable arises under a Land and Home
                  Contract or is a Mortgage Loan, with respect to which the
                  related Mortgage has been properly recorded as required by
                  law;

                           (fff) if such Receivable arises under a Manufactured
                  Housing Contract, the original Title is in the possession of
                  the Custodian;

                           (ggg) the related Contract, and the loan created
                  thereunder, does not constitute a Section 32 Loan;

                           (hhh) with respect to which, the representations and
                  warranties of the Dealer involved in the origination of such
                  Receivable were true and correct as of the date that the
                  Receivable was acquired from such Dealer;

                           (iii) which, if originated by a Dealer, was
                  originated by such Dealer in the regular course of its
                  business;

                           (jjj) the inclusion at any time (whether on the date
                  a Receivable Interest in such Receivable is first Purchased or
                  at any time thereafter) of such Receivable in the Receivables
                  Pool as an Eligible Receivable shall not cause the Weighted
                  Average Loan-to-Value to be greater than 90%;

                           (kkk) the inclusion at any time (whether on the date
                  a Receivable Interest in such Receivable is first Purchased or
                  at any time thereafter) of such Receivable in the Receivables
                  Pool as an Eligible Receivable shall not cause the Weighted
                  Average FICO Score to be less than 670;

                           (lll) the inclusion at any time (whether on the date
                  a Receivable Interest in such Receivable is first Purchased or
                  at any time thereafter) of such Receivable in the Receivables
                  Pool as an Eligible Receivable shall not cause the Weighted
                  Average Manufactured Housing Contract Remaining Term to be
                  greater than 300 months;

                           (mmm) the inclusion (whether on the date a Receivable
                  Interest in such Receivable is first Purchased or at any time
                  thereafter) of such Receivable in the Receivables Pool as an
                  Eligible Receivable shall not cause the California Weighted
                  Average FICO Score to be less than 700 at any time that the
                  amount by which the Aggregate Outstanding Balance of all
                  Eligible Receivables in the Receivables Pool



                                       17
<PAGE>

                  originated in the State of California exceeds 20% of the
                  Aggregate Outstanding Balance of all Eligible Receivables in
                  the Receivables Pool;

                         (nnn) until such time as HomePride, HomePride SPV and
                  the Seller shall have obtained duly issued licenses, permits
                  and/or approvals which authorize them to originate and hold
                  Contracts under the applicable statutes, rules, regulations,
                  case law and administrative decisions of the State of Maryland
                  and its courts and administrative bodies, (i) the Obligor
                  under the Contract related to such Receivable shall not be a
                  resident of the State of Maryland, (ii) the related
                  Manufactured Home shall not be located in the State of
                  Maryland and (iii) the Title for such Manufactured Home shall
                  not be, and shall not be required to be, issued by the State
                  of Maryland or any subdivision, agency, bureau or court
                  thereof;

                           (ooo) until such time as HomePride, HomePride SPV and
                  the Seller shall have obtained duly issued licenses, permits
                  and/or approvals which authorize them to originate and hold
                  Contracts under the applicable statutes, rules, regulations,
                  case law and administrative decisions of the State of
                  Louisiana and its courts and administrative bodies, (i) the
                  Obligor under the Contract related to such Receivable shall
                  not be a resident of the State of Louisiana, (ii) the related
                  Manufactured Home shall not be located in the State of
                  Louisiana and (iii) the Title for such Manufactured Home shall
                  not be, and shall not be required to be, issued by the State
                  of Louisiana or any subdivision, agency, bureau or court
                  thereof; and

                         (ppp) until such time as HomePride, HomePride SPV and
                  the Seller shall have obtained duly issued licenses, permits
                  and/or approvals which authorize them to originate and hold
                  Contracts under the applicable statutes, rules, regulations,
                  case law and administrative decisions of the Commonwealth of
                  Pennsylvania and its courts and administrative bodies, (i) the
                  Obligor under the Contract related to such Receivable shall
                  not be a resident of the Commonwealth of Pennsylvania, (ii)
                  the related Manufactured Home shall not be located in the
                  Commonwealth of Pennsylvania and (iii) the Title for such
                  Manufactured Home shall not be, and shall not be required to
                  be, issued by the Commonwealth of Pennsylvania or any
                  subdivision, agency, bureau or court thereof;

                         (qqq) with respect to which the Amount Financed under
                  the related Contract did not exceed the dealer invoice price
                  with respect to the related Manufactured Home by more than
                  135%; and

                         (rrr) which arises under a Contract which is not a
                  Buy-For Contract, other than a Parent/Child Buy-For Contract.



                                       18
<PAGE>

                  "Eligible Servicer" means HomePride or a Person, acceptable to
the Agent, which at the time it succeeds the then existing Servicer as Servicer,
(a) is servicing a portfolio of manufactured housing loans, (b) is legally
qualified and has the capacity to service the Receivables in the Receivables
Pool, (c) has demonstrated the ability, professionally and competently, to
service a portfolio of manufactured housing loans similar to the Receivables in
the Receivables Pool with reasonable skill and care, and (d) is qualified and
entitled to use, pursuant to a license or other written agreement, and agrees to
maintain the confidentiality of, the software which the Servicer and
Sub-Servicer use in connection with performing its duties and responsibilities
under this Agreement or otherwise has available software which is adequate to
perform its duties and responsibilities under this Agreement.

                  "Eligible Sub-Servicer" means CIT Group Sales or a Person,
acceptable to the Agent, which at the time it succeeds the then existing
Sub-Servicer as Sub-Servicer, (a) is servicing a portfolio of manufactured
housing loans, (b) is legally qualified and has the capacity to service the
Receivables in the Receivables Pool, (c) has demonstrated the ability,
professionally and competently, to service a portfolio of manufactured housing
loans similar to the Receivables in the Receivables Pool with reasonable skill
and care, and (d) is qualified and entitled to use, pursuant to a license or
other written agreement, and agrees to maintain the confidentiality of, the
software which the Sub-Servicer uses in connection with performing its duties
and responsibilities under this Agreement or otherwise has available software
which is adequate to perform its duties and responsibilities under this
Agreement.

                  "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.

                  "ERISA Affiliate" means, with respect to the Parent or any of
its Subsidiaries, any trade or business (whether or not incorporated) that is a
member of a group of which the Parent or any of its Subsidiaries is a member and
which is treated as a single employer under Section 414(b) or (c) of the Code
or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is
treated as a single employer under Section 414 of the Code.

                  "ERISA Event" means for any Person, (a) any "reportable
event," as defined in Section 4043 of ERISA or the regulations issued thereunder
with respect to a Plan (other than an event for which the 30 day notice period
is waived); (b) the existence with respect to any Plan of an "accumulated
funding deficiency" (as defined in Section 412 of the Code or Section 302 of
ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the
Code or Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Plan; (d) the incurrence by such Person or
any of its ERISA Affiliates of any liability under Title IV of ERISA with
respect to the termination of any Plan; (e) the receipt by such Person or any
ERISA Affiliate from the PBGC or a plan administrator of any notice relating to
an intention to terminate any Plan or Plans or to appoint a trustee to
administer any Plan; (f) the incurrence by such Person or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal
from any Plan or Multiemployer Plan; or (g) the receipt by such Person or any
ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from
such Person or any ERISA Affiliate of any notice, concerning the imposition




                                       19
<PAGE>

of Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.

                  "Eurocurrency Liabilities" has the meaning assigned to such
term in Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.

                  "Eurodollar Rate" means, for any Fixed Period, an interest
rate per annum equal to the rate per annum (rounded upward, if necessary, to the
nearest 1/16 of 1%) as determined on the basis of the offered rates for deposits
in U.S. Dollars, for a period of 30 days which appears at Telerate Page 3750 as
of 11:00 A.M. (London time) (i) in the case of any Fixed Period in respect of
which Yield is computed by reference to the Assignee Rate, two (2) Business Days
before the first day of such Fixed Period or (ii) in the case of any Fixed
Period in respect of which Yield is computed by reference to the Investor Rate,
on the first day of such Fixed Period; provided that if the rate described above
does not appear on Telerate Page 3750 on any applicable interest determination
date, the Eurodollar Rate shall be the rate (rounded upward as described above,
if necessary) for deposits in Dollars for a period of 30 days on the Reuters
Screen LIBO Page, as of 11:00 A.M. (London time) (i) in the case of any Fixed
Period in respect of which Yield is computed by reference to the Assignee Rate,
two (2) Business Days before the first day of such Fixed Period or (ii) in the
case of any Fixed Period in respect of which Yield is computed by reference to
the Investor Rate, on the first day of such Fixed Period. If the Agent is unable
to determine the Eurodollar Rate for any Fixed Period by reference to either the
Telerate Page 3750 or the Reuters Screen LIBO Page, then the Eurodollar Rate for
that Fixed Period will be the rate per annum of the offered rate for deposits in
U.S. Dollars for a period of 30 days which is offered by CSFB in the London
interbank market at approximately 11:00 A.M. (London time) two (2) Business Days
before the first day of such Fixed Period. Each determination by the Agent
pursuant to this definition shall be conclusive absent manifest error.

                  "Eurodollar Rate Reserve Percentage" of any Investor or Bank
for any Fixed Period in respect of which Yield is computed by reference to the
Eurodollar Rate means the reserve percentage applicable two Business Days before
the first day of such Fixed Period under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) (or if
more than one such percentage shall be applicable, the daily average of such
percentages for those days in such Fixed Period during which any such percentage
shall be so applicable) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other marginal
reserve requirement) for such Investor or Bank with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities (or with respect to
any other category of liabilities that includes deposits by reference to which
the interest rate on Eurocurrency Liabilities is determined) having a term equal
to such Fixed Period.




                                       20
<PAGE>


                  "Event of Bankruptcy" shall be deemed to have occurred with
respect to a Person if either:

                           (a) a case or other proceeding shall be commenced,
                  without the application or consent of such Person, in any
                  court, seeking the liquidation, reorganization, debt
                  arrangement, dissolution, winding up, or composition or
                  readjustment of debts of such Person, the appointment of a
                  trustee, receiver, custodian, liquidator, assignee,
                  sequestrator or the like for such Person or all or
                  substantially all of its assets, or any similar action with
                  respect to such Person under any law relating to bankruptcy,
                  insolvency, reorganization, winding up or composition or
                  adjustment of debts, and, with respect to any such case or
                  proceeding brought against, or in respect of, any Person other
                  than Seller or HomePride SPV, such case or proceeding shall
                  continue undismissed, or unstayed and in effect, for a period
                  of 60 consecutive days; or an order for relief in respect of
                  such Person shall be entered in an involuntary case under the
                  federal bankruptcy laws or other similar laws now or hereafter
                  in effect; or

                           (b) such Person shall commence a voluntary case or
                  other proceeding under any applicable bankruptcy, insolvency,
                  reorganization, debt arrangement, dissolution or other similar
                  law now or hereafter in effect, or shall consent to the
                  appointment of or taking possession by a receiver, liquidator,
                  assignee, trustee, custodian, sequestrator (or other similar
                  official) for such Person or for any substantial part of its
                  property, or shall make any general assignment for the benefit
                  of creditors, or shall fail to, or admit in writing its
                  inability to, pay its debts generally as they become due, or,
                  if a corporation or similar entity, its board of directors
                  shall vote to implement any of the foregoing.

                  "Excess Collections" means, with respect to any Distribution
Date, the amount equal to (A) the Interest Collections, with respect to the
immediately preceding Collection Period minus (B) the sum of (i) an amount equal
to all accrued Yield, Fees and Other Amounts to be paid on such Distribution
Date, (ii) an amount equal to the accrued fees and expenses to be paid to the
Custodian on such Distribution Date, (iii) the amount to be deposited in the
Reserve Account on such Distribution Date and (iv) an amount equal to the
accrued Servicing Fees to be paid on such Distribution Date.

                  "Excess Collections Account" means the account designated as
the Excess Collections Account in, and which is established and maintained with
the Collection Account Bank pursuant to Section 11.14(d).

                  "Excess Collections Percentage" means, with respect to any
date of determination, the average of Spread Percentages for the three
consecutive Collection Periods (or such lesser number of Collection Periods as
shall have elapsed after the Closing Date) that are immediately preceding such
date.




                                       21
<PAGE>

                  "Excess Concentration Amount" means, at any time, an amount
equal to the sum, without duplication, of the following:

                         (a) the amount by which the Aggregate Outstanding
                  Balance of Eligible Receivables in the Receivables Pool for
                  which the number of Scheduled Payments has been increased
                  subsequent to the origination thereof exceeds 2% of the
                  Aggregate Outstanding Balance of all Eligible Receivables in
                  the Receivables Pool;

                         (b) the amount by which the Aggregate Outstanding
                  Balance of Eligible Receivables in the Receivables Pool which
                  were not originated by HomePride or an Affiliate of HomePride
                  and were acquired by HomePride as part of an acquisition of a
                  portfolio of Contracts, exceeds 5% of the Aggregate
                  Outstanding Balance of all Eligible Receivables in the
                  Receivables Pool;

                         (c) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  that are secured by manufactured homes which were
                  previously-owned manufactured homes at the time such Contracts
                  were originated exceeds 25% of the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool;

                         (d) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  originated in the State of California exceeds 30% of the
                  Aggregate Outstanding Balance of all Eligible Receivables;

                         (e) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  originated in any one State, other than the State of
                  California, exceeds 20% of the Aggregate Outstanding Balance
                  of all Eligible Receivables in the Receivables Pool;

                         (f) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  originated in the Three Highest States exceeds 60% of the
                  Aggregate Outstanding Balance of all Eligible Receivables in
                  the Receivables Pool;

                         (g) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  for which the related land was pledged in lieu of a down
                  payment at the time of purchase by the Obligor exceeds 3% of
                  the Aggregate Outstanding Balance of all Eligible Receivables
                  in the Receivables Pool;

                         (h) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  secured by single-wide Manufactured Homes



                                       22
<PAGE>

                  exceeds 40% of the Aggregate Outstanding Balance of all
                  Eligible Receivables in the Receivables Pool;

                         (i) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  attributable to loans for the purchase of Manufactured Homes
                  which were previously repossessed exceeds 5% of the Aggregate
                  Outstanding Balance of all Eligible Receivables in the
                  Receivables Pool;

                         (j) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  with respect to which the related Manufactured Home is located
                  in a mobile home park exceeds 60% of the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool;

                         (k) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  for which an exception to the Credit and Collection Policy was
                  made exceeds 10% of the Aggregate Outstanding Balance of all
                  Eligible Receivables in the Receivables Pool that were
                  originated by HomePride;

                         (l) the amount by which the aggregate Financed Points
                  related to all Eligible Receivables in the Receivables Pool
                  exceeds 4% of the Aggregate Outstanding Balance of all
                  Eligible Receivables in the Receivables Pool;

                         (m) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  with respect to which the related Obligor has a FICO Score of
                  600 or less or as to which a FICO Score is not available
                  exceeds 5% of the Aggregate Outstanding Balance of all
                  Eligible Receivables in the Receivables Pool;

                         (n) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  with respect to which the Outstanding Balance thereof is
                  greater than $150,000 but less than or equal to $200,000
                  exceeds 10% of the Aggregate Outstanding Balance of all
                  Eligible Receivables in the Receivables Pool;

                         (o) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  for which the down payment at the time of purchase by the
                  related Obligor was less than 8% of the Amount Financed in
                  respect of the related Manufactured Home and/or Mortgaged
                  Property exceeds 35% of the Aggregate Outstanding Balance of
                  all Eligible Receivables in the Receivables Pool;

                         (p) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool as
                  to which the related Manufactured Homes and/or Mortgaged
                  Properties securing the related Contracts did not constitute
                  the



                                       23
<PAGE>

                  primary residence of the related Obligors at the time of
                  origination of such Contracts exceeds 5% of the Aggregate
                  Outstanding Balance of all Eligible Receivables in the
                  Receivables Pool; and

                         (q) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  with respect to which the related Contract is a Parent/Child
                  Buy-For Contract exceeds 5% of the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool.

                  "Exit Fee Rate" shall have the meaning ascribed thereto in the
Fee Letter.

                  "Facility Termination Date" means the earliest of (a) April
17, 2003, unless, prior to such date (or the date so extended pursuant to this
clause), upon the Seller's request, made not more than 90 nor less than 45 days
prior to the then Facility Termination Date, the Conduit and one or more Banks
having commitments equal to 100% of the Purchase Limit shall in their sole
discretion consent, which consent shall be given not more than 30 days prior to
the then Facility Termination Date, to the extension of the Facility Termination
Date to the date occurring 364 days after the then Facility Termination Date;
provided, however, that any failure of the Conduit or any Bank to respond to the
Seller's request for such extension shall be deemed a denial of such request by
the Conduit or such Bank, (b) the date determined pursuant to Section 14.01, and
(c) the date on which the Purchase Limit has been reduced to zero.

                  "Fair Market Value" means, with respect to any Contract or any
group of Contracts as of any date of determination, the market value of such
Contract or group of Contracts as determined by the Agent and the Servicer.

                  "Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.

                  "Fee Letter" means the letter agreement, dated as of the
Closing Date, among the Agent, HomePride and the Seller, as such letter
agreement may be amended, supplemented or otherwise modified from time to time.

                  "Fees" means all fees and other amounts payable by HomePride
or the Seller to the Agent, the Investors or the Banks pursuant to the Fee
Letter or Section 2.05 or Section 2.06 hereof.





                                       24
<PAGE>


                  "FICO Score" means the statistical credit bureau scores
obtained by lenders in connection with the loan application to help assess a
borrower's credit worthiness.

                  "Financed Points" means, with respect to any Receivable, the
aggregate Dollar amount of any related points due at the time of origination of
the related Contract which were financed by the loan made to the Obligor under
the related Contract.

                  "Fixed Period" means, with respect to any Receivable Interest,
the period commencing on the date such Receivable Interest is purchased
hereunder and ending on the next Distribution Date and each successive period
commencing on the first day after the previous Distribution Date and ending on
the immediately subsequent Distribution Date.

                  "Funds Transfer Letter" means a letter in substantially the
form of Annex H hereto executed and delivered by Seller to the Agent.

                  "GAAP" means generally accepted United States accounting
principles.

                  "Global Servicing Agreement" means that Servicing Agreement
entered into as of April 18, 2002 between HomePride and CIT Group/Sales, as
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof and hereof.

                  "GSS" means Global Securitization Services, Inc., a Delaware
corporation.

                  "HomePride" has the meaning set forth in the Preamble.

                  "HomePride SPV" means HomePride Funding Corp., a Delaware
corporation, and any successor thereto or assign thereof acceptable to the
Agent.

                  "HomePride Account" means account number 1851358596 maintained
by HomePride at Comerica Bank of Detroit.

                  "Incipient Termination Event" means an event that but for
notice or lapse of time or both would constitute a Termination Event.

                  "Indemnified Amounts" has the meaning set forth in Section
16.01.

                  "Indemnified Party" has the meaning set forth in Section
16.01.

                  "1999 Indenture" means the Indenture, dated as May 3, 1999
among the Parent, as the issuer, the Subsidiary Guarantors named therein and The
First National Bank of Chicago, as trustee, as amended, supplemented or
otherwise modified from time to time.




                                       25
<PAGE>

                  "2002 Indenture" means the Indenture, dated as of April 22,
2002, among Champion Home Builders, Co., as the issuer, the Parent, as parent
guarantor, the Subsidiary Guarantors named therein and Bank One Trust Company,
N.A., as trustee, as amended, supplemented or otherwise modified from time to
time.

                  "Independent Accountants" has the meaning set forth in Section
11.10(a).

                  "Independent Director" has the meaning set forth in Section
9.12(a).

                  "Insurance Policies" means, with respect to a Receivable, any
insurance policy (including the insurance policies described in clause (p) of
the definition of "Eligible Receivable") required in accordance with the Credit
and Collection Policy benefitting the holder of the Receivable providing loss or
physical damage, extended warranty, credit life, credit disability, or similar
coverage with respect to the related Manufactured Home, Mortgaged Property or
Obligor.

                  "Insurance Proceeds" means proceeds of any Insurance Policies
to the extent not expended by the Servicer for the restoration or repair of any
Manufactured Home or Mortgaged Property.

                  "Interest Collections" means, with respect to a Distribution
Date, the sum of (a) the amount deposited in the Collection Account during the
preceding Collection Period attributable to interest payments on the Receivables
in the Receivables Pool pursuant to the related Contracts (including Paid Ahead
Interest Payments); (b) the portion of any Liquidation Proceeds, Other Proceeds
or Take-Out Proceeds received during such Collection Period allocable to
interest due on such Receivables; and (c) the amount of any investment income
earned on amounts on deposit in the Bank Accounts since the preceding
Distribution Date (or the Closing Date in the case of the first Distribution
Date) and deposited in the Collection Account pursuant to Section 5.02.

                  "Interest Coverage Ratio" means, as the end of any fiscal
quarter of the Parent, the ratio of (a) Consolidated EBIT to (b) Consolidated
Interest Expense.

                  "Interest Rate Hedge" means, with respect to all or any
Receivables in the Receivables Pool, an interest rate cap agreement which:

                         (a) is entered into by the Agent, on behalf of the
                  Seller, with an Eligible Counterparty;

                         (b) is evidenced by a standard ISDA Agreement and
                  confirmation thereto;

                         (c) has been assigned to the Agent, for the benefit of
                  the Investors and the Banks, and provides for all payments
                  thereunder to be deposited directly into the Collection
                  Account;





                                       26
<PAGE>

                         (d) provides for the Eligible Counterparty thereunder
                  to make monthly payments thereunder to the Seller in an amount
                  equal to (I) the notional amount thereof times (II) the excess
                  of (x) Eurodollar Rate, determined monthly during the term
                  thereof, over (y) an amount equal to (A) the Weighted Average
                  Coupon Rate of the Receivables in respect of which such
                  Interest Rate Hedge is being purchased minus (B) the sum of
                  (i) all Yield (without giving effect to the Eurodollar Rate)
                  and Fees payable hereunder in respect of the Receivable Pool
                  during the applicable monthly period (such Yield and Fees to
                  be expressed as an annual percentage rate), (ii) the Servicing
                  Fee payable in respect of the Receivable Pool for such monthly
                  period (to be expressed as an annual percentage rate), (iii)
                  all fees and expenses payable to the Custodian in respect of
                  the Receivable Pool for such monthly period (to be expressed
                  as an annual percentage rate), (iv) all Other Amounts payable
                  in respect of the Receivable Pool for such monthly period (to
                  be expressed as an annual percentage rate) and (v) 4.00%;

                         (e) shall have a notional balance which shall be
                  acceptable to the Agent, but in no event greater than the
                  Aggregate Outstanding Balance of all Receivables which shall
                  then be in the Receivables Pool;

                         (f) provides for payments thereunder to be calculated
                  on an actual/360 basis;

                         (g) includes provisions requiring the Eligible
                  Counterparty thereunder to post short-term marketable
                  collateral in an amount acceptable to the Agent within 30 days
                  of the rating of the long-term unsecured senior indebtedness
                  of the Eligible Counterparty being downgraded to or below (i)
                  "A2" by Moody's (or such rating having been withdrawn or
                  canceled) or (ii) "A" by S&P (or such rating having been
                  withdrawn or canceled) (and such provisions have been complied
                  with in full);

                         (h) includes provisions requiring the Eligible
                  Counterparty to be replaced within 30 days of (a) the rating
                  of its long-term unsecured senior indebtedness being
                  downgraded to or below (i) "A2" by Moody's or (ii) "A" by S&P,
                  or (b) the Eligible Counterparty's failure to perform in any
                  material respect any of its obligations under such interest
                  rate cap agreement (and such provisions have been complied
                  with in full); and

                         (i) shall otherwise be on such terms and conditions and
                  pursuant to such documentation as shall be acceptable to the
                  Agent.

                  "Investor" means Conduit and all other owners by assignment or
otherwise of a Receivable Interest originally purchased by Conduit and, to the
extent of the undivided interests so purchased, shall include any participants.




                                       27
<PAGE>

                  "Investor Rate" for any Fixed Period for any Receivable
Interest means, to the extent that the Investor funds such Receivable Interest
by issuing commercial paper or other promissory notes, an interest rate per
annum equal to the Eurodollar Rate; for such Fixed Period plus the Applicable
Spread; provided, however, that in case of:

                  (i) any Fixed Period on or prior to the first day of which an
Investor shall have notified the Agent that (A) the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other governmental authority asserts that it is unlawful,
for such Investor to fund such Receivable Interest at the Investor Rate set
forth above or (B) it is unable to obtain U.S. Dollars in the London interbank
market to fund or maintain any Receivable Interest (and such Investor shall not
have subsequently notified the Agent that such circumstances no longer exist),
or

                  (ii) any Fixed Period for a Receivable Interest the Capital
Investment of which allocated to the Investors is less than $500,000,

the "Investor Rate" for such Fixed Period shall be an interest rate per annum
equal to the Alternate Base Rate in effect from time to time during such Fixed
Period; provided further that the Agent and the Seller may agree in writing from
time to time upon a different "Investor Rate."

                  "Land and Home Contract" means a manufactured housing fixed
rate retail installment sale contract, installment loan agreement or promissory
note that is secured in part, or intended to be secured in part, by the lien of
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" means with respect to each
Receivable arising under a Land and Home Contract, (a) the original of such Land
and Home Contract and the original related Mortgage Note, if any; (b) the
original related Mortgage with evidence of recording thereon and any Title for
the related Manufactured Home; (c) the duly executed original assignment of the
Land and Home Contract from the originator thereof to HomePride; (d) all
original extension, modification or waiver agreement(s) relating to such
Contract; (e) the duly executed original Mortgage Note, endorsed by HomePride in
blank, without recourse and in a form satisfactory to the Agent, showing a
complete chain of endorsement from the originator thereof to HomePride; (f) all
original interim recorded assignments of such Mortgage, if any, showing a
complete chain of title from the originator thereof to HomePride in recordable
form and sufficient to effect the assignment of and transfer to the assignee
thereof under the Mortgage to which the assignment relates; provided that, if
the related Mortgage has not been returned from the applicable public recording
office, such assignment of the Mortgage may exclude the recording information;
(g) an assignment of such Mortgage by HomePride in blank and in recordable form;
(h) the original of each assumption, written assurance or substitution
agreement, if any; and (i) the original or duplicate original lender's title
policy with respect to such Land and Home Contract.




                                       28
<PAGE>

                  "Lien" means any security interest, lien, charge, pledge,
preference, equity or encumbrance of any kind, including tax liens, mechanics'
liens and any liens that attach by operation of law.

                  "Limited Recourse Guaranty" means the Limited Recourse
Guaranty, dated as of the Closing Date, executed by the Parent in favor of the
Agent in respect of certain payment obligations of the Seller under this
Agreement, as amended, supplemented or otherwise modified from time to time.

                  "Limited Servicer Termination Event" has the meaning set forth
in Section 13.02(a).

                  "Liquidated Receivable" means, with respect to any Collection
Period, a Receivable as to which the applicable servicer has determined in good
faith that all amounts it expects to recover with respect to such Receivable
have been received.

                  "Liquidation Proceeds" means, with respect to a Liquidated
Receivable, all amounts realized with respect to such Liquidated Receivable
(including insurance proceeds) net of (a) expenses of the Servicer incurred in
connection with the collection, repossession, repair and disposition of the
related Manufactured Home (and Mortgaged Property, if any), (b) any expenses
incurred by the Sub-Servicer in foreclosing upon a Pool Receivable which shall
have been reimbursed to the Sub-Servicer by Servicer pursuant to Section
11.04(a), and (c) amounts that are required to be refunded to the related
Obligor; provided, however, that the Liquidation Proceeds with respect to any
Receivable shall in no event be less than zero.

                  "Loan-to-Value Ratio" means, with respect to a Receivable, the
ratio of the original outstanding principal amount of the related Contract,
including prepaid finance charges to (i) with respect to any Receivable that is
not located in California and does not arise in connection with a Land Home
Contract, the cash selling price of the related Manufactured Home plus the sum
of the related (a) sales tax, (b) freight, (c) prepaid finance charges, (d)
closing fees to third parties and (e) insurance or (ii) with respect to any
contract located in California or that arises in connection with a Land Home
Contract, the sum of the Appraised Value of the related Manufactured Home plus
the sum of the related (a) sales tax, (b) freight, (c) prepaid finance charges,
(d) closing fees to third parties and (e) insurance.

                  "Lock-Box Account" means a post office box administered by a
Lock-Box Bank or an account maintained at a Lock-Box Bank, in each case for the
purpose of receiving Collections.

                  "Lock-Box Agreement" means an agreement providing for the
establishment and maintenance of a Lock-Box Account, which agreement shall be in
form and substance satisfactory to the Agent.

                  "Lock-Box Bank" means any of the banks holding one or more
Lock-Box Accounts which is subject to a Lock-Box Agreement.





                                       29
<PAGE>
                  "Management Agreement" means the Management Agreement, dated
as of the Closing Date, between the Seller and GSS as amended, supplemented or
otherwise modified from time to time with the prior written consent of the
Agent.

                  "Management Fees" means the fees and expenses owed to GSS
under the Management Agreement.

                  "Manufactured Home" means (i) a structure, transportable in
one or more sections, built to National Manufactured Home Construction and
Safety Standards, on a permanent chassis and designed to be used as a single
family dwelling with or without a permanent foundation when connected to the
required utilities including any plumbing, heating, air conditioning and
electrical systems present and installed in the Manufactured Home, securing the
indebtedness of the Obligor under the related Contract, (ii) modular housing
complying with all applicable state and local building codes or (iii) a
manufactured home, including all accessions thereto, that is legally classified
as real property under applicable state law, securing the indebtedness of the
Obligor under the related Contract.

                  "Manufactured Housing Contract" means an agreement which
evidences both (i) the obligation of the related Obligor to repay the related
Contract evidenced thereby and (ii) the grant of a first priority security
interest in the related Manufactured Home.

                         (j) "Manufactured Housing Contract File" means, with
                  respect to a Receivable, other than a Receivable arising under
                  a Land and Home Contract or a Mortgage Loan, (a) the original
                  of the Contract and endorsements or assignments (which may be
                  blanket assignments) from Dealers or other sellers showing a
                  complete chain of title to HomePride; (b) the original Title
                  for the related Manufactured Home of the type issued in the
                  name of HomePride unless the laws of the jurisdiction in which
                  the related Manufactured Home is located do not provide for
                  the issuance of a Title for such Manufactured Home; provided,
                  however, that at any time following the occurrence of a
                  Termination Event (to the extent there is any Capital
                  Investment which remains outstanding) the Agent may request
                  and require that the Seller cause the party in whose name the
                  lien is noted to transfer such lien to the Seller; (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 required under applicable law:
                  (1) notation of such security interest on the related Title,
                  (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) any extension,
                  modification or waiver agreement(s) relating to such Contract;
                  and (e) an original or copy of the credit application of the
                  Obligor.

                  "Material Adverse Effect" means, with respect to each Servicer
Party, a material adverse effect on (i) its financial condition or operations or
those of any of its Subsidiaries or (ii) its




                                       30
<PAGE>

ability to perform its obligations under this Agreement or the legality,
validity or enforceability of this Agreement or (iii) the collectibility of, or
its ability to collect, any Pool Receivable.

                  "Minimum Purchase Price" means, with respect to a Take-Out,
the sum of (a) all outstanding Capital Investment in respect of the Receivable
Interests whose related Contracts are subject of such Take-Out together with all
unpaid Yield on such Capital Investment which has accrued or will accrue through
the related Take-Out Date; (b) all accrued and unpaid Fees through such Take-Out
Date; (c) all accrued and unpaid fees and expenses of the Custodian through such
Take-Out Date; and (d) any Other Amounts owed to the Agent, the Investors or the
Banks hereunder.

                  "Minimum Shadow Rating" has the meaning set forth in Section
9.21.

                  "Moody's" means Moody's Investors Service, Inc. and any
successor thereto.

                  "Mortgage" means, with respect to a Land and Home Contract or
Mortgage Loan, the original mortgage, deed of trust or other security
instrument, if any, executed by an Obligor which creates a first lien on an
estate in fee simple interest in the real property securing such Contract.

                  "Mortgage Loan File" means with respect to each Mortgage Loan,
(a) the original related Mortgage, with evidence of recording indicated thereon,
(b) the duly executed assignments of the Mortgage from the originator hereof to
HomePride with evidence of recording thereon, (c) the duly executed original
Mortgage Note, if any, endorsed by HomePride in blank, without recourse and in a
form satisfactory to the Agent, showing a complete chain of endorsement from the
originator thereof to HomePride; (d) the original assignment and any intervening
assignments of the related Mortgage, with evidence of recording thereon, showing
a complete chain of assignments of such Mortgage Loan from origination of such
Mortgage Loan to HomePride; (e) all original extension, modification or waiver
agreement(s), if any, for such Mortgage Loan; (f) the originals of each
assumption, written assurance or substitution agreement, if any; (g) an
assignment of such Mortgage by HomePride in blank and in recordable form; and
(h) the original or duplicate original lender's title policy with respect to
such Mortgage Loan.

                  "Mortgage Loans" means the mortgage loans or deeds of trust
loans secured by a Mortgage on single-family residential properties, described
in the related Purchase Request, and which include, without limitation, all
related security interest and any and all rights to receive payments which are
due pursuant thereto from and after the date, but shall exclude rights to
receive payments which are due pursuant thereto prior to the applicable Purchase
Date or after the completion of any Take-Out for such Mortgage Loan.

                  "Mortgage Note" means the note or other evidence of
indebtedness secured by a Mortgage purporting to create a first lien or similar
interest in real estate or improvements thereon.





                                       31
<PAGE>

                  "Mortgaged Property" means as to any Land and Home Contract or
Mortgage Loan, the underlying property, including real property and improvements
thereon securing the related Contract.

                  "Multiemployer Plan" means, with respect to any Person, a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.

                  "Net Receivables Pool Balance" means, at any time, the
Outstanding Balance of Eligible Receivables then in the Receivables Pool minus
the Excess Concentration Amount, reduced by the sum of the aggregate amount of
Collections on hand at such time for payment on account of any Eligible
Receivables, the Obligor of which has not been identified.

                  "Obligor" means a Person obligated to make payments pursuant
to a Contract or who has acquired a Manufactured Home subject to a Contract.

                  "Officer's Certificate" means, with respect to any Person, a
certificate from a Responsible Officer of such Person with respect to the
representations, warranties and notices required to be submitted on behalf of
such Person pursuant to Section 11.09.

                  "Opinion of Counsel" means a written opinion of counsel
reasonably acceptable to the Agent.

                  "Original Value" means, (a) 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 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 such Contracts as determined by an independent
appraiser, and (b) 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;
provided, however, that in the case of a refinanced Contract, the Original Value
shall equal the appraised value of the Manufactured Home (including for this
purpose, any Mortgaged Property not constituting a part of the Manufactured
Home) at the time such Contract was refinanced as determined by an independent
appraiser.

                  "Other Amounts" means collectively, all amounts (not
constituting repayment of Capital Investment or Yield) owed by the Seller to the
Investors, the Banks and the Agent, including, without limitation, amounts
arising under Article VI.

                  "Other Costs" has the meaning set forth in Section 17.05(b).





                                       32
<PAGE>

                  "Other Proceeds" means all proceeds deposited in the
Collection Account which were realized in connection with, or arose from, the
occurrence of any of the events, circumstances or results, or the exercise or
performance of any rights or obligations, described or set forth in Section 2.05
hereof, Section 2.04 or Section 8.01 of the Purchase and Contribution Agreement
or Section 2.04 or 8.01 of the Purchase and Sale Agreement.

                  "Other Sellers" has the meaning set forth in Section 17.05(b).

                  "Other Taxes" has the meaning set forth in Section 6.03(b).

                  "Outstanding Balance" means, with respect to any Receivable,
as of any date, the Amount Financed minus that portion of all amounts received
with respect to such Receivable on or prior to such date and allocable to
principal in accordance with the related Contract (including any Paid Ahead
Principal Payments and principal prepayments).

                  "Paid Ahead Interest Payments" means the portion of any
Scheduled Payments made by an Obligor prior to the related due date therefor and
allocable to interest payments on the related Receivable in accordance with the
related Contract (but excluding any such payments applied as prepayments).

                  "Paid Ahead Principal Payments" means the portion of any
Scheduled Payments made by an Obligor prior to the related due date therefor and
allocable to principal payments on the related Receivable in accordance with the
related Contract (but excluding any such payments applied as prepayments).

                  "Parent" means Champion Enterprises, Inc., a Michigan
corporation, and its permitted successors and assigns.

                  "Parent/Child Buy-For Contract" means a Contract under which
(i) at least one parent of one or more children of such parent is the Obligor
under such Contract and the related Manufactured Home was purchased primarily
for use by such child(ren) or (ii) at least one child of one or both parents of
such child is the Obligor under such Contract and the related Manufactured Home
was purchased primarily for use by such parent(s).

                  "Parent Guaranty" means the Guaranty, dated as of the Closing
Date, executed by the Parent in favor of the Seller in respect of the
obligations of HomePride under the Purchase and Contribution Agreement, as
amended, supplemented or otherwise modified from time to time.

                  "PBGC" means the Pension Benefit Guaranty Corporation,
referred to and defined in ERISA, and any successor entity performing similar
functions.




                                       33
<PAGE>

                  "Percentage" of any Bank means, (a) with respect to CSFB, the
percentage set forth on the signature page to this Agreement, or such amount as
reduced by any Assignment and Acceptance entered into with an Eligible Assignee,
or (b) with respect to a Bank that has entered into an Assignment and
Acceptance, the amount set forth therein as such Bank's Percentage, or such
amount as reduced by an Assignment and Acceptance entered into between such Bank
and an Eligible Assignee.

                  "Permitted Investment" means, at any time:

                         (k) any evidence of indebtedness issued or guaranteed
                  by the United States government or any agency thereof;

                         (l) commercial paper, in each case issued by a
                  corporation (other than the Seller or any Affiliate of the
                  Seller) organized under the laws of any state of the United
                  States or of the District of Columbia and rated at least A-1
                  by Standard & Poor's or P-1 by Moody's;

                         (m) any certificate of deposit (or time deposits
                  represented by such certificates of deposit) or bankers
                  acceptance or overnight federal funds transactions that are
                  issued or sold by a commercial banking institution that is a
                  member of the Federal Reserve System and has a combined
                  capital and surplus and undivided profits of not less than
                  $500,000,000; and/or

                         (n) money market mutual funds registered under the
                  Investment Company Act of 1940, as amended, having a rating,
                  at the time of such investment, from each of Standard & Poor's
                  and Moody's in the highest investment category granted
                  thereby.

Any Permitted Investments may be purchased by or through the Agent or any of its
Affiliates and may include investments for which the Collection Account Bank or
any of its affiliates is an investment manager or adviser.

                  "Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.

                  "Plan" means, at any particular time, any employee benefit
plan which is covered by ERISA and in respect of which the Parent or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.

                  "Pool Receivable" means a Receivable in the Receivables Pool.




                                       34
<PAGE>

                  "Preferred Stock" means, as of any date, any capital stock of
the Parent or any consolidated Subsidiary of the Parent (which shall not include
the Seller) which (i) has priority, both with respect to the payment of
dividends and distributions upon liquidation, over the common stock of the
Parent, or, as the case may be, such consolidated Subsidiary of the Parent, (ii)
has been issued in a specific Dollar amount, (iii) has a specific maturity date
which is no earlier than (I) the second anniversary date of the Closing Date or
(II) if the facility provided hereunder shall have been extended one or more
times, the second anniversary date of the effective date of the most recent
extension of the facility provided hereunder, (iv) entitles the holder thereof
to receive a fixed rate of return from the date of issuance thereof to the date
of maturity thereof and (v) has not been held, since its date of issuance, by a
Person which is the Parent, any Subsidiary of the Parent, or any Affiliate of
the Parent or any such Subsidiary.

                  "Purchase" has the meaning set forth in Section 2.01; the term
"Purchased" shall have a correlative meaning.

                  "Purchase and Contribution Agreement" means the Purchase and
Contribution Agreement, dated as of the Closing Date, by and between HomePride,
as seller, and HomePride SPV, as buyer, as amended, restated or otherwise
modified from time to time with the prior written consent of the Agent.

                  "Purchase and Sale Agreement" means the Purchase and Sale
Agreement, dated as of the Closing Date, by and between HomePride SPV, as
seller, and Seller, as buyer, as amended, restated or otherwise modified from
time to time with the prior written consent of the Agent.

                  "Purchase Date" has the meaning set forth in Section 2.02(b).

                  "Purchase Limit" means $150,000,000, or such other amount as
the Seller and the Agent shall agree from time to time with the consent of all
Investors and all Banks. References to the unused portion of the Purchase Limit
shall mean, at any time, the Purchase Limit minus the then outstanding Capital
Investment.

                  "Purchase Price" means, with respect to each Purchase, an
amount equal to the product of the then Advance Rate multiplied by, with respect
to the Eligible Receivable related to the Receivables Interests purchased in
connection with such Purchase, the Net Receivables Pool Balance with respect to
such Eligible Receivable as of the date of such purchase.

                  "Purchase Request" means a request for the purchase of
Receivables in the form of Annex C.

                  "Rating Agencies" means Standard & Poor's and Moody's if and
so long as they have rated and are continuing to rate commercial paper notes of
the Conduit, or such other nationally




                                       35
<PAGE>

recognized statistical rating organizations as may be designated by the Agent,
together with their permitted successors and assigns.

                  "Rating Agency Submission" means, at any time, the submission
to one or more of the Rating Agencies of the facility hereunder.

                  "Receivable" means all rights to payment from an Obligor under
a Contract including the right to payment of any finance charges, interest or
fees with respect thereto.

                  "Receivable File" means a Manufactured Housing Contract File,
a Land and Home Contract File and/or a Mortgage Loan File.

                  "Receivable Interest" means, at any time, an undivided
percentage ownership interest in (i) all then outstanding Pool Receivables
arising prior to the time of the most recent computation or recomputation of
such undivided percentage interest pursuant to Section 2.03, (ii) all Related
Security with respect to such Pool Receivables, and (iii) all Collections with
respect to, and other proceeds of, such Pool Receivables. Such undivided
percentage interest shall be computed as:

                                     CI + AU
                                    --------
                                      NRPB

                  where:

                         CI       =    the Capital Investment of such Receivable
                                       Interest at the time of computation.

                         AU       =    the aggregate accrued and unpaid Yield,
                                       Fees and Other Amounts related to such
                                       Receivable Interest at the time of
                                       computation.

                         NRPB     =    the Net Receivables Pool Balance at the
                                       time of computation.

Each Receivable Interest shall be determined from time to time pursuant to the
provisions of Section 2.03.

                  "Receivables Pool" means, at any time, the aggregation of each
then outstanding Receivable sold to the Seller pursuant to the Purchase and Sale
Agreement and which comprise and underlie the Receivable Interest (as recomputed
in accordance with Section 2.03) then outstanding.

                  "Records" means, with respect to any Contract, all documents,
books, records and other information (including, without limitation, computer
programs, tapes, discs, punch cards, data processing software and related
property and rights) relating to such Contract.




                                       36
<PAGE>

                  "Related Security" means with respect to any Receivable, (a)
the Seller's security interest in the related Manufactured Homes and Mortgaged
Property, (b) the Seller's rights, remedies, powers and privileges under the
related Contracts, including any personal guaranty thereof, (c) the Seller's
rights, remedies, powers and privileges under the Transaction Documents, (d) the
Receivables Files for such Receivables, (e) the Seller's rights, remedies,
powers and privileges under the Dealer Agreements, including but not limited to
Dealer Recourse and any holdback amounts, (f) with respect to any related Land
and Home Contracts, the Seller's rights, remedies, powers and privileges under
the related Mortgage, (g) the Seller's rights, remedies, powers and privileges
under the related Insurance Policies, (h) all security agreements, mortgages,
deeds of trust or other agreements that relate to such Receivable, (i) all other
security interests or liens and property subject thereto from time to time, if
any, purporting to secure payment of such Receivable, whether pursuant to the
Contract related to such Receivable or otherwise, together with all financing
statements signed by the related Obligor (or otherwise filed against the related
Obligor) describing any collateral securing such Receivable, (j) the assignment
to the Seller of all financing statements concerning any collateral securing
payment of such Receivable, (k) all guaranties, insurance and other agreements
or arrangements of whatever character from time to time supporting or securing
payment of such Receivable whether pursuant to the Contract related to such
Receivable or otherwise, (l) the Contract, all Records with respect thereto and
all other books, records and other information (including, without limitation,
computer programs, tapes, discs, punch cards, data processing software and
related property and rights) relating to such Receivable and the related
Obligor, (m) any certificate of title related to such Receivable, (n) each
Interest Rate Hedge purchased in accordance with the provisions of this
Agreement and all transactions consummated thereunder, (o) the Bank Accounts and
all cash proceeds and investments therein, and (p) all proceeds of the
foregoing.

                  "Repossessed Receivable" means a Receivable (other than a
Liquidated Receivable) as to which the Servicer or Sub-Servicer has repossessed
the related Manufactured Home.

                  "Repurchase Price" has the meaning specified in Section 2.05.

                  "Required Interest Coverage Ratio" means, as of the end of any
fiscal quarter of the Parent listed below, the ratio listed below beside such
fiscal quarter.

                        Fiscal Quarter                          Ratio
                        --------------                          -----
                  March 31st - June 29th                      1.0 to 1.0
                  June 30th - September 28th                  1.5 to 1.0
                  September 29th - December 28th              0.5 to 1.0
                  December 29th - March 29th                  0.1 to 1.0

                  "Required Reserve Account Amount" means, with respect to any
Purchase, the product of (a) the Required Reserve Account Percentage for such
Purchase and (b) the Aggregate Outstanding Balance of the Receivables which are
related to such Purchase.




                                       37
<PAGE>

                  "Required Reserve Account Percentage" means, initially, 2.00%,
as such percentage may be (a) decreased by Agent, in it sole discretion, to take
into account Interest Rate Hedges purchased pursuant to the terms hereof or (b)
increased by the Agent, in it sole discretion, (i) to permit the facility
hereunder to receive a rating of "A" from Standard & Poor's or "A2" by Moody's
in connection with any Rating Agency Submission or (ii) to reflect a level of
reserves for the facility hereunder which is consistent with the level of
reserves which was required for a rating of "A" from Standard & Poor's or "A2"
by Moody's in connection with the most recent Term Securitization for which the
Servicer was the sponsor.

                  "Reserve Account" means the account designated as such in, and
which is established and maintained with the Collection Bank pursuant to Section
11.14(c).

                  "Responsible Officer" means, with respect to any Person that
is not an individual, the President, any Vice-President, Corporate Trust Officer
or the Controller of such Person, or any other officer or employee having
similar functions to whom a matter arising under this Agreement may be referred.

                  "Restricted Contingent Liabilities" means, with respect to any
Person, all Debt (without duplication) for (i) the undrawn amount of letters of
credit for which such Person or any of its consolidated Subsidiaries, has a
reimbursement or other guaranty obligation and (ii) guaranties of such Person or
any of its consolidated Subsidiaries relating to subordinate tranches or classes
of securities or certificates issued in connection with, or other obligations
arising under, any Term Securitization program of such Person or any of its
consolidated Subsidiaries.

                  "Scheduled Payment" means, with respect to any Receivable, the
periodic payment set forth in the related Contract (excluding, however, any
portion of such payment that represents late payment charges and payments in
respect of taxes, licenses or similar items).

                  "Section 32 Loan" means a Contract classified as (a) a "high
cost" loan under the Home Ownership and Equity Protection Act of 1994 or (b) a
"high cost," "threshold," or "predatory" loan under any other applicable state,
federal or local law.

                  "Seller" has the meaning set forth in the Preamble.

                  "Seller's Parent" means GSS Holdings, Inc., a Delaware
corporation, and any successor thereto, or assign thereof, reasonably
satisfactory to the Agent.

                  "Semi-Monthly Contract" means a Contract pursuant to which the
scheduled level of payment of interest and principal is due twice each month.

                  "Servicer" means HomePride Finance Corp., in its capacity as
such under this Agreement, or, as applicable, any successor servicer appointed
pursuant to this Agreement.




                                       38
<PAGE>

                  "Servicer Parties" means, collectively, the Servicer and
Sub-Servicer and, individually, the Servicer or Sub-Servicer.

                  "Servicer Take-Out" has the meaning set forth in Section
2.05(a).

                  "Servicer Termination Event" has the meaning set forth in
Section 13.01.

                  "Servicer's Certificate" means, with respect to each
Determination Date, a certificate, completed by and executed on behalf of the
Servicer by a Responsible Officer, in accordance with Section 11.08, in a form
reasonably acceptable to the Agent.

                  "Servicing Fee" has the meaning set forth in Section 11.07(a).

                  "Shadow Rating" means collectively, a "shadow" rating for the
financing facility provided under this Agreement by Moody's and a credit
assessment letter from S&P stating that the credit performance of the financing
facility provided hereunder is consistent with a certain rating.

                  "Significant Subsidiary" means any Subsidiary of a Person
which fits the definition of Significant Subsidiary contained in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission, other than
a Subsidiary that is a special purpose entity formed for the purpose of
securitizing, selling for securitization or otherwise facilitating the
securitization of assets of such Person or any other Subsidiary.

                  "Special Indemnified Amounts" has the meaning specified in
Section 12.01.

                  "Special Indemnified Party" has the meaning specified in
Section 12.01.

                  "Specified Account" means the account numbered 010212725
maintained at Bank One, Oklahoma, N.A. in Oklahoma City, Oklahoma in the name of
The CIT Group/Sales Financing, Inc., and any replacements therefor or additions
thereto which are acceptable to the Agent.

                  "Specified Account Bank" means Bank One, Oklahoma, N.A., and
any replacements therefor or additions thereto agreed to in writing by the
Agent.

                  "Spread Percentage" means, on any date of determination and
with respect to the Collection Period immediately preceding a Distribution Date,
the percentage equivalent of a fraction (a) the numerator of which shall be the
product of (x) Excess Collections for such Collection Period and (y) a fraction,
the numerator of which shall be the number of days in the year in which such
Collection Period shall occur and the denominator of which shall be the number
of days in such Collection Period, and (b) the denominator of which shall be the
weighted average Aggregate Outstanding Balance of the Pool Receivables during
such Collection Period.





                                       39
<PAGE>

                  "Standard & Poor's" means Standard & Poor's Ratings Service, a
division of The McGraw-Hill Companies, Inc. and any successor thereto.

                  "Subject Manufactured Home" has the meaning set forth in
Section 17.16.

                  "Sub-Servicer" means CIT Group/Sales, in its capacity as such
under this Agreement, or any successor sub-servicer appointed pursuant to this
Agreement.

                  "Sub-Servicer Replacement Event" has the meaning set forth in
Section 13.02(a).

                  "Sub-Servicing Fee" has the meaning set forth in Section
11.07(b).

                  "Subsidiary" means any corporation of which securities having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions are at the time directly or indirectly
owned by the Seller or the Parent, as the case may be, or one or more
Subsidiaries, or by the Seller or the Parent, as the case may be, and one or
more Subsidiaries.

                  "Successor Servicer" has the meaning set forth in Section
13.03(a).

                  "Successor Sub-Servicer" has the meaning set forth in Section
13.02(a).

                  "Take-Out" means a Take-Out Securitization or Servicer
Take-Out.

                  "Take-Out Date" means the date on which a Take-Out
Securitization occurs.

                  "Take-Out Proceeds" means all proceeds deposited in the
Collection Account as a result of any of the actions taken pursuant to Section
2.04.

                  "Take-Out Securitization" means (i) a financing transaction of
any sort undertaken by the Seller or any Affiliate of the Seller secured,
directly or indirectly, by any Contracts subject hereto or (ii) any other asset
securitization, secured loans or similar transactions involving any Contracts
subject hereto or any beneficial interest therein, including any Term
Securitization.

                  "Tangible Net Worth" means with respect to the Seller, the net
worth of the Seller calculated in accordance with GAAP after subtracting
therefrom the aggregate amount of the Seller's intangible assets, including,
without limitation, goodwill, franchises, licenses, patents, trademarks,
tradenames, copyrights and service marks.

                  "Taxes" has the meaning set forth in Section 6.03(a).

                  "Term Debt" means, as of any date, any indebtedness of the
Parent or any consolidated Subsidiary of the Parent (which shall not include the
Seller) for borrowed money which is evidenced by





                                       40
<PAGE>

bonds, debentures, notes or other similar instruments and (i) the proceeds of
the borrowings thereunder have been fully advanced on the date of issuance of
such bonds, debentures, notes or other similar instruments, (ii) does not
entitle the holder thereof to receive any stock of the Parent or any such
consolidated Subsidiary of the Parent, or any warrants or options in respect of
any such stock, as consideration (in whole or in part) for the money lent
thereunder to the Parent or such consolidated Subsidiary of the Parent, as the
case may be, (iii) has been issued in a specific Dollar amount, (iv) provides
for the payment of interest to the holder thereof at a stated interest rate, (v)
has a specific maturity date which is not earlier than (I) the second
anniversary date of the Closing Date or (II) if the facility provided hereunder
shall have been extended one or more times, the second anniversary date of the
effective date of the most recent extension of the facility provided hereunder
and (vi) has not been held, since its date of issuance, by the Parent, any
Subsidiary of the Parent, or any Affiliate of the Parent or any such Subsidiary.

                  "Term Securitization" means an asset securitization or a
financing undertaken by the Servicer, or any Affiliate thereof, in each case
involving the direct or indirect sale or other conveyance of Contracts to a
Person that shall privately or publicly sell securities, notes or certificates
backed by such Contracts.

                  "Termination Event" has the meaning set forth in Section
14.01.

                  "Three Highest States" means, on any date of determination,
those three States or Commonwealths in the United States of America in which
Eligible Receivables with the three largest (determined on a per
State/Commonwealth basis) Aggregate Outstanding Balances (determined on such
date of determination) were originated.

                  "Tier 1 Delinquency Ratio" means, as of any date of
determination, with respect to any group of Receivables, the ratio (expressed as
a percentage) computed by dividing:

                  (i)    the Aggregate Outstanding Balance of such Receivables
                         which were Tier 1 Delinquent Receivables as of the last
                         day of the immediately preceding Collection Period;

                  by

                  (ii)   the Aggregate Outstanding Balance of all such
                         Receivables as of the last day of the immediately
                         preceding Collection Period.

                  "Tier 2 Delinquency Ratio" means, as of any date of
determination, with respect to any group of Receivables, the ratio (expressed as
a percentage) computed by dividing:






                                       41
<PAGE>

                  (i)    the Aggregate Outstanding Balance of such Receivables
                         which were Tier 2 Delinquent Receivables as of the last
                         day of the immediately preceding Collection Period;

                  by

                  (ii)   the Aggregate Outstanding Balance of all such
                         Receivables as of the last day of the immediately
                         preceding Collection Period.

                  "Tier 1 Delinquent Receivable" means a Receivable as to which
any Scheduled Payment, or part thereof, remains unpaid for 30 or more days but
less than 60 days from the original due date for such Scheduled Payment.

                  "Tier 2 Delinquent Receivable" means a Receivable as to which
any Scheduled Payment, or part thereof, remains unpaid for 60 days or more from
the original due date for such Scheduled Payment.

                  "Title" means any certificate of title or other similar form
of title issued with respect to a Manufactured Home by any governmental agency
or body responsible for the registration of, and the issuance of certificates of
title relating to, Manufactured Homes and liens thereon.

                  "Total Liabilities" means, as of any date of determination,
all Debt of the Parent and its Subsidiaries on a consolidated basis outstanding
at such time which matures more than one year after the date of calculation, and
any such Debt maturing within one year from such date of calculation which is
renewable or extendable at the option of the obligor to a date more than one
year from such date.

                  "Transaction Documents" means this Agreement, the Fee Letter,
the Custodial Agreement, the Purchase and Sale Agreement, the Purchase and
Contribution Agreement, the Funds Transfer Letter, the Lock-Box Agreements, the
Parent Guaranty, the Control Agreement, the Limited Recourse Guaranty, the
Global Servicing Agreement, the CIT Guaranty and the Interest Rate Hedges, the
confirmations related thereto and the other documents to be executed and
delivered in connection with this Agreement.

                  "Transfer Certificate" means a transfer certificate evidencing
the sale of a Receivable Interest hereunder in the form of Annex D hereto.

                  "Trust Receipt" shall mean the confirmation statement issued
by the Custodian that evidences receipt and confirms ownership of Contracts and
other documents indicated thereon, as provided for in Section 6 of the Custodial
Agreement with respect to the Custodian.

                  "UCC" means the Uniform Commercial Code as from time to time
in effect in the specified jurisdiction.




                                       42
<PAGE>

                  "USAP" has the meaning set forth in Section 11.10(a).

                  "Weighted Average Coupon Rate" means, as of any date of
determination and with respect to any group of Receivables, the weighted average
(based upon the Outstanding Balances of such Receivables) of the Coupon Rates of
such Receivables.

                  "Weighted Average FICO Score" means, as of any date of
determination, the weighted average (weighted solely based upon the Outstanding
Balances of the Eligible Receivables owed by the applicable Obligors as of such
date of determination) of the FICO Scores of the Obligors related to all
Eligible Receivables as of such date of determination.

                  "Weighted Average Loan-to-Value Ratio" means, as of any date
of determination, the weighted average (weighted solely based upon the
Outstanding Balances of the Eligible Receivables as of such date of
determination) of the Loan-to-Value Ratios of the Eligible Receivables as of
such date of determination.

                  "Weighted Average Manufactured Housing Contract Remaining
Term" means, as of any date of determination, the weighted average (weighted
solely based upon the Outstanding Balances, as of such date of determination, of
the Eligible Receivables originated under Manufactured Housing Contracts) of the
then unexpired terms to stated maturity under the Manufactured Housing Contracts
related to the Eligible Receivables.

                  "Weighted Average Remaining Term" means, as of any date of
determination, the weighted average (weighted solely based upon the Outstanding
Balances of the Eligible Receivables as of such date of determination) of the
then unexpired terms to stated maturity under the Contracts related to the
Eligible Receivables.

                  "Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.

                  "Yield" means:

                  (i) for each Receivable Interest for any Fixed Period to the
extent the Conduit will be funding such Receivable Interest through the issuance
of commercial paper or other promissory notes,

                                  IR x CI x ED
                                            ----
                                            360




                                       43
<PAGE>

                  (ii) for each Receivable Interest for any Fixed Period to the
extent (x) the Investors will not be funding such Receivable Interest through
the issuance of commercial paper or other promissory notes, or (y) the Banks
will be funding such Receivable Interest,

                                  AR x CI x ED
                                            ----
                                            360

                  where:

                         AR   =   the Assignee Rate for such Fixed Period

                         CI   =   the average daily balance of the Capital
                                  Investment during such Fixed Period

                         IR   =   the Investor Rate for such Fixed Period

                         ED   =   the actual number of days elapsed during such
                                  Fixed Period

provided that no provision of this Agreement shall require the payment or permit
the collection of Yield in excess of the maximum permitted by applicable law;
provided further, that to the extent that any Receivable Interest remains
outstanding on or after the Facility Termination Date, Yield for such Receivable
Interest shall be equal to Alternative Base Rate from time to time in effect
plus 2.00% per annum; and provided even further that Yield for any Receivable
Interest shall not be considered paid by any distribution to the extent that at
any time all or a portion of such distribution is rescinded or must otherwise be
returned for any reason.

                  SECTION 1.02. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. All
terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.

                                   ARTICLE II

                       AMOUNTS AND TERMS OF THE PURCHASES

                  SECTION 2.01. Purchase Facility. On the terms and conditions
hereinafter set forth, Conduit may, in its sole discretion, and the Banks shall,
ratably in accordance with their respective Bank Commitments, purchase
Receivable Interests ("Purchase") from the Seller from time to time during the
period from the Closing Date to the Facility Termination Date. Under no
circumstances shall Conduit make any such purchase, or the Banks be obligated to
make any such purchase, if after giving effect to such purchase (i) the
aggregate outstanding Capital Investment of Receivable Interests would exceed
the Purchase Limit or (ii) a Capital Deficiency shall exist.



                                       44
<PAGE>


                  SECTION 2.02. Making Purchases. (a) Each Purchase by Conduit
or the Banks shall be made following delivery by the Servicer, on behalf of the
Seller, to the Agent of a Purchase Request by no later than Noon (New York City
time) at least two Business Days prior to the proposed date of Purchase (or by
no later than Noon (New York City time) one Business Day in the case of the
initial Purchase hereunder). Each such Purchase Request shall specify (i) the
Purchase Price requested to be paid to the Seller (such amount, which shall not
be less than $1,000,000, being referred to herein as the "Capital Investment" of
the Receivable Interests then being Purchased), (ii) the date of such Purchase
(which shall be a Business Day) and (iii) be accompanied by Computer Tape
describing the Receivables that are the subject of the requested Purchase. The
Servicer, on behalf of the Seller, shall submit no more than one (1) Purchase
Request per calendar week and no more than four (4) Purchase Requests in any
calendar month. The Agent shall promptly thereafter notify the Seller whether
Conduit has determined to make a Purchase and, if so, whether all of the terms
specified by the Seller are acceptable to Conduit.

                  If Conduit has determined not to make a proposed purchase, the
Agent shall promptly send notice of the proposed purchase to all of the Banks
concurrently by telecopier, telex or cable specifying the date of such purchase.
Such notice shall also set forth (i) the Purchase Price to be paid by each such
Bank, which shall be equal to each Bank's Percentage multiplied by the aggregate
amount of Capital Investment of the Receivable Interest being purchased and (ii)
whether the Yield for such Receivable Interest is to be computed based on the
Eurodollar Rate or on the Alternate Base Rate; provided, however, that the
Eurodollar Rate may be used only if the related Purchase Notice is given at
least two Business Days prior to the proposed Purchase Date.

                  (b) On the date of each such Purchase (a "Purchase Date"),
Conduit or the Banks, as the case may be, shall, upon satisfaction of the
applicable conditions set forth in Article VII, in payment of the Purchase Price
in respect of such Purchase, (i) deposit a portion of the Purchase Price for
such Purchase equal to the Required Reserve Account Amount for such Purchase
into the Reserve Account and (ii) make available to the Seller by deposit into
an account specified by the Seller in same day funds of an amount equal to the
remaining amount of the Purchase Price.

                  (c) Effective on the date of each Purchase pursuant to this
Section 2.02, the Seller hereby sells and assigns to the Agent, for the benefit
of the parties making such Purchase, an undivided percentage ownership interest,
to the extent of the Receivable Interest then being Purchased, in each Pool
Receivable then existing and in the Related Security and Collections with
respect thereto.

                  (d) Notwithstanding the foregoing, a Bank shall not be
obligated to make purchases under this Section 2.02 at any time in an amount
which would exceed the Bank Commitment of such Bank less the sum of (i) the
aggregate outstanding and unpaid amount of any purchases made by such Bank under
the Asset Purchase Agreement plus (ii) such Bank's ratable share of the
aggregate outstanding Capital Investment held by Conduit. Each Bank's obligation
shall be several, such that the failure of any Bank to make available to the
Seller any funds in connection with any Purchase shall not relieve any other
Bank of its obligation, if any, hereunder to make funds available on the date of
such



                                       45
<PAGE>


Purchase, but no Bank shall be responsible for the failure of any other Bank to
make funds available in connection with any Purchase.

                  SECTION 2.03. Receivable Interest Calculation. Each Receivable
Interest shall be initially computed on its date of Purchase. Thereafter until
the Facility Termination Date, such Receivable Interest shall be automatically
recomputed (or deemed to be recomputed) on each day. Any Receivable Interest, as
computed (or deemed recomputed) as of the day immediately preceding the Facility
Termination Date for such Receivable Interest, shall there after remain
constant; provided, however, that from and after the date on which the Facility
Termination Date shall have occurred for all Receivable Interests and until each
Receivable Interest becomes zero in accordance with the next sentence, each
Receivable Interest shall be calculated as the percentage equivalent of a
fraction the numerator of which is the percentage representing such Receivable
Interest immediately prior to such date and the denominator of which is the sum
of the percentages representing all Receivable Interests which were outstanding
immediately prior to such date. Each Receivable Interest shall become zero when
Capital Investment thereof and Yield thereon shall have been paid in full, and
all Fees and other amounts owed by the Seller hereunder to the Investors, the
Banks or the Agent are paid and the Servicer shall have received the accrued
Servicing Fee thereon.

                  SECTION 2.04. Take-Outs. (a) On any Take-Out Date, the Agent,
with the consent of the Servicer, may direct the Servicer (on behalf of the
Seller and the Agent) to sell the Contracts (or a portion thereof equal to at
least the amount necessary to permit the Servicer to exercise its purchase
rights pursuant to Section 2.05) to the Person designated by the Agent, with the
consent of the Servicer, for the Fair Market Value thereof in connection with a
Take-Out Securitization. All Take-Out Proceeds received from such a Take-Out
Securitization shall be immediately deposited in the Collection Account for
distribution pursuant to Section 5.02(d). In the event that the Fair Market
Value of the Contracts subject to any such Take-Out Securitization would be less
than the Minimum Purchase Price on the proposed Take-Out Date, the Agent shall
have the right to (i) purchase the Contracts subject to the Take-Out
Securitization for the Fair Market Value thereof or (ii) notify the Seller that
the Investors and the Banks will not purchase any additional Receivable
Interests hereunder. In the event that (A) the Agent exercises its option
pursuant to clause (i) of the immediately preceding sentence, (x) the Agent
shall deposit into the Collection Account an amount equal to the Fair Market
Value of the Contracts (for distribution in accordance with the provisions of
Section 5.02(d)) and (y) the Seller's interest in such Contracts and in the
related Receivables shall be deemed canceled without requirement for any future
actions or (B) the Agent exercises its option pursuant to clause (ii) of the
immediately preceding sentence, the Seller shall retain title to the Contracts
subject to the Take-Out Securitization (subject to the Banks and the Investors
Receivable Interests in the related Receivables), and all amounts in the
Collection Account to be distributed on succeeding Distribution Dates shall be
distributed in accordance with Section 5.02(c).

                  (b) The Seller and each Servicer Party agree to take any and
all actions reasonably required by the Agent to effectuate any sale of Contracts
described in this Section 2.04. Any Contracts subject to a Take-Out shall be
released by the Agent (on behalf of the Investors and Banks)



                                       46
<PAGE>


from the Receivables Interests of the Banks and Investors therein upon
completion of such Take-Out and the deposit of the applicable proceeds in the
Collection Account.

                  SECTION 2.05. Servicer Take-Outs. (a) Upon five Business Day's
notice to the Agent and so long as no event has occurred and is continuing which
constitutes a Termination Event or an Incipient Termination Event, the Servicer
may direct the Seller to sell Contracts to the Person designated by the Servicer
for the Fair Market Value thereof (a "Servicer Take-Out"); provided, that (i)
all proceeds received from such a sale shall be immediately deposited in the
Collection Account for distribution pursuant to Section 5.02, (ii) the Seller
shall have paid to the Agent a fee (the amount of which shall be paid from funds
on account in the Collection Account) with respect to the Receivables related to
such Contracts equal to the Aggregate Outstanding Balance of such Receivables
multiplied by the Exit Fee Rate and (iii) after giving effect to any such sale,
the deposit of the proceeds thereof in the Collection Account and the payment of
the fee referred to in the immediately preceding clause (ii), no Termination
Event or Incipient Termination Event shall occur.

         (b) Any Contracts subject to a sale referred to in Section 2.05(a)
shall be released by the Agent (on behalf of the Investors and Banks) from the
Receivables Interests of the Banks and Investors therein upon completion of such
sale in full compliance with Section 2.05(a).

                  SECTION 2.06. Optional Reductions. (a) The Seller may, at any
time and from time to time with the consent or at the direction of the Servicer,
repay all or a portion of the Capital Investment by written notice delivered to
the Agent no later than the fifth (5th) Business Day prior to the Business Day
of the desired reduction; provided that (i) each such repayment of the Capital
Investment shall be in an amount that is an integral multiple of $5,000,000 and
not less than $10,000,000 in the aggregate (unless the amount of the Capital
Investment is less than $10,000,000 at such time, in which case such repayment
shall be in an amount equal to the total amount of the Capital Investment such
time), (ii) all accrued Yield with respect to the Capital Investment being
repaid shall be paid concurrently with the repayment of such Capital Investment
and (iii) after giving effect to any such repayment, no Termination Event or
Incipient Termination Event shall occur. Such reductions shall occur no more
frequently than once per calendar month.

                  (b) The Seller may, at any time and from time to time with the
consent or at the direction of the Servicer, upon at least three (3) Business
Days' written notice to the Agent, terminate in whole or reduce in part the
unused portion of the Purchase Limit; provided that (i) each such reduction of
the Purchase Limit shall be in an amount that is an integral multiple of
$5,000,000 and (ii) after giving effect to such reduction, no Termination Event
or Incipient Termination Event shall occur. Upon any such permanent reduction of
the Purchase Limit, each Bank Commitment shall be reduced ratably in accordance
with the amount of such reduction. Such reductions shall occur not more
frequently than once per calendar month.

                  (c) Upon the request of the Seller, with the consent or at the
direction of the Servicer, the Agent (on behalf of itself, the Investor and the
Banks), agrees to take any and all actions reasonably requested by the Seller to
release any Lien in favor of the Agent, the Investor and the Banks on any



                                       47
<PAGE>


Receivables subject to a reduction described in Sections 2.06(a) and (b) above;
provided, that, the Seller shall have paid to the Agent a fee (the amount of
which shall be paid from funds on account in the Collection Account) with
respect to such Receivables equal to the Aggregate Outstanding Balance of such
Receivables on the date of such release multiplied by the Exit Fee Rate.


                                   ARTICLE III

                                YIELD, FEES, ETC.

                  SECTION 3.01. Yield Payment Dates. Yield accrued on each
Purchase shall be payable, without duplication: (a) on the date of any payment
or prepayment, in whole or in part, of Capital Investment and (b) on each
Distribution Date.

                  SECTION 3.02. Fees. The Seller agrees that CSFB, as agent for
the Banks, shall be entitled to receive on each Distribution Date the Fees in
the amounts set forth in the Fee Letter.

                  SECTION 3.03. Computation of Yield and Fees. All Yield and
Fees shall be computed on the basis of the actual number of days (including the
first day but excluding the last day) occurring during the period for which such
Yield or Fee is payable over a year comprised of 360 days.

                                   ARTICLE IV

                          CAPITAL INVESTMENT REPAYMENTS

                  SECTION 4.01. Repayments of Capital Investment. Capital
Investment shall be due and payable in accordance with the provisions of Article
V.

                                    ARTICLE V

                                    PAYMENTS

                  SECTION 5.01. Making of Payments. (a) All amounts to be paid
or deposited by the Seller or either Servicer Party hereunder shall be paid or
deposited no later than 12:00 P.M. (New York City time) on the day when due in
same day funds to the Agent, at the Agent's Account.

                  (b) The Seller and each Servicer Party shall, to the extent
permitted by law, pay interest on any amount not paid or deposited by it when
due hereunder, at an interest rate per annum equal to Alternate Base Rate then
in effect plus 2% per annum, payable on demand.

                  (c) All computations of interest under subsection (b) above
and all computations of Yield, Fees, and other amounts hereunder shall be made
on the basis of a year of 360 days for the actual



                                       48
<PAGE>


number of days (including the first but excluding the last day) elapsed.
Whenever any payment or deposit to be made hereunder shall be due on a day other
than a Business Day, such payment or deposit shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of such payment or deposit.

                  SECTION 5.02. Distributions. (a) Collection of the Pool
Receivables shall be administered by the Servicer Parties in accordance with the
terms of Article XI of this Agreement. All Collections received by the
Sub-Servicer shall be deposited in the Collection Account by 4:00 p.m. (New York
time) on the second Business Day following the receipt thereof in the Specified
Account. All Collections received by the Servicer shall be deposited in the
Collection Account by 11:00 a.m. (New York time) on the Business Day following
the receipt thereof in the Lock-Box Account.

                  (b) On each Distribution Date prior to the Facility
Termination Date (other than on a Distribution Date next following the
occurrence of a Take-Out), the Agent shall distribute amounts on deposit in the
Collection Account as follows:

                  FIRST, to the Servicer and Sub-Servicer in respect of
Servicing Fees and Sub-Servicing Fees due for the immediately-preceding
Collection Period, to be paid, pro rata, based upon the respective amounts of
such Servicing Fees and Sub-Servicing Fees due to the Servicer and Sub-Servicer,
respectively;

                  SECOND, pro rata, to (i) the Custodian, in payment of any
Custodial Fees due for the immediately-preceding Collection Period and (ii) the
Collection Account Bank in payment of any fees or expenses due under the Control
Agreement for the immediately-preceding Collection Period;

                  THIRD, to the Agent's Account, an amount equal to any accrued
and unpaid Yield and Fees in respect of all preceding Fixed Periods, and Other
Amounts, owing to the Agent, the Banks and the Investors;

                  FOURTH, to GSS, in respect of any Management Fees due for the
immediately- preceding Collection Period;

                  FIFTH, to the Reserve Account, until the amount on deposit
therein is equal to the Aggregate Required Reserve Account Amount at such time;

                  SIXTH, to the Agent's Account, in an amount equal to any
Capital Deficiency;

                  SEVENTH, if the senior unsecured long-term debt rating of the
Parent is downgraded below B- by S&P (or if the Parent is put on negative credit
watch by S&P at any time that such rating is at B-) or below B3 by Moody's (or
if the Parent is put on negative credit watch by Moody's at any time that such
rating is at B3)(or if such rating is withdrawn or cancelled by S&P or Moody's),
to the Agent's Account in payment of the Capital Investment until such time as
the Deemed AAA Credit Enhancement Amount shall have been paid in full;




                                       49
<PAGE>



                  EIGHTH, to any Successor Servicer, in payment of any unpaid
transition costs approved by the Agent pursuant to Section 13.03; and

                  NINTH, any remaining amounts, to the Excess Collections
Account; provided, however, that, prior to the Facility Termination Date, if
HomePride has repurchased, on or before the immediately-preceding Determination
Date, all Delinquent Receivables as of the end of the immediately-preceding
Collection Period in accordance with Section 2.04(c) of the Purchase and
Contribution Agreement, then if no Termination Event or Incipient Termination
Event shall have occurred, all such remaining amounts, plus all other amounts on
deposit in the Excess Collections Account, shall be remitted to the Seller for
its own account.

                  (c) On each Distribution Date following the occurrence of the
Facility Termination Date, the Agent shall distribute amounts on deposit in the
Collection Account as follows:

                  FIRST, to the Servicer and Sub-Servicer in respect of
Servicing Fees and Sub-Servicing Fees due for the immediately-preceding
Collection Period, to be paid, pro rata, based upon the respective amounts of
such Servicing Fees and Sub-Servicing Fees due to the Servicer and Sub-Servicer,
respectively;

                  SECOND, pro rata, to (i) the Custodian, in payment of any
Custodial Fees due for the immediately-preceding Collection Period and (ii) the
Collection Account Bank in payment of any fees or expenses due under the Control
Agreement for the immediately-preceding Collection Period;

                  THIRD, to the Agent's Account, an amount equal to all accrued
and unpaid Yield and Fees in respect of all preceding Fixed Periods, and Other
Amounts, owing to the Agent, the Banks and the Investors;

                  FOURTH, to GSS, in respect of any Management Fees due for the
immediately- preceding Collection Period;

                  FIFTH, to any Successor Servicer, in payment of any unpaid
transition costs approved by the Agent pursuant to Section 13.03; and

                  SIXTH, to the Investors and/or Banks in reduction to zero of
all Capital Investment.

                  After all Capital Investment, Yield, Fees, Servicing Fees,
fees owed to the Custodian, and Other Amounts have been paid in full, all
additional amounts on deposit in the Collection Account, the Reserve Account and
the Excess Collections Account shall be released and remitted to the Seller for
its own account.




                                       50
<PAGE>


                  (d) On each Distribution Date following the occurrence of a
Take-Out, the Agent shall distribute all Take-Out Proceeds on deposit in the
Collection Account (whether such amounts are paid by the Seller, either Servicer
Party, the Agent or a third-party purchaser) as follows:

                  FIRST, to the Servicer and Sub-Servicer in respect of
Servicing Fees and Sub-Servicing Fees due for the immediately-preceding
Collection Period, to be paid, pro rata, based upon the respective amounts of
such Servicing Fees and Sub-Servicing Fees due to the Servicer and Sub-Servicer,
respectively;

                  SECOND, pro rata, to (i) the Custodian, in payment of any
Custodial Fees due for the immediately-preceding Collection Period and (ii) the
Collection Account Bank in payment of any fees or expenses due under the Control
Agreement for the immediately-preceding Collection Period;

                  THIRD, to the Agent's Account, an amount equal to any accrued
and unpaid Yield and Fees in respect of all preceding Fixed Periods, and Other
Amounts, owing to the Agent, the Banks and the Investors;

                  FOURTH, to GSS, in respect of any Management Fees due for the
immediately- preceding Collection Period;

                  FIFTH, to the Agent's Account, in an amount equal to any
Capital Deficiency;

                  SIXTH, to the Reserve Account, until the amount on deposit
therein is equal to the Aggregate Required Reserve Account Amount at such time;

                  SEVENTH, if the senior unsecured long-term debt rating of the
Parent is downgraded below B- by S&P (or if the Parent is put on negative credit
watch by S&P at any time that such rating is at B-) or below B3 by Moody's (or
if the Parent is put on negative credit watch by Moody's at any time that such
rating is at B3) (or if such rating is withdrawn or cancelled by S&P or
Moody's), to the Agent's Account in payment of the Capital Investment until such
time as the Deemed AAA Credit Enhancement Amount shall have been paid in full;

                  EIGHTH, to any Successor Servicer, in payment of any unpaid
transition costs approved by Agent pursuant to Section 13.03; and

                  NINTH, any remaining amounts shall be released and remitted to
the Seller for its own account.

                  (e) The Agent shall have the right to purchase Interest Rate
Hedges with respect to all or any portion of the Receivables Pool for the
benefit of the Seller at such times as the Agent may elect. Any Interest Rate
Hedge purchased pursuant to the previous sentence shall be purchased only after
the Agent shall have requested and received price quotes for such an Interest
Rate Hedge from three Eligible



                                       51
<PAGE>


Counterparties and such Interest Rate Hedge shall be purchased only from the
Eligible Counterparty that provided the lowest such price quote, unless the
Agent shall have determined in its reasonable discretion that purchasing such
Interest Rate Hedge from one of the remaining two such Eligible Counterparties
would better serve the interests of the Investors (in which case such Interest
Rate Hedge shall be purchased from one of such remaining Eligible
Counterparties). In connection with any such purchase of an Interest Rate Hedge,
the Agent may, in its sole discretion, direct the Collection Account Bank in
writing, and the Collection Account Bank shall, upon such direction, withdraw
such amounts on deposit in the Reserve Account (and if the Reserve Account is
depleted, then the Excess Collections Account) as the Agent shall designate (in
its sole discretion) for payment of any fees and/or costs which may be owed to
the Eligible Counterparty providing such Interest Rate Hedge. On each
Distribution Date prior to the Facility Termination Date and on the Termination
Date or any date subsequent thereto, the Agent may, in its sole discretion,
direct the Collection Account Bank in writing, and the Collection Account Bank
shall, upon such direction, withdraw such amounts on deposit in the Reserve
Account and/or Excess Collections Account as the Agent shall designate (in its
sole discretion) for payment of any and all amounts set forth in Subsections
(a), (c) or (d) of this Section 5.02 as the Agent shall designate (in its sole
discretion) which shall remain unpaid after the application of Collections
required to be made on such date.

                  (f) For purposes of this Section 5.02:

                  (i) if on any day any of the representations or warranties
contained in Section 8.01(g) is no longer true with respect to any Pool
Receivable, the Seller shall be deemed to have received on such day a Collection
of such Pool Receivable in full; and

                  (ii) if and to the extent the Agent, the Investors or the
Banks shall be required for any reason to pay over to an Obligor any amount
received on its behalf hereunder, such amount shall be deemed not to have been
so received but rather to have been retained by the Seller and, accordingly, the
Agent, the Investors or the Banks, as the case may be, shall have a claim
against the Seller for such amount, payable when and to the extent that any
distribution from or on behalf of such Obligor is made in respect thereof;
provided, however, that it is expressly agreed and understood by the parties
hereto (i) that the foregoing is not intended to, and shall not, constitute a
guarantee of the collectibility or payment of the Pool Receivables and (ii) that
nothing in this Section 5.02(f) shall require the Seller to indemnify any Person
for Receivables which are not collected, not paid or uncollectible on account of
the insolvency, bankruptcy, or financial inability to pay of the applicable
Obligor.

                                   ARTICLE VI

                             INCREASED COSTS; TAXES

                  SECTION 6.01. Increased Costs. (a) If CSFB, any Investor, any
Bank, any entity which enters into a commitment to purchase Receivable
Interests, or any of their respective Affiliates (each an "Affected Person")
determines that compliance with any law or regulation or any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) affects or



                                       52
<PAGE>


would affect the amount of the capital required or expected to be maintained by
such Affected Person and such Affected Person determines that the amount of such
capital is increased by or based upon the existence of any commitment to make
purchases of or otherwise to maintain the investment in Pool Receivables or
interests therein related to this Agreement or to the funding thereof and other
commitments of the same type, then, after demand by such Affected Person (with a
copy to the Agent), the Seller shall be given written notice and the Agent shall
be entitled to receive, from Collections or amounts on deposit in the Excess
Collections Account or Reserve Account in accordance with Section 5.02, for the
account of such Affected Person (as a third-party beneficiary), from time to
time as specified by such Affected Person, additional amounts sufficient to
compensate such Affected Person in the light of such circumstances, to the
extent that such Affected Person determines such increase in capital to be
allocable to the existence of any of such commitments. A certificate as to such
amounts submitted to the Seller and the Agent by such Affected Person shall set
forth such amounts in reasonable detail and shall be conclusive and binding for
all purposes, absent manifest error.

                  (b) If, due to either (i) the introduction of or any change
(other than any change by way of imposition or increase of reserve requirements
referred to in Section 6.02) in or in the interpretation of any law or
regulation or (ii) compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Investor or Bank of agreeing to
purchase or purchasing, or maintaining the ownership of Receivable Interests in
respect of which Yield is computed by reference to the Eurodollar Rate, then,
the Seller shall be given written notice and after demand by such Investor or
Bank (with a copy to the Agent), the Agent shall be entitled to receive, from
Collections and amounts on deposit in the Excess Collections Account and the
Reserve Account in accordance with Section 5.02, for the account of such
Investor or Bank (as a third-party beneficiary), from time to time as specified
by such Investor or Bank, additional amounts sufficient to compensate such
Investor or Bank for such increased costs. A certificate as to such amounts
submitted to the Seller and the Agent by such Investor or Bank shall set forth
such amounts in reasonable detail and shall be conclusive and binding for all
purposes, absent manifest error.

                  SECTION 6.02. Additional Yield on Receivable Interests Bearing
a Eurodollar Rate. Each Investor and Bank shall be entitled to receive, from
Collections in accordance with Section 5.02 and amounts on deposit in the Excess
Collections Account and the Reserve Account, so long as such Investor or Bank
shall be required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional Yield on the
unpaid Capital Investment of each Receivable Interest of such Investor or Bank
during each Fixed Period in respect of which Yield is computed by reference to
the Eurodollar Rate, for such Fixed Period, at a rate per annum equal at all
times during such Fixed Period to the remainder obtained by subtracting (i) the
Eurodollar Rate for such Fixed Period from (ii) the rate obtained by dividing
such Eurodollar Rate referred to in clause (i) above by that percentage equal to
100% minus the Eurodollar Rate Reserve Percentage of such Investor or Bank for
such Fixed Period, payable on each date on which Yield is payable on such
Receivable Interest. Such additional Yield shall be determined by such Investor
or Bank and notice thereof given to the Seller through the Agent within 30 days
after any Yield payment is made with respect to which such additional Yield is
requested. A certificate as to such additional Yield



                                       53
<PAGE>

submitted to the Seller and the Agent by such Investor or Bank shall set forth
such amounts in reasonable detail and shall be conclusive and binding for all
purposes, absent manifest error.

                  SECTION 6.03. Taxes. (a) Any and all payments and deposits
required to be made hereunder or under any other Transaction Document by the
Servicer, HomePride or the Seller shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding net
income taxes or taxes of a similar nature (however characterized by the
applicable jurisdiction) that are imposed by the United States and franchise
taxes and net income taxes that are imposed on an Affected Person by any state
or foreign jurisdiction or other locality (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Seller or the Servicer shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder to any
Affected Person, (i) the Seller shall make an additional payment to such
Affected Person, in an amount sufficient so that, after making all required
deductions (including deductions applicable to additional sums payable under
this Section 6.03), such Affected Person receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Seller, HomePride
or the Servicer, as the case may be, shall make such deductions and (iii) the
Seller, HomePride or the Servicer, as the case may be, shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.

                  (b) In addition, the Seller agrees to pay, in accordance with
the terms and order of priority set forth in Section 5.02 hereof, any present or
future stamp or other documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made hereunder or under
any other Transaction Document or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement or any other Transaction
Document (hereinafter referred to as "Other Taxes").

                  (c) The Seller will indemnify each Affected Person for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
6.03) paid by such Affected Person and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto whether or not
such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made, in accordance with the terms and order of
priority set forth in Section 5.02 hereof, on the Distribution Date immediately
following the date on which the Affected Person makes written demand therefor
(and a copy of such demand shall be delivered to the Agent). A certificate as to
the amount of such indemnification submitted to the Seller and the Agent by such
Affected Person, setting forth, in reasonable detail, the basis for and the
calculation thereof, shall be conclusive and binding for all purposes absent
manifest error.



                                       54
<PAGE>

                                   ARTICLE VII

                             CONDITIONS OF PURCHASES

                  SECTION 7.01. Conditions Precedent to Initial Purchase. The
initial Purchase of a Receivable Interest under this Agreement is subject to the
conditions precedent that the Agent shall have received on or before the date of
such purchase the following, each (unless otherwise indicated) dated such date
and in form and substance satisfactory to the Agent:

                  (a) Certified copies of the resolutions of the Board of
Directors of each of the Seller, the Servicer and the Sub-Servicer approving
this Agreement, the Purchase and Sale Agreement, if applicable, the other
Transaction Documents to which each of them is a party and any other documents
contemplated thereby and certified copies of all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect to
this Agreement, the Purchase and Sale Agreement, the other Transaction Documents
and any other documents contemplated thereby;

                  (b) A certificate of the Secretary or Assistant Secretary of
each of the Seller, the Servicer and the Sub-Servicer certifying the names and
true signatures of the officers of the Seller and the Servicer authorized to
sign the Purchase and Sale Agreement, if applicable, this Agreement and the
other Transaction Documents to be delivered by it in connection herewith and
therewith;

                  (c) Proper financing statements under the UCC of all
jurisdictions that the Agent may deem necessary or desirable in order to perfect
the ownership and security interests contemplated by this Agreement, the
Purchase and Sale Agreement and the Purchase and Contribution Agreement;

                  (d) Acknowledgment copies of proper financing statements, if
any, necessary to release all security interests and other rights of any Person
in the Pool Receivables, any Contracts related thereto or any Related Security
related thereto previously granted by the Seller, HomePride SPV or HomePride;

                  (e) Completed requests for information, dated on or before the
date of such initial Purchase, with respect to each jurisdiction referred to in
subsection (c) above that name the Seller, HomePride SPV or HomePride as debtor,
together with copies of such other financing statements (none of which shall
cover any Pool Receivables, any Contracts related thereto or any Related
Security related thereto or any collateral referred to in Section 10.01);

                  (f) Favorable Opinions of Counsel in form and substance
satisfactory to the Agent, with respect to, among other things, the due
authorization, execution and delivery of, and enforceability of this Agreement
and the other Transaction Documents;

                  (g) A favorable Opinion of Counsel, in form and substance
satisfactory to the Agent, to the effect that (i) the Receivables to be conveyed
to HomePride SPV under the Purchase and Contribution Agreement will be conveyed
to HomePride SPV in a "true sale" and would not be considered part of


                                       55

<PAGE>

HomePride's bankruptcy estate in the event of its insolvency and (ii) HomePride
SPV would not be substantially consolidated with HomePride for purposes of the
Federal Bankruptcy Code in such event;

                  (h) A favorable Opinion of Counsel, in form and substance
satisfactory to the Agent, to the effect that the Seller would not be
substantially consolidated with Seller's Parent for purposes of the Federal
Bankruptcy Code in such event;

                  (i) A favorable Opinion of Counsel, in form and substance
satisfactory to the Agent with respect to, among other things, there being no
material conflicts between the Transaction Documents and the 1999 Indenture or
the 2002 Indenture;

                  (j) Favorable Opinions of Counsel, in form and substance
satisfactory to the Agent, with respect to the creation, perfection and priority
of ownership interests and, in the alternative, security interests in the
Transferred Receivables, Related Security and Collections under the Purchase and
Sale Agreement (as such terms are defined in the Purchase and Sale Agreement),
the Transferred Receivables, Related Security and Collections under the Purchase
and Contribution Agreement (as such terms are defined in the Purchase and Sale
Agreement) and the Pool Receivables, Related Security and Collections under this
Agreement;

                  (k) A favorable Opinion of Counsel from special counsel for
the Seller, with respect to the first priority perfected security interest of
the Agent in the Collection Account, the Excess Collections Account and the
Reserve Account;

                  (l) A favorable Opinion of Counsel, in form and substance
satisfactory to the Agent, which shall address (i) certain regulatory and
licensing issues related to the (a) ownership of the Receivables and Related
Security by HomePride, HomePride SPV and the Seller and (b) the servicing of the
Receivables by the Servicer and (ii) the exemption of the Agent, Investors and
Banks from federal, state and local licensing requirements with respect to the
transactions contemplated by the Transaction Documents;

                  (m) A favorable Opinion of Counsel from special Texas counsel
for the Seller satisfactory to the Agent, in form and substance satisfactory to
the Agent, with respect to the first priority, perfected, possessory security
interest in the Contracts;

                  (n) A copy of the by-laws of the Seller, the Servicer and the
Sub-Servicer certified by the Secretary or Assistant Secretary of the Seller,
the Servicer or the Sub-Servicer, as applicable;

                  (o) A copy of the certificate or articles of incorporation of
the Seller, the Servicer and the Sub-Servicer, certified as of a recent date by
the Secretary of State or other appropriate official of the state of its
organization, and a certificate as to the good standing of the Seller, the
Servicer and the Sub-Servicer from such Secretary of State or other official,
dated as of a recent date;



                                       56
<PAGE>

                  (p) The Agent (or its counsel) shall have received from each
party to the Fee Letter either (i) an original counterpart of the Fee Letter
signed on behalf of such party or (ii) written evidence satisfactory to the
Agent (which may include telecopy transmission of a signed signature page of the
Fee Letter) that such party has signed a counterpart of the Fee Letter;

                  (q) The Agent (or its counsel) shall have received from each
party to the Purchase and Sale Agreement either (i) an original counterpart of
the Purchase and Sale Agreement signed on behalf of such party or (ii) written
evidence satisfactory to the Agent (which may include telecopy transmission of a
signed signature page of the Purchase and Sale Agreement) that such party has
signed a counterpart of the Purchase and Sale Agreement;

                  (r) The Agent (or its counsel) shall have received from each
party to the Purchase and Contribution Agreement either (i) an original
counterpart of the Purchase and Contribution Agreement signed on behalf of such
party or (ii) written evidence satisfactory to the Agent (which may include
telecopy transmission of a signed signature page of the Purchase and
Contribution Agreement) that such party has signed a counterpart of the Purchase
and Contribution Agreement;

                  (s) The Agent (or its counsel) shall have received from each
party to the Custodial Agreement either (i) an original counterpart of the
Custodial Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Agent (which may include telecopy transmission of a signed
signature page of the Custodial Agreement) that such party has signed a
counterpart of the Custodial Agreement;

                  (t) The Agent (or its counsel) shall have received from the
Parent (i) an original counterpart of the Parent Guaranty signed on behalf of
the Parent or (ii) written evidence satisfactory to the Agent (which may include
telecopy transmission of a signed signature page of the Parent Guaranty) that
the Parent has signed a counterpart of the Parent Guaranty;

                  (u) The Agent (or its counsel) shall have received from the
Parent (i) an original counterpart of the Limited Recourse Guaranty signed on
behalf of the Parent or (ii) written evidence satisfactory to the Agent (which
may include telecopy transmission of a signed signature page of the Limited
Recourse Guaranty) that the Parent has signed a counterpart of the Limited
Recourse Guaranty;

                  (v) The Agent (or its counsel) shall have received from CIT
(i) an original counterpart of the CIT Guaranty signed on behalf of CIT or (ii)
written evidence satisfactory to the Agent (which may include telecopy
transmission of a signed signature page of the CIT Guaranty) that CIT has signed
a counterpart of the CIT Guaranty;

                  (w) The Agent (or its counsel) shall have received the Global
Servicing Agreement in form and substance satisfactory to the Agent and from
each party thereto either (i) an original counterpart of the Global Servicing
Agreement signed on behalf of such party or (ii) written evidence satisfactory
to the Agent (which may include telecopy transmission of a signed signature page
of the Global Servicing Agreement) that such party has signed a counterpart of
the Global Servicing Agreement;


                                       57
<PAGE>

                  (x) The Agent (or its counsel) shall have received the Control
Agreement in form and substance satisfactory to the Agent and from each party
thereto either (i) an original counterpart of the Control Agreement signed on
behalf of such party or (ii) written evidence satisfactory to the Agent (which
may include telecopy transmission of a signed signature page of the Control
Agreement) that such party has signed a counterpart of the Control Agreement;

                  (y) The Agent (or its counsel) shall have received from the
Seller (i) an original counterpart of the Funds Transfer Letter signed on behalf
of the Seller or (ii) written evidence satisfactory to the Agent (which may
include telecopy transmission of a signed signature page of the Funds Transfer
Letter) that the Seller has signed a counterpart of the Funds Transfer Letter;

                  (z) The Agent (or its counsel) shall have received this
Agreement and all other Transaction Documents required to be delivered on the
date hereof, in each case, in form and substance satisfactory to the Agent and
from each party thereto either (i) an original counterpart thereof signed on
behalf of such party or (ii) written evidence satisfactory to the Agent (which
may include telecopy transmission of a signed signature page thereof that such
party has signed a counterpart thereof.

                  (aa) A Responsible Officer of the Seller shall have certified
that all conditions to the obligations of HomePride and the Seller under the
Purchase and Sale Agreement shall have been satisfied in all respects and a copy
of all documents delivered thereunder shall be delivered to the Agent and shall
be reasonably satisfactory to the Agent;

                  (bb) A Responsible Officer of HomePride shall have certified
that all conditions to the obligations of HomePride and HomePride SPV under the
Purchase and Contribution Agreement shall have been satisfied in all respects
and a copy of all documents delivered thereunder shall be delivered to the Agent
and shall be reasonably satisfactory to the Agent;

                  (cc) A Responsible Officer of HomePride shall have certified
that all conditions to the obligations of HomePride and CIT Group/Sales under
the Global Servicing Agreement shall have been satisfied in all respects and a
copy of all documents delivered thereunder shall be delivered to the Agent and
shall be reasonably satisfactory to the Agent;

                  (dd) A copy of the Credit and Collection Policy, certified by
a Responsible Officer of the Seller;

                  (ee) A review of the computer programs, material tapes, data
and back-up plans of Sub-Servicer, HomePride, HomePride SPV and the Seller
required for the collection of Receivables and the Agent shall be satisfied that
the foregoing, including the procedures of Sub-Servicer, HomePride, HomePride
SPV and the Seller for the preparation, storage and retrieval thereof, are
sufficient upon the termination of the Servicer or the Sub-Servicer to permit
(i) the Seller or the Agent to collect the Receivables with or without the
participation of HomePride, HomePride SPV or the Sub-Servicer and the


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<PAGE>

Seller or the Servicer and (ii) a third-party servicer to collect the
Receivables with or without the participation of HomePride, HomePride SPV, the
Servicer, the Sub-Servicer or the Seller; and

                  (ff) Such other documents, instruments, certificates and
opinions as the Agent may reasonably request.

                  SECTION 7.02. Conditions Precedent to All Purchases. Each
Purchase (including the initial Purchase) shall be subject to the further
conditions precedent that:

                  (a) If requested by the Agent in connection with such
Purchase, the Seller shall have entered into an Interest Rate Hedge with respect
to the Receivables which are the subject of such Purchase;

                  (b) The representations and warranties contained in Section
8.01 shall be correct on and as of the date of such Purchase as though made on
and as of such date (other than the representations and warranties stated to be
correct on or as of a date certain, which shall have been correct on such date
certain);

                  (c) No event has occurred and is continuing, or would result
from such purchase, that constitutes a Termination Event or an Incipient
Termination Event;

                  (d) The Agent shall have received the Purchase Request for
such Purchase in accordance with Section 2.02, together with all items required
to be delivered in connection therewith;

                  (e) The Facility Termination Date shall not have occurred;

                  (f) The Agent shall have received a Trust Receipt, in form and
substance satisfactory to the Agent, in respect of each Receivable File related
to such Purchase;

                  (g) The amount on deposit in the Reserve Account shall be
equal to the Aggregate Required Reserve Amount (after giving effect to such
Purchase);

                  (h) The Seller's Tangible Net Worth shall not be less than
$50,000;

                  (i) The Agent shall have received a duly executed Transfer
Certificate, in form and substance satisfactory to the Agent, with respect to
the Receivable Interests to be Purchased on the requested Purchase Date; and

                  (j) The Agent shall have received such other approvals,
opinions or documents as it may request.

Acceptance of the proceeds of each Purchase shall be deemed a representation and
warranty that the conditions set forth in this Section 7.02 have been fulfilled.




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<PAGE>

                                  ARTICLE VIII

                         REPRESENTATIONS AND WARRANTIES

                  SECTION 8.01. Representations and Warranties of the Seller.
The Seller hereby represents and warrants as of the Closing Date and as of the
date of each Purchase as follows; provided, however, that each representation
and warranty of the Seller with respect to the Lock-Box Accounts or Lock-Box
Banks shall not be deemed to be made by the Seller until the date when one or
more Lock-Box Accounts are required to be established pursuant to the terms of
this Agreement:

                  (a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, and is duly qualified
to do business, and is in good standing, in every jurisdiction where the nature
of its business requires it to be so qualified. The Seller has full corporate
power and authority to execute and deliver this Agreement and the other
Transaction Documents to which it is a party and to carry out its terms and
their terms, respectively.

                  (b) The execution, delivery and performance by the Seller of
this Agreement and the Transaction Documents to which it is a party and the
other documents to be delivered by it hereunder, including the Seller's use of
the proceeds of Purchases, (i) have been duly authorized by all necessary
corporate action, (ii) do not contravene (1) the Seller's certificate of
incorporation or by-laws, (2) any law, rule or regulation applicable to the
Seller, (3) any contractual restriction binding on or affecting the Seller or
its property or (4) any order, writ, judgment, award, injunction or decree
binding on or affecting the Seller or its property, and (iii) do not result in
or require the creation of any Lien upon or with respect to any of its
properties (except for the interests created pursuant to the Transaction
Documents). Each of the Transaction Documents to which it is a party has been
duly executed and delivered by the Seller.

                  (c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body (which
has not been obtained) is required for the due execution, delivery and
performance by the Seller of the Transaction Documents to which it is a party or
any other document to be delivered thereunder, except for the filing of UCC
financing statements which are referred to herein and therein.

                  (d) Each of the Transaction Documents to which it is a party
constitutes the legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.

                  (e) The balance sheets of the Parent and its Subsidiaries as
at December 29, 2001, and the related statements of operations of the Parent and
its Subsidiaries for the fiscal year ended


                                       60
<PAGE>

December 29, 2001, copies of which have been furnished to the Agent, fairly
present the financial condition of the Parent and its Subsidiaries as at such
date and the results of the operations of the Parent and its Subsidiaries for
the period ended on such date, all in accordance with GAAP consistently applied,
and since December 29, 2001 there has been no material adverse change in the
business, operations, property or financial or other condition of the Parent.

                  (f) There is no pending or, to the Seller's knowledge,
threatened action or proceeding affecting the Seller or the Parent or any of its
Subsidiaries before any court, governmental agency or arbitrator which, if
adversely determined, would materially adversely affect the financial condition
or operations of the Seller or of the Parent and Subsidiaries taken as a whole
or the ability of the Seller or the Servicer to perform their respective
obligations under the Transaction Documents, or which purports to affect the
legality, validity or enforceability of the Transaction Documents; none of the
Seller, the Parent or any Subsidiary of the Parent is in default with respect to
any order of any court, arbitration or governmental body except for defaults
with respect to orders of governmental agencies which defaults are not material
to the business or operations of the Seller, the Parent or the Parent's
Subsidiaries.

                  (g) Immediately prior to the Purchase by the Investors or the
Banks, as the case may be, the Seller is the legal and beneficial owner of the
Pool Receivables and Related Security free and clear of any Lien; upon each
Purchase, the Investors or the Banks, as the case may be, shall acquire a valid
and perfected first priority undivided percentage ownership interest to the
extent of the pertinent Receivable Interest in each Pool Receivable then
existing or thereafter arising and in the Related Security and Collections with
respect thereto. No effective financing statement or other instrument similar in
effect covering any Contract or Pool Receivable or the Related Security or
Collections with respect thereto is on file in any recording office, except
those filed in favor of the Agent relating to this Agreement, those filed by the
Seller pursuant to the Purchase and Sale Agreement, those filed by HomePride SPV
pursuant to the Purchase and Contribution Agreement and those filed by HomePride
pursuant to any Dealer Agreements.

                  (h) Each Servicer Certificate (if prepared by the Seller or
one of its Affiliates, or to the extent that information contained therein is
supplied by the Seller or an Affiliate), information, exhibit, financial
statement, document, book, record or report furnished or to be furnished at any
time by or on behalf of the Seller to the Agent or the Investors in connection
with this Agreement is or will be accurate in all material respects as of its
date or (except as otherwise disclosed to the Agent or the Investors, as the
case may be, at such time) as of the date so furnished, and no such document (in
each case as of such date) (x) contains or will contain any untrue statement of
a material fact or (y) omits or will omit to state a material fact necessary in
order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.

                  (i) The principal place of business and chief executive office
of the Seller and the office where the Seller keeps its records concerning the
Pool Receivables are located at the address or addresses referred to in Section
17.03 (other than records held by a Custodian).



                                       61
<PAGE>

                  (j) The Seller is not known by and does not use any tradename
or doing-business-as name.

                  (k) The Seller was organized on April 17, 2002, and the Seller
did not engage in any business activities prior to the date of this Agreement.
The Seller has no Subsidiaries.

                  (l) With respect to each Pool Receivable, the Seller shall
have purchased such Pool Receivable from HomePride SPV in exchange for payment
(made by the Seller to HomePride SPV in accordance with the provisions of the
Purchase and Sale Agreement) of cash and/or subordinated debt in an amount which
constitutes fair consideration and reasonably equivalent value. Each such sale
referred to in the preceding sentence shall not have been made for or on account
of an antecedent debt owed by HomePride SPV to the Seller and no such sale is
intended to be voidable or subject to avoidance under any section of the
Bankruptcy Code.

                  (m) The Seller will treat the purchase of each Receivable and
Related Security pursuant to the Purchase and Sale Agreement as a purchase of
HomePride SPV's full right, title and ownership interest in such Receivable and
Related Security.

                  (n) The Seller has complied with all applicable laws, rules,
regulations, judgments, agreements, decrees and orders with respect to its
business and properties and all Pool Receivables and Related Security.

                  (o) The Seller has filed on a timely basis all material tax
returns (including, without limitation, foreign, federal, state, local and
otherwise) required to be filed, is not liable for taxes payable by any other
Person and has paid or made adequate provisions for the payment of all material
taxes, assessments and other governmental charges due from the Seller. No tax
lien or similar adverse claim has been filed, and no claim is being asserted,
with respect to any such tax, assessment or other governmental charge. Any
taxes, fees and other governmental charges payable by the Seller in connection
with the execution and delivery of this Agreement and the other Transaction
Documents to which it is a party and the transactions contemplated hereby or
thereby including the transfer of each Pool Receivable and Related Security to
the Seller have been paid or shall have been paid if and when due at or prior to
the Closing Date and the relevant Purchase Date, as the case may be.

                  (p) The Seller is in compliance with ERISA and has not
incurred and does not expect to incur any liabilities (except for premium
payments arising in the ordinary course of business) to the PBGC under ERISA.

                  (q) (i) The Seller is not a party to any indenture, loan or
credit agreement or any lease or other agreement or instrument or subject to any
restriction that could have, and no provision of applicable law or governmental
regulation is reasonably likely to have, a material adverse effect on the
condition (financial or otherwise), business, operations, results of operations
or properties of the Seller, or could have such a material adverse effect on the
ability of the Seller to carry out its obligations under this



                                       62
<PAGE>

Agreement and the other Transaction Documents to which it is a party and (ii)
the Seller is not in default under or with respect to any contract, agreement,
lease or other instrument to which the Seller is a party and which would have a
material adverse effect on the Seller's condition (financial or otherwise),
business, operations or properties, and the Seller has not delivered or received
any notice of default thereunder.

                  (r) The Seller is not an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended. The making of the
Purchases by the Investors, the application of the proceeds and repayment
thereof by the Seller and the consummation of the transactions contemplated by
this Agreement and the other Transaction Documents to which the Seller is a
party will not cause the Seller to violate any provision of such Act or any
rule, regulation or order issued by the Securities and Exchange Commission
thereunder.

                  (s) No proceeds of any Purchase will be used to acquire any
equity security of a class which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended.

                  (t) No transaction contemplated hereby or by the Purchase and
Sale Agreement requires compliance with any bulk sales act or similar law.

                  (u) (i) The fair value of the property of the Seller is
greater than the total amount of liabilities, including contingent liabilities,
of the Seller, (ii) the present fair salable value of the assets of the Seller
is not less than the amount that will be required to pay all probable
liabilities of the Seller on its debts as they become absolute and matured,
(iii) the Seller does not intend to, and does not believe that it will, incur
debts or liabilities beyond the Seller's abilities to pay such debts and
liabilities as they mature and (iv) the Seller is not engaged in a business or a
transaction, and is not about to engage in a business or a transaction, for
which the Seller's property would constitute unreasonably small capital.

                  (v) Each Contract has been originated or re-underwritten by
HomePride consistent with the eligibility criteria required for a public
securitization of manufactured housing contracts, land-and-home contracts and
mortgage loans similar to the Contracts, and, as of the related Purchase Date,
there are no additional criteria which would exclude such Contracts from future
securitizations at such Purchase Date.

                  (w) Intentionally Omitted.

                  (x) Each of the Lock-Box Accounts, the Collection Account, the
Reserve Account and the Excess Collections Account is free and clear of any Lien
and not subject to any right of set- off other than any banker's lien or right
of set-off in favor of the banks holding such accounts that are obtained by
operation of law or contract, to the extent such liens or rights of set-off were
granted solely with respect to customary fees and expenses for the routine
maintenance of such accounts or the amounts of any checks which have been
credited to such accounts but are subsequently returned unpaid because of
uncollected or insufficient funds.




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<PAGE>

                                   ARTICLE IX

                                    COVENANTS

                  Until the later of (x) the Facility Termination Date and (y)
the date on which no Capital Investment of or Yield on any Receivable Interest
shall be outstanding or the date all Other Amounts owed hereunder to the
Investors, the Banks or the Agent are paid in full:

                  SECTION 9.01. Records. The Seller and each Servicer Party
shall, at their own cost and expense, maintain satisfactory and complete records
of the Pool Receivables, including a record of all payments received and all
credits granted with respect to the Pool Receivables and all other dealings with
the Pool Receivables. Upon 72 hours notice at any time after the occurrence and
during the continuation of a Termination Event, the Seller and each Servicer
Party shall deliver and turn over to the Agent or to its representatives, or at
the option of the Agent, shall provide the Agent or its representatives with
access to, during ordinary business hours, on demand of the Agent, all of the
Seller's and such Servicer Party's facilities, personnel, books and records
pertaining to the Pool Receivables, including all Records. If a Termination
Event shall have occurred and be continuing, promptly upon request therefor, the
Seller or such Servicer Party shall deliver to the Agent records reflecting
payment activity relating to the Pool Receivables through the close of business
on the immediately preceding Business Day.

                  SECTION 9.02. Other Liens or Interests. The Seller will not
sell, pledge, assign (by operation of law or otherwise), transfer to any other
Person, otherwise dispose of, or grant, create, incur, assume or suffer to exist
any Lien upon or with respect to, the Seller's undivided interest in any Pool
Receivable, Related Security, related Contract or Collections, or upon or with
respect to any account to which any Collections of any Pool Receivable are sent,
or assign any right to receive income in respect thereof, and the Seller and
Servicer shall defend the right, title, and interest of the Investors, the Banks
and the Agent in and to the Pool Receivables, related Contracts and Related
Security against all claims of third parties claiming through or under the
Seller other than (i) for the ownership and security interests created by this
Agreement in favor of the Agent or (ii) in connection with any Take-Out, but
only to the extent that the Minimum Purchase Price for all related Receivable
Interests shall have been paid in full in connection therewith. The Seller and
each Servicer Party shall advise the Agent promptly, in reasonable detail of the
occurrence of any event which would have a material adverse effect on the
aggregate value of the Pool Receivables, related Contracts and Related Security
or on the assignments and security interests granted by the Seller in this
Agreement.

                  SECTION 9.03. Costs and Expenses. The Seller shall pay all of
its reasonable costs and disbursements in connection with the performance of its
obligations hereunder and under the Transaction Documents.

                  SECTION 9.04. Compliance with Laws, Etc. The Seller will
comply with all applicable laws, rules, regulations and orders and preserve and
maintain its corporate existence, rights, franchises, qualifications, and
privileges.




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<PAGE>


                  SECTION 9.05. Offices, Records, Name and Organization. The
Seller will keep its principal place of business and chief executive office and
the office where it keeps its records concerning the Pool Receivables at the
address of the Seller set forth under its name on the signature pages to this
Agreement or, upon 30 days' prior written notice to the Agent, at any other
locations within the United States. The Seller will not change its name or its
state of organization, unless (i) the Seller shall have provided the Agent with
at least 30 days' prior written notice thereof and (ii) no later than the
effective date of such change, all actions requested by the Agent to protect and
perfect the interest in the Pool Receivables have been taken and completed. The
Seller also will maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing Pool
Receivables and related Contracts in the event of the destruction of the
originals thereof), and keep and maintain all documents, books, records and
other information reasonably necessary or advisable for the collection of all
Pool Receivables (including, without limitation, records adequate to permit the
daily identification of each Pool Receivable and all Collections of and
adjustments to each existing Pool Receivable). The Seller will give the Agent
notice of any material change in the administrative and operating procedures of
the Seller referred to in the previous sentence.

                  SECTION 9.06. Performance and Compliance with Contracts and
Credit and Collection Policy. The Seller will, at its expense, timely and fully
perform and comply with all provisions, covenants and other promises required to
be observed by it under the Contracts related to the Pool Receivables, and
timely and fully comply in all respects (other than an in inconsequential
respect) with the Credit and Collection Policy in regard to each Pool Receivable
and the related Contract.

                  SECTION 9.07. Change in Business or Credit and Collection
Policy. The Seller will not make any change in its business or in the Credit and
Collection Policy (other than, with respect to the Credit and Collection Policy,
an inconsequential change thereto) that would adversely affect the
collectibility of the Pool Receivables or the ability of the Seller or either
Servicer Party to perform its obligations under this Agreement.

                  SECTION 9.08. Extension or Amendment of Receivables. Except as
provided in Section 11.03, the Seller will not extend, amend or otherwise modify
the terms of any Pool Receivable, or amend, modify or waive any term or
condition of any Contract related thereto.

                  SECTION 9.09. Marking of Records. At its expense, the Seller
will mark its master data processing records evidencing Pool Receivables with a
legend evidencing that Receivable Interests related to such Pool Receivables
have been sold in accordance with this Agreement.

                  SECTION 9.10. Further Assurances. (a) The Seller and Servicer
agree from time to time, at its own expense, promptly to execute and deliver all
further instruments and documents, and to take all further actions, that may be
necessary or desirable, or that the Agent may reasonably request, to perfect,
protect or more fully evidence the Purchases, to perfect the security interests
granted under this Agreement or to enable the Investors, the Banks or the Agent
to exercise and enforce their respective rights



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<PAGE>

and remedies under this Agreement. Without limiting the foregoing, the Seller
and Servicer will, upon the request of the Agent, execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments and documents, that may be necessary or desirable, or that the Agent
may request, to perfect, protect or evidence such Purchases.

                  (b) The Seller authorizes the Agent to file financing or
continuation statements, and amendments thereto and assignments thereof,
relating to the Pool Receivables and the Related Security and the Collections
with respect thereto without the signature of the Seller where permitted by law
in order to enable the Investors, the Banks or the Agent to exercise their
respective rights and remedies under this Agreement. A photocopy or other
reproduction of this Agreement shall be sufficient as a financing statement
where permitted by law.

                  (c) The Seller and Servicer shall furnish to the Agent from
time to time such statements and schedules further identifying and describing
the Pool Receivables and Related Security and such other reports in connection
with the Pool Receivables and Related Security as the Agent may request, all in
reasonable detail.

                  SECTION 9.11. Reporting Requirements. The Seller and Servicer
will maintain a system of accounting established and administered in accordance
with GAAP and will provide to the Agent (in multiple copies, if requested by the
Agent) the following:

                  (a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Parent, a copy of the audited consolidated
financial statements for such year of the Parent and its consolidated
Subsidiaries, certified by independent accountants of nationally recognized
standing, together with calculations, certified by the chief financial officer
or chief accounting officer of the Parent, of the Adjusted Consolidated Tangible
Net Worth as of the end of such fiscal year and the Interest Coverage Ratio as
of the end of the fiscal quarter ending on the last day of such fiscal year;

                  (b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the Parent, a
consolidated balance sheet of the Parent and its consolidated Subsidiaries as of
the end of such quarter and including the prior comparable period, and
consolidated statements of operations of the Parent and its consolidated
Subsidiaries for such quarter and for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter prepared in
accordance with GAAP, together with calculations of the Adjusted Consolidated
Tangible Net Worth and Interest Coverage Ratio as of the end of such fiscal
quarter, such balance sheet, statements of operations, and calculations to be
certified by the chief financial officer or chief accounting officer of the
Parent identifying such balance sheets or statements as being the balance sheets
or statements described in this paragraph (b) and stating that the information
set forth therein fairly presents the financial condition of the Parent and its
consolidated Subsidiaries as of and for the periods then ended, subject to
year-end adjustments consisting only of normal, recurring accruals and subject
to the auditors' year end report and confirming that the Parent is in compliance
with all financial conditions in this Agreement;




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<PAGE>

                  (c) as soon as available and in any event within 90 days after
the end of each fiscal year of the Seller, a copy of the audited financial
statements for such year of the Seller, certified by independent accountants of
nationally recognized standing; and

                  (d) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the Seller, a
balance sheet of the Seller as of the end of such quarter and including the
prior comparable period, and consolidated statements of income of the Seller for
such quarter and for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter prepared in accordance with GAAP,
certified by the officer of the Seller responsible for its financial affairs
identifying such balance sheets or statements as being the balance sheets or
statements described in this paragraph (d) and stating that the information set
forth therein fairly presents the financial condition of the Seller as of and
for the periods then ended, subject to year-end adjustments consisting only of
normal, recurring accruals and subject to the auditors' year end report and
confirming that the Seller is in compliance with all financial covenants in this
Agreement.

                  (e) as soon as available and in any event within 90 days after
the end of each fiscal year of the Servicer, a balance sheet of the Servicer as
of the end of such fiscal year, and a statement of operations of the Servicer
for such fiscal year prepared in accordance with GAAP, such balance sheet and
statements of operations to be certified by the chief financial officer or chief
accounting officer of the Servicer identifying such balance sheets or statements
as being the balance sheets or statements described in this paragraph and
stating that the information set forth therein fairly presents the financial
condition of the Servicer as of and for the fiscal year then ended;

                  (f) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the Servicer,
a balance sheet of the Servicer as of the end of such quarter and including the
prior comparable period, and a statement of operations of the Servicer for such
quarter and for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter prepared in accordance with GAAP, such
balance sheet and statement of operations to be certified by the chief financial
officer or chief accounting officer of the Servicer identifying such balance
sheets or statements as being the balance sheets or statements described in this
paragraph and stating that the information set forth therein fairly presents the
financial condition of the Servicer as of and for the periods then ended,
subject to year-end adjustments consisting only of normal, recurring accruals;

                  (g) as soon as available and in any event within 90 days after
the end of each fiscal year of the HomePride SPV, a balance sheet of HomePride
SPV as of the end of such fiscal year, and a statement of operations of
HomePride SPV for such fiscal year prepared in accordance with GAAP, such
balance sheet and statements of operations to be certified by the chief
financial officer or chief accounting officer of HomePride SPV identifying such
balance sheets or statements as being the balance sheets or statements described
in this paragraph and stating that the information set forth therein fairly
presents the financial condition of HomePride SPV as of and for the fiscal year
then ended;

                  (h) as soon as available and in any event within 45 days after
the end of each of the first



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<PAGE>

three quarters of each fiscal year of HomePride SPV, a balance sheet of
HomePride SPV as of the end of such quarter and including the prior comparable
period, and a statement of operations of HomePride SPV for such quarter and for
the period commencing at the end of the previous fiscal year and ending with the
end of such quarter prepared in accordance with GAAP, such balance sheet and
statement of operations to be certified by the chief financial officer or chief
accounting officer of HomePride SPV identifying such balance sheets or
statements as being the balance sheets or statements described in this paragraph
and stating that the information set forth therein fairly presents the financial
condition of HomePride SPV as of and for the periods then ended, subject to
year-end adjustments consisting only of normal, recurring accruals;

                  (i) concurrently with the delivery of the financial statements
referred to in Section 9.11, a certificate of a Responsible Officer of the
Seller stating that, to the best of such Responsible Officer's knowledge, the
Seller during such period has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained in the Transaction
Documents to which it is a party to be observed, performed or satisfied by it,
and that such Responsible Officer has obtained no knowledge of any Termination
Event or Incipient Termination Event, except as specified in such certificate;

                  (j) as soon as possible and in any event within one day after
the occurrence of each Termination Event or Incipient Termination Event, a
statement of the principal financial officer of the Seller setting forth details
of such Termination Event or Incipient Termination Event and the action that the
Seller has taken and proposes to take with respect thereto;

                  (k) promptly upon the furnishing thereof to the shareholders
of the Parent or the Servicer, copies of all financial statements, reports and
proxy statements so furnished;

                  (l) promptly after sending or filing thereof and upon request
by the Agent therefor, copies of all registration statements and annual,
quarterly, monthly or other regular reports which the Parent or any of its
Subsidiaries files with the Securities and Exchange Commission;

                  (m) promptly after the filing or receiving thereof, copies of
all reports and notices that the Parent or any Affiliate thereof files under
ERISA with the Internal Revenue Service or the PBGC or the U.S. Department of
Labor or that the Parent or any Affiliate thereof receives from any of the
foregoing or from any multiemployer plan (within the meaning of Section
4001(a)(3) of ERISA) to which the Parent or any Affiliate thereof is or was,
within the preceding five years, a contributing employer;

                  (n) at least 30 days prior to any change in the name of either
Servicer Party or the Seller, a notice setting forth the new name and the
effective date thereof;

                  (o) promptly after the Seller or Servicer obtains knowledge
thereof, notice of any "Event of Termination" or "Facility Termination Date"
under the Purchase and Sale Agreement;

                  (p) so long as any Capital Investment shall be outstanding, as
soon as possible and in any




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<PAGE>

event no later than the day of occurrence thereof, notice that HomePride SPV has
stopped selling Receivables to the Seller pursuant to the Purchase and Sale
Agreement;

                  (q) promptly after receipt thereof, copies of all notices
received by the Seller from HomePride SPV under the Purchase and Sale Agreement;
and

                  (r) promptly, such additional financial and other information
with respect to the Parent, HomePride, HomePride SPV, either Servicer Party and
the Seller and their business and properties (including, without limitation, the
Pool Receivables and the Related Security) as any Agent may from time to time
reasonably request by written notice to the Seller or the Servicer.

                  SECTION 9.12. Corporate Separateness. (a) The Seller shall at
all times maintain at least one independent director (an "Independent Director")
who (i) is in fact independent, (ii) does not have any direct financial interest
or any material indirect financial interest in the Seller, or in any Affiliate
of the Seller, (iii) is not, and has not been, connected with the Seller or any
Affiliate of the Seller as an officer, employee, promoter, underwriter, trustee,
partner or person performing similar functions and is not a member of the
immediate family of any such officer or employee and (iv) is not, and has not
been, a director (other than as an independent director for an Affiliate which
is a limited special purpose corporation) or stockholder of any Affiliate of the
Seller and is not a member of the immediate family of any such director or
stockholder.

                  (b) The Seller shall not direct or participate in the
management of any other Person's operations, and no other Person shall be
permitted to direct or participate in the management of the Seller.

                  (c) The Seller shall maintain a principal executive and
administrative office through which its business in conducted separate from
those of any other Person, and, to the extent that the Seller and any other
Persons have offices in contiguous space, there shall be fair and appropriate
allocation of overhead costs among them, and each such entity shall bear its
fair share of such expenses.

                  (d) The Seller shall engage only in those transactions
described in Section 3 of its certificate of incorporation and matters
necessarily incident thereto.

                  (e) The Seller shall have stationery and other business forms
separate from that of any other Person.

                  (f) The Seller shall ensure that, to the extent that it
jointly contracts with any of its stockholders or Affiliates to do business with
vendors or service providers or to share overhead expenses, the costs incurred
in so doing shall be allocated fairly among such entities and that each such
entity shall bear its fair share of such costs and shall ensure that, to the
extent that the Seller contracts or does business with vendors or service
providers where the goods and services provided are partially for the benefit of
any other Person, the costs incurred in so doing shall be fairly allocated to or
among such entities for whose benefit the goods and services are provided and
that each such entity shall bear its fair share of such costs.





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<PAGE>

                  (g) The Seller shall at all times be adequately capitalized in
light of its contemplated business.

                  (h) The Seller shall at all times provide for its own
operating expenses and liabilities from its own funds, shall not allow its funds
to be diverted to any other Person or for other than the corporate use of the
Seller, and shall not, except as may be expressly permitted by agreements of the
Seller, allow its funds to be commingled with those of any Affiliate of the
Seller.

                  (i) The Seller shall maintain its assets and transactions
separately from those of any other Person, reflect such assets and transactions
in financial statements separate and distinct from those of any other Person and
evidence such assets and transactions by appropriate entries in books and
records separate and distinct from those of any other Person.

                  (j) The Seller shall ensure that all material transactions
between the Seller and any of its Affiliates shall be only on an arm's-length
basis and shall receive the approval of its board of directors, including at
least one Independent Director.

                  (k) The Seller shall hold itself out to the public under its
own name as a legal entity separate and distinct from any other Person, shall
act solely in its own corporate name and through its own authorized officers and
agents, and no Affiliate of the Seller shall be appointed to act as agent by the
Seller, except as may be expressly permitted by any agreements of the Seller.

                  (l) The Seller shall not hold itself out as having agreed to
pay, or as being liable, primarily or secondarily, for any obligations of any
other Person, except as may be expressly permitted in any agreements of the
Seller.

                  (m) The Seller shall not maintain any joint account with any
other Person or become liable as a guarantor or otherwise with respect to any
debt or contractual obligation of any other Person.

                  (n) The Seller shall not make any payment or distribution of
assets with respect to any obligation of any other Person or grant any lien,
security interest or encumbrance on any of its assets to secure any obligation
of any other Person.

                  (o) The Seller shall not make loans, advances or otherwise
extend credit to any other Person, except on an arm's-length basis, and shall
not permit any Affiliate of the Seller to advance funds to the Seller or
otherwise supply funds to, or guaranty debts of, the Seller.

                  (p) The Seller shall hold regular duly noticed meetings of its
sole member and board of directors, no less than once annually, and make and
retain minutes of such meetings.

                  (q) The Seller shall ensure that decisions with respect to its
business and daily operations



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<PAGE>

shall be independently made by the Seller (although the officer making any
particular decision may also be an officer or director of any Affiliate of the
Seller) and shall not be dictated by an Affiliate of the Seller.

                  (r) The Seller shall have bills of sale (or other similar
instruments of assignment) and, if appropriate, UCC-1 financing statements, with
respect to all assets purchased from any other Person.

                  (s) The Seller shall ensure that any financial reports
required of the Seller shall comply with GAAP and shall be issued separately
from, but may be consolidated with, any reports prepared for any of its
Affiliates and the Seller shall comply with the filing requirements under
applicable tax laws.

                  (t) The Seller shall not fail to maintain its assets in such a
manner that it will not be costly or difficult to segregate, ascertain or
identify its individual assets from those of any other Person.

                  (u) The Seller shall comply with all provisions of its
articles of organization and operating agreement and shall observe all
necessary, appropriate and customary corporate formalities.

                  SECTION 9.13. Purchase and Contribution Agreement; Purchase
and Sale Agreement; Custodial Agreement; Global Servicing Agreement. The Seller
will not amend, waive or modify any provision of the Purchase and Contribution
Agreement, Purchase and Sale Agreement or the Custodial Agreement or Section
2.13 of the Global Servicing Agreement in any respect or waive the occurrence of
any default under any such agreement, without in each case the prior written
consent of the Agent. The Seller will perform all of its obligations under the
Purchase and Sale Agreement and the Custodial Agreement in all respects and will
enforce the Purchase and Sale Agreement and the Custodial Agreement in
accordance with its terms in all respects.

                  SECTION 9.14. Nature of Business. The Seller will not engage
in any business other than as permitted under its articles of organization. The
Seller will not create or form any Subsidiary.

                  SECTION 9.15. Mergers, Etc. The Seller will not merge with or
into or consolidate with or into, or convey, transfer, lease or otherwise
dispose of (whether in one transaction or in a series of transactions), all or
substantially all of its assets (whether now owned or hereafter acquired) to, or
acquire all or substantially all of the assets or capital stock or other
ownership interest of, or enter into any joint venture or partnership agreement
with, any Person, other than as contemplated by this Agreement and the Purchase
and Sale Agreement.

                  SECTION 9.16. Distributions, Etc. The Seller will not declare
or make any dividend payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of equity interests of the Seller,
or return any equity to its shareholders as such, or purchase, retire, defease,
redeem or otherwise acquire for value or make any payment in respect of any
equity interests of the Seller or any warrants, rights or options to acquire any
such equity interests, now or hereafter outstanding.

                  SECTION 9.17. Debt. The Seller will not incur any Debt, other
than any Debt incurred pursuant to this Agreement and the other Transaction
Documents.




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<PAGE>


                  SECTION 9.18. Certificate of Incorporation and By-Laws. The
Seller will not Receivables Purchase Agreement amend or delete its Certificate
of Incorporation or its By-Laws without the prior written consent of the Agent
except to correct clerical errors.

                  SECTION 9.19. Inspections. (a) The Seller and each Servicer
Party will, at their respective expenses, during regular business hours as
requested by the Agent, upon reasonable prior notice to the Seller or such
Servicer Party, permit the Agent or its agents or representatives (including
independent public accountants, which may be the Seller's or such Servicer
Party's independent public accountants), (i) to conduct annual audits of the
Receivables, the Related Security and the related books and records and
collections systems of such Servicer Party or the Seller, (ii) to examine and
make copies of and abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession or under the
control of the Seller or such Servicer Party relating to Pool Receivables and
the Related Security, including, without limitation, the Contracts, and (iii) to
visit the offices and properties of the Parent, such Servicer Party or the
Seller for the purpose of examining such materials described in clause (ii)
above, and to discuss matters relating to Pool Receivables and the Related
Security or the Seller's or such Servicer Party's performance under the
Transaction Documents or under the Contracts with any of the officers or
employees of such Servicer Party or the Seller having knowledge of such matters;
provided, however, that, prior to occurrence of a Termination Event or Event of
Default, the Agent shall not exercise its rights in clauses (i) through (iii) of
this sentence more than once per each calendar quarter. The Agent or its agents
or representatives shall at the expense of the Seller or the Servicer and as
frequently as the Agent may desire, has the right under this Agreement after the
occurrence and during the continuance of a Termination Event, or an Event of
Default, upon reasonable prior notice to the Seller or either Servicer Party, to
examine and audit, during business hours or at such other times as might be
reasonable under applicable circumstances, any and all of the books, records, or
other information of such Servicer Party or the Seller, or held by another for
such Servicer Party or the Seller or on its behalf, concerning this Agreement
and to conduct any other activities described in clauses (ii) and (iii) above.
The Agent shall make commercially reasonable efforts to schedule the audits,
examinations and visits provided for under this Section 9.19(a) so that they
occur, to the degree reasonably feasible, concurrently with similar audits,
examinations and visits to be conducted by HomePride in connection with the
Global Servicing Agreement.

                  (b) Upon the Agent's request, the Seller will, at its expense,
utilize the Agent's representatives or auditors, to prepare and deliver to the
Agent a written report with respect to the Pool Receivables and the Credit and
Collection Policy (including, in each case, the systems, procedures and records
relating thereto) on a scope and in a form requested by the Agent.

                  SECTION 9.20. Take-Out Securitization. (a) Upon the request of
the Agent, each of the Seller and the Servicer agrees that it shall amend this
Agreement to be consistent with any documents executed by the Seller or any
Affiliate of the Seller in connection with a Take-Out Securitization or Term
Securitization to the extent any provisions included therein for the benefit of
any holders of asset backed



                                       72
<PAGE>

securities issued in connection therewith are more favorable to the terms
provided to the Investors and the Banks herein.

                  (b) The Seller shall give the Agent not less than 30 days
prior written notice of any proposed Take-Out Securitization (which notice shall
set forth the proposed date of such Take-Out Securitization); provided, that the
Seller shall promptly update any such notice if the proposed date of any
Take-Out Securitization is changed.

                  SECTION 9.21. Shadow Rating. Each of the Seller and the
Servicer shall take such actions as reasonably requested by the Agent and as
otherwise are necessary to obtain a "shadow" rating for the financing facility
provided hereunder of at least "A2" by Moody's and a credit assessment letter
from S&P stating that the credit performance of the financing facility provided
hereunder is consistent with that of at least a "A" rated obligation
(collectively, the "Minimum Shadow Rating") within 60 days after the Closing
Date (including, without limitation, modifying the calculation of Advance Rate
and Excess Concentration Amount and agreeing to amendments to the Transaction
Documents (including, without limitation, amendments of provisions with respect
to Eligible Receivables criteria) to the extent necessary to obtain such a
Minimum Shadow Rating).

                  SECTION 9.22. Intentionally Omitted.

                  SECTION 9.23. Changes in Payment Instructions to Obligors. The
Seller and Servicer Parties will not terminate the Specified Account Bank or
make any change in its instructions to Obligors regarding payments to be made to
the Seller or payments to be made to the Specified Account, unless CIT
Group/Sales is no longer the Sub-Servicer hereunder and such termination or
change has been consented to in writing by the Agent or such termination or
change is otherwise required by this Agreement.

                  SECTION 9.24. Deposits to Specified Accounts. Subject to
Section 9.23 hereof, the Seller and Servicer Parties will instruct all Obligors
to remit all their payments in respect of Receivables to the Specified Account.
If the Seller or either Servicer Party shall receive any Collections directly
from an Obligor, it shall deposit the same into the Specified Account or, if
applicable, a Lock-Box Account within one (1) Business Day of receipt. The
Seller will not deposit or otherwise credit, or cause or permit to be so
deposited or credited, to the Specified Account cash or cash proceeds other than
Collections of Receivables.

                  SECTION 9.25. Lock-Box Accounts; Lock-Box Banks. As and when
required pursuant to Section 11.03(c) hereof, the Seller and the Servicer
Parties will instruct all Obligors to remit all their payments in respect of
Receivables to one or more Lock-Box Accounts. In such case, the Seller and the
Servicer Parties (i) will not add or terminate any bank as a Lock-Box Bank or
make any change in its instructions to Obligors regarding payments to be made to
the Seller or payments to be made to any Lock-Box Account, unless the Agent
shall have approved in writing such addition, termination or change, (ii) will
not deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account cash or cash proceeds other than Collections
of Receivables and (iii) shall cause any Collections




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received from an Obligor to be deposited immediately (and in any event within
one Business Day) to a Lock-Box Account.

                                    ARTICLE X

                           GRANT OF SECURITY INTEREST

                  SECTION 10.01. Seller's Grant of Security Interest; Assignment
of Purchase and Sale Agreement. (a) As collateral security for the performance
by the Seller of all the terms, covenants and agreements on the part of the
Seller (whether as Seller or otherwise) to be performed under this Agreement or
any document delivered in connection with this Agreement in accordance with the
terms thereof, the Seller hereby assigns to the Agent for its benefit and the
ratable benefit of the Investors and the Banks and hereby grants a security
interest to the Agent for its benefit and the ratable benefit of the Investors
and the Banks in all of the Seller's right, title and interest in, to and under
(i) the Purchase and Sale Agreement, the Purchase and Contribution Agreement
(which right, title and interest in and to the Purchase and Contribution
Agreement shall be assigned to the Seller under the Purchase and Sale Agreement)
and the Global Servicing Agreement (which right, title and interest shall be
assigned to the Seller under the Purchase and Sale Agreement), including,
without limitation, (A) all property and rights assigned or pledged thereunder
and all rights of the Seller to receive monies due or to become due under or
pursuant to such agreements, whether payable as fees, costs, expenses or
otherwise, (B) all security interests and property subject thereto from time to
time purporting to secure payment of monies due or to become due under or
pursuant to such agreements, (C) all rights of the Seller to receive proceeds of
any insurance, indemnity, warranty or guaranty with respect to such agreements,
including, without limitation, the Parent Guaranty, (D) claims of the Seller for
damages arising out of or for breach of or default under such agreements
(including any breach of any representation or warranty thereunder), (E) the
rights of the Seller to amend, waive or terminate such agreements, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder (which rights shall be exerciseable by the Agent upon the occurrence
of a Termination Event), (F) all other rights, remedies, powers, privileges and
claims of the Seller under or in connection with such agreements (whether
arising pursuant to such agreements or otherwise available to the Seller at law
or in equity), including the rights of the Seller to enforce such agreements and
to give or withhold any and all consents, requests, notices, directions,
approvals, extensions or waivers under or in connection therewith, including,
without limitation, the right of the Seller to compel performance and otherwise
exercise all remedies thereunder (all of which shall be exerciseable by the
Agent upon the occurrence of a Termination Event), and (G) all monies due or to
become due and all amounts received with respect to the items listed in clauses
(A) through (F) and all proceeds (including, without limitation, whatever is
received upon the sale, exchange, collection or other disposition of the
foregoing and all "proceeds" as defined in Section 9-102 of the UCC as in effect
in the State of New York) thereof, including all Recoveries relating thereto
(collectively, the "Transferred Agreements"), (ii) all Receivables, whether now
owned and existing or hereafter acquired or arising, the Related Security with
respect thereto and the Collections and all other assets, including, without
limitation, accounts, chattel paper, instruments, payment intangibles and
general intangibles (as those terms are defined in the UCC), including undivided
interests in any of the foregoing, owned by the Seller and not otherwise
purchased under this Agreement,



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(iii) all existing and hereafter acquired or hereafter arising Pool Receivables,
together with all Related Security, Collections and proceeds with respect
thereto, (iv) each Bank Account and all cash, securities entitlements and other
financial assets as shall be deposited therein from time to time, (v) the
Interest Rate Hedges and (vi) to the extent not included in the foregoing, all
proceeds of any and all of the foregoing.

                  (b) As collateral security for the performance by the Seller
of all the terms, covenants and agreements on the part of the Seller (whether as
Seller or otherwise) to be performed under this Agreement or any document
delivered in connection with this Agreement in accordance with the terms hereof,
the Seller hereby grants to the Agent for its benefit and the ratable benefit of
the Investors and the Banks, a first priority perfected and continuing security
interest in each Bank Account and in all cash, securities entitlements and other
financial assets as shall be deposited therein from time to time.

                  SECTION 10.02. Characterization of Transaction. It is the
intention of the parties that the transactions contemplated hereby constitute
sales of Receivable Interests to the Agent, on behalf of the Banks and
Investors, as applicable, pursuant to the terms of this Agreement. Each of the
parties hereto will treat the transactions contemplated by this Agreement in a
manner consistent with the sale of such Receivable Interests in the Pool
Receivables, together with Related Security, Collections and proceeds with
respect thereto, by the Seller to the Agent on behalf of the Banks and
Investors, as applicable. Subject to the terms of this Agreement, the Seller
shall hold legal title to the Pool Receivables, together with Related Security,
Collections and proceeds with respect thereto, on behalf of and for the benefit
of the Agent (on behalf of the Investors and the Banks). Each of the parties
hereto hereby agrees to treat each purchase of interests in Receivables
hereunder (and the payment of the related Purchase Prices) as debt for income
tax purposes under the tax laws currently in effect, and as sales of such
interests for all other purposes.

                  SECTION 10.03. Seller Remains Liable. (a) Notwithstanding
anything in this Agreement, (i) the Seller shall remain liable under the Pool
Receivables, all Related Security, the Transferred Agreements and any Interest
Rate Hedges and to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (ii) the exercise by the
Agent, an Investor or a Bank of any of its rights under this Agreement shall not
release the Seller or the Servicer from any of their respective duties or
obligations under the Pool Receivables, all Related Security, the Transferred
Agreements or any Interest Rate Hedges, (iii) the Agent, the Investors, the
Banks, and the Custodian shall not have any obligation or liability under the
Pool Receivables, the Related Security, the Transferred Agreements or any
Interest Rate Hedges by reason of this Agreement, and (iv) neither the Agent,
the Custodian, the Investors or Banks shall be obligated to perform any of the
obligations or duties of the Seller or the Servicer under the Pool Receivables,
the Related Security, the Transferred Agreements or any Interest Rate Hedges or
to take any action to collect or enforce any claim for payment assigned under
this Agreement.

                  (b) The Seller shall not change its name, identity, or
corporate structure in any manner that would, could or might make any financing
statement or continuation statement filed by the Seller (or by the Agent on
behalf of the Seller) in accordance with the terms hereof seriously misleading
within the



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<PAGE>

meaning of the UCC, unless the Seller shall have given the Agent at least 60
days prior written notice thereof, and shall promptly file appropriate
amendments to all previously filed financing statements and continuation
statements. The Seller shall give the Agent at least 30 days prior written
notice of any relocation of its principal executive office if, as a result of
such relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation statement or
of any new financing statement. The Seller shall at all times maintain its
principal executive office within the United States of America.

                                   ARTICLE XI

                   ADMINISTRATION AND SERVICING OF RECEIVABLES

                  SECTION 11.01. Designation of Servicer Parties. (a) The
servicing, administration and collection of Pool Receivables shall be conducted
by the Servicer Parties so designated hereunder from time to time.

                  (b) Until the Agent gives notice to the Seller of the
designation of a Successor Servicer pursuant to the provisions of Section 13.03,
HomePride is hereby designated as, and hereby agrees to perform the duties and
obligations of, the Servicer pursuant to the terms hereof. Notwithstanding the
appointment of the Sub-Servicer pursuant to Section 11.01(c), the Servicer shall
be liable and responsible for all covenants, obligations, duties, liabilities,
responsibilities, representations and warranties of the Sub-Servicer under this
Agreement.

                  (c) The Servicer hereby appoints CIT Group/Sales as
Sub-Servicer under this Agreement and agrees that CIT Group/Sales shall perform
the covenants, obligations and duties of Sub-Servicer under this Agreement. CIT
Group/Sales hereby accepts its appointment as Sub-Servicer under this Agreement
and hereby agrees and covenants to perform all covenants, obligations and
duties, and be responsible for all liabilities, representations and warranties,
of Sub-Servicer under this Agreement. The Servicer shall have the right to
terminate the appointment of CIT Group/Sales as Sub-Servicer hereunder solely in
accordance with the terms and provisions of the Global Servicing Agreement and
with the prior written consent of the Agent, and the Agent shall have the right
to terminate the appointment of CIT Group/Sales as Sub-Servicer hereunder in
accordance with the terms and provisions of the CIT Guaranty. Upon any
termination by the Servicer of the appointment of CIT Group/Sales as
Sub-Servicer hereunder in accordance with the terms and provisions of the Global
Servicing Agreement and this Agreement, or any termination by the Agent of the
appointment of CIT Group/Sales as Sub-Servicer hereunder in accordance with the
terms and provisions of the CIT Guaranty, the Servicer may, with the prior
written consent of the Agent, (i) appoint an Eligible Sub-Servicer as
Sub-Servicer hereunder and, in such case, such Eligible Sub-Servicer so
appointed shall be responsible for all covenants, obligations, duties,
liabilities, representations and warranties, and be entitled to all rights,
benefits and privileges, of the Sub-Servicer hereunder on and after the date of
such appointment or (ii) designate that there shall no longer be a Sub-Servicer
under this Agreement and, in such case, all covenants, obligations, duties,
liabilities, representations and warranties which were theretofore covenants,
obligations, duties, liabilities, representations and warranties of the
Sub-






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<PAGE>

Servicer hereunder shall, upon such designation, become covenants, obligations,
duties, liabilities, representations and warranties of the Servicer, and all
rights, benefits and privileges which were theretofore rights, benefits and
privileges of the Sub-Servicer hereunder shall, upon such designation, become
rights, benefits and privileges of the Servicer.

                  The Agent shall have the right to terminate the appointment of
CIT Group/Sales as Sub-Servicer hereunder in connection with its designation of
a Successor Servicer pursuant to Section 13.03.

                  CIT Group/Sales hereby agrees to perform, and be responsible
for, all of its covenants, obligations, duties, liabilities, representations and
warranties hereunder in its capacity as Sub-Servicer until the effective date of
(w) the appointment of an Eligible Sub-Servicer as Sub-Servicer hereunder
pursuant to this Section 11.01(c), (x) the designation by the Servicer, pursuant
to this Section 11.01(c), that there shall no longer be a Sub-Servicer
hereunder, (y) the termination by the Agent of CIT Group/Sales appointment as
Sub-Servicer hereunder pursuant to this Section 11.01(c) and Section 13.03 and
(z) the appointment of an Eligible Sub-Servicer as Sub-Servicer hereunder
following CIT Group/Sales' resignation as Sub-Servicer pursuant to Section 12.05
hereof or Section 2.13 of the Global Servicing Agreement (the date upon which
any of the events described in the immediately-preceding clauses (w), (x), (y)
and (z) shall occur is herein referred to as "CIT Group/Sales Termination
Date"). Notwithstanding the occurrence of a CIT Group/Sales Termination Date,
CIT Group/Sales shall be responsible for all covenants, obligations, duties,
liabilities, representations and warranties made by it in its capacity as
Sub-Servicer, to be performed, or arising, made or accruing, prior to the CIT
Group/Sales Termination Date and shall be entitled to all Sub-Servicing Fees and
expense reimbursements owed to it as Sub-Servicer which shall have accrued prior
to the CIT Group/Sales Termination Date.

                  SECTION 11.02. Duties of the Servicer Parties. (a) The
Servicer is hereby authorized to act for the Seller and in such capacity shall
perform the duties of managing, servicing, administering and making collections
on the Pool Receivables, and perform the other actions required of the Servicer
under this Agreement for the benefit of the Investors and the Banks and,
pursuant to its appointment pursuant to Section 11.01(c), the Sub-Servicer is
authorized to perform certain of such duties and actions, all as set forth in
this Agreement. Each of the Servicer Parties agrees that its servicing of the
Pool Receivables shall be carried out in accordance with customary and usual
procedures of prudent institutions which service manufactured housing loans
similar to the Receivables and, to the extent more exacting, the degree of skill
and attention that such Servicer Party exercises from time to time with respect
to all comparable manufactured housing loans that it services for itself or
others in accordance with the Credit and Collection Policy and Global Servicing
Agreement as in effect from time to time; provided, however, to the extent that
the terms and provisions of this Agreement shall be in conflict with the terms
and provisions of the Credit and Collection Policy or the Global Servicing
Agreement, the terms and provisions of this Agreement shall control. The duties
of the Servicer Parties shall include, without limitation, collection and
posting of all payments, responding to inquiries of Obligors on the Pool
Receivables, investigating delinquencies, sending payment statements to
Obligors, reporting any required tax information to Obligors, monitoring the
collateral, accounting for collections and furnishing monthly servicing reports
to the Agent with respect to distributions, monitoring the status of Insurance
Policies and



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<PAGE>

performing the other duties specified herein, in each case in accordance with
the Credit and Collection Policy as in effect from time to time. The Servicer
Parties shall also administer and enforce in accordance with the Credit and
Collection Policy as in effect from time to time all rights and responsibilities
of the holder of the Pool Receivables provided for in the Insurance Policies, to
the extent that such Insurance Policies relate to the Pool Receivables, the
Manufactured Homes, the Mortgaged Properties or the Obligors. The Sub-Servicer
shall be responsible for solely those covenants, obligations, duties,
liabilities, representations and warranties in respect of the servicing and
administration of the Receivables and Related Security which, according to the
terms of this Agreement, the Sub-Servicer is responsible to perform or
undertake. However, the Servicer shall be responsible for the performance of all
covenants, obligations, duties, liabilities, representations and warranties in
respect of the servicing and administration of the Receivables and Related
Security set forth in this Agreement, notwithstanding the fact that the
Sub-Servicer shall be responsible for, and/or performing, certain of such
covenants, obligations, duties, liabilities, representations and warranties.

                  (b) To the extent consistent with the standards, policies and
procedures otherwise required hereby, each of the Servicer Parties shall follow
its customary standards, policies and procedures and shall have full power and
authority, acting alone, to do any and all things in connection with such
managing, servicing, administration and collection that it may deem necessary or
desirable. Without limiting the generality of the foregoing, each of the
Servicer Parties is hereby authorized and empowered by the Seller to execute and
deliver, on behalf of the Seller, the Investors, the Banks 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
Pool Receivables; provided, however, that notwithstanding the foregoing, such
Servicer Party shall not, except pursuant to an order from a court of competent
jurisdiction, release an Obligor from payment of any unpaid amount under any
Pool Receivable or waive the right to collect the unpaid balance of any Pool
Receivable from the Obligor (other than as permitted by the Agent and the
Seller), except that such Servicer Party may forego collection efforts if the
amount subject to collection is deminimis and if it would forego collection in
accordance with its customary procedures. Each of the Servicer Parties is hereby
authorized to commence, in its own name or in the name of the Seller, the
Investors and the Banks, a legal proceeding to enforce a Pool Receivable
pursuant to Section 11.03 or to commence or participate in any other legal
proceeding (including, without limitation, a bankruptcy proceeding) relating to
or involving a Pool Receivable or an Obligor. If such Servicer Party commences
or participates in such a legal proceeding in its own name, the Seller, the
Banks or the Investors, as the case may be, shall thereupon be deemed to have
automatically assigned such Pool Receivable to such Servicer Party solely for
purposes of commencing or participating in any such proceeding as a party or
claimant, and such Servicer Party is authorized and empowered by the Seller, the
Banks or the Investors, as the case may be, to execute and deliver in its name
any notices, demands, claims, complaints, responses, affidavits or other
documents or instruments in connection with any such proceeding. The Seller, the
Banks or the Investors, as the case may be, shall furnish each Servicer Party
with any powers of attorney and other documents which each Servicer Party may
reasonably request in writing and which such Servicer Party deems necessary or
appropriate and take any other steps which the Servicer may deem necessary or
appropriate to enable it to carry out its servicing and administrative duties
under this Agreement. The Servicer Parties shall not make the Agent, any Bank or
any Investor a party to any litigation described in this Section 11.02(b)
without the prior written consent of such Person.




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<PAGE>


                  (c) Notwithstanding any provision contained herein or in the
Global Servicing Agreement or Credit and Collection Policy to the contrary, if
the terms and provisions of the Global Servicing Agreement or the Credit and
Collection Policy shall be in conflict with the terms and provisions of this
Agreement then, to the extent of such conflict, the terms and provisions of this
Agreement shall control.

                  SECTION 11.03. Collection of Receivable Payments; Modification
and Amendment of Receivables. (a) Consistent with the standards, policies and
procedures required by this Agreement, the Sub-Servicer shall make reasonable
efforts to collect all payments called for under the terms and provisions of the
Pool Receivables as and when the same shall become due, and shall follow such
collection procedures which are comparable to those which it follows with
respect to all comparable manufactured housing loans that it services for itself
or institutional investors and otherwise act with respect to the Pool
Receivables and the Insurance Policies as required of it hereunder and in such
manner as will, in the reasonable judgment of the Sub-Servicer, maximize the
amount to be received by the Seller and the Investors with respect thereto. In
connection therewith, the Sub-Servicer shall use commercially reasonable efforts
to diligently pursue, foreclose upon, or otherwise comparably convert the
ownership of Manufactured Homes and Mortgaged Properties securing a Pool
Receivable that continues in default (including default in payment of taxes and
insurance), unless the Sub-Servicer, in its commercially reasonable judgment,
believes that such Receivable can be returned to current status within a
reasonable period of time or, solely with respect to defaults due solely to
default in payment of taxes, insurance or other amounts, unless the
Sub-Servicer, in its commercially reasonable judgment, believes it is most
appropriate, under the circumstances, and not as a general matter, not to pursue
outstanding taxes, insurance or other amounts. The Sub-Servicer is authorized,
in its sole discretion, to waive any prepayment charge, late payment charge or
any other similar fees that may be collected in the ordinary course of servicing
any Pool Receivable.

                  (b) So long as no Termination Event shall have occurred and be
continuing, the Sub-Servicer may grant payment extensions on, or other
modifications or amendments to, a Pool Receivable (including those modifications
permitted by Section 11.02) in accordance with the Credit and Collection Policy
and its customary procedures if the Sub-Servicer believes in good faith that
such extension, modification or amendment is necessary to avoid a default on
such Pool Receivable, will maximize the amount to be received by the Seller, the
Investors and the Banks with respect to such Pool Receivable, and is otherwise
in the best interests of the Seller, the Investors and the Banks; provided,
however, that the Sub-Servicer shall not amend or modify a Pool Receivable
(except as provided in Section 11.02 and this Section 11.03(b)) without the
written consent of the Agent and Servicer.

                  (c) For so long as CIT Group/Sales shall be the Sub-Servicer
hereunder, the Servicer and Sub-Servicer shall (i) instruct all Obligors to make
all payments in respect of the Receivables to the Specified Account and (ii)
deposit all Liquidation Proceeds and Insurance Proceeds in respect of the
Receivables and Related Security into the Specified Account within one (1)
Business Day of receipt thereof by the Servicer or Sub-Servicer, as the case may
be. The Sub-Servicer shall cause, by direction to the




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Specified Account Bank, all Collections deposited into the Specified Account to
be transferred to account number 161907.1 (the "Collection Account"), in the
name of Seller, at JP Morgan Chase Bank (the "Collection Account Bank"), within
two (2) Business Days of the date upon which such Collections shall be so
deposited into the Specified Account. At such time as the senior unsecured
long-term debt rating of CIT shall be first downgraded to B or lower from S&P or
B2 or lower from Moody's (or if such rating is withdrawn or cancelled by S&P or
Moody's), the Servicer and Sub-Servicer shall (I) within thirty (30) days
thereof, take all such actions as shall be necessary (i) for the Seller to enter
into one or more Lock-Box Agreements and establish one or more Lock-Box Accounts
and (ii) to instruct all Obligors to make all payments in respect of the
Receivables directly to such Lock-Box Accounts and (II) deposit all Liquidation
Proceeds and Insurance Proceeds directly into the Collection Account within one
(1) Business Day of receipt thereof by the Servicer or Sub-Servicer, as the case
may be. If CIT Group/Sales shall no longer be the Sub-Servicer hereunder, then
the Servicer shall immediately (i) take all such actions as shall be necessary
for the Seller to enter into one or more Lock-Box Agreements and establish one
or more Lock-Box Accounts, (ii) instruct all Obligors to make all payments in
respect of the Receivables directly to such Lock-Box Accounts and (iii) deposit,
and shall cause any Successor Sub-Servicer to deposit, all Liquidation Proceeds
and Insurance Proceeds directly into the Collection Account within one (1)
Business Day of receipt thereof by the Servicer or Successor Sub-Servicer, as
the case may be.

                  (d) If the Servicer has reason to believe that any
Manufactured Home or Mortgaged Property has been abandoned or that the value
thereof has been significantly impaired, then the Servicer shall use its
customary and reasonable efforts to physically inspect or visit such
Manufactured Home or Mortgaged Property. The Servicer shall use its customary
and reasonable efforts to physically inspect or visit each Manufactured Home and
Mortgaged Property which shall have become an Acquired Property.

                  (e) The Sub-Servicer shall, with respect to Manufactured Homes
and Mortgage Properties which are known by the Sub-Servicer to be abandoned or
in foreclosure, and the Servicer shall, with respect to Manufactured Homes and
Mortgaged Properties which have become Acquired Properties, take such action as
it deems necessary in its commercially reasonable judgment and not in violation
of law to protect such Manufactured Homes and Mortgaged Properties from
vandalism or damage by the elements.

                  (f) In connection with each Purchase hereunder, the Servicer
shall take all such actions as shall be necessary to (i) deliver the Receivable
Files related to such Purchase to the Custodian as required under the Custodial
Agreement and (ii) to cause the Custodian to deliver to the Agent a Trust
Receipt with respect to such Receivable Files.

                  SECTION 11.04. Realization Upon Receivables. (a) The
Sub-Servicer shall be entitled to be reimbursed by the Servicer for all
reasonable expenses incurred by the Sub-Servicer in the course of foreclosing
upon a Pool Receivable (including repossession, replevin or other related
realization upon a defaulted Contract). The Servicer shall reimburse the
Sub-Servicer for any such expenses within 30 days of receipt of a written demand
for reimbursement of such expenses or, if sooner, the date upon which the
Liquidation Proceeds in respect of such foreclosure of such Pool Receivable
shall be made



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available to the Servicer. The Servicer shall be entitled to be reimbursed out
of the Liquidation Proceeds of, or any deficiency judgment in respect of, any
Pool Receivable for (i) any reasonable expenses as to which it provided
reimbursement to the Servicer pursuant to this Section 11.04(a) with respect to
such Pool Receivable and (ii) any reasonable expenses incurred by the Servicer
in connection with the remarketing and sale of any Manufactured Home or
Mortgaged Property which became an Acquired Property.

                  (b) The deed to any Acquired Property delivered as a result of
any foreclosure or similar proceeding or deed in lieu thereof shall name the
Servicer as grantee unless the Servicer deems it necessary to foreclose or
otherwise comparably convert title to any Mortgaged Property in the name of a
party other than the Servicer, in which case, the Servicer may designate such a
party to hold title to the Acquired Property. The party designated to hold such
title shall sign a written acknowledgment that it is holding title on behalf of
the Investors and the Banks and any such acknowledgment shall be delivered to
the Custodian together with the deed to such Acquired Property.

                  (c) Upon acquisition of an Acquired Property by the Seller,
the Servicer shall prepare an Acquired Property Mortgage in form appropriate to
the state in which such Acquired Property is located and furnish such Acquired
Property Mortgage to the Custodian within ten Business Days of acquiring a deed
in respect of such Acquired Property for execution by the Seller and
recordation. The Servicer, in order to facilitate the sale of the Acquired
Property, at its option, may execute and record as agent and attorney-in-fact
for the Seller a deed granting to the Servicer a 10% interest in the Acquired
Property as a tenant-in-common, which interest shall be subject to the Acquired
Property Mortgage. As consideration for that interest, the Servicer shall convey
and hereby agrees to convey to the Seller all of its share of the proceeds of
disposition of any such Acquired Property. No other consideration shall be
payable by the Servicer to the Seller for that interest.

                  (d) Upon the acquisition of an Acquired Property, the Servicer
shall (i) deliver the deed or certificate of sale to the Custodian, (ii) advance
all taxes and standard hazard insurance premiums relating to the Acquired
Property, (iii) process any claims for redemption and otherwise comply with any
redemption procedures required by law, (iv) use its reasonable best efforts to
promptly sell or otherwise dispose of such Acquired Property at a price which in
its best judgment represents reasonable value and remit the proceeds to the
Specified Account or, as may be required hereunder, to the Collection Account
within one Business Day of receipt thereof, and (v) if, in order to sell the
property at what it reasonably determines to be the best price available, the
Servicer deems it reasonably necessary for the Servicer to provide mortgage
financing to the prospective buyer, the Servicer shall undertake, as agent for
the Seller, to apply substantially the same underwriting standards as the
Servicer applies to similar transactions originated by it for its own account.
The Servicer shall be under no obligation to provide such mortgage financing.

                  In connection with the sale of an Acquired Property, any
contract of sale or deed shall be executed by the Servicer in its individual
capacity and as agent and attorney-in-fact for the Seller. The Servicer shall
request release of the Acquired Property Mortgage by the Custodian. Immediately
upon consummation of the sale, the Servicer shall assign all of its right,
title, and interest in the new Receivable



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<PAGE>

to the Seller and the Seller shall assign all of its right, title, and interest
in the new Receivable to the Agent. The Servicer shall record the release, the
deed, the Mortgage, the assignment of the Servicer's interest to the Seller and
an assignment of the Mortgage by the Seller to the Agent immediately.

                  (e) The Servicer shall deposit all funds collected and
received in connection with the rental or sale of any Acquired Property in the
Collection Account as soon as practicable but in any event within two Business
Days of receipt thereof.

                  SECTION 11.05. Insurance and Dealer Recourse. (a) The Servicer
Parties shall monitor the status of the Insurance Policies in accordance with
their customary servicing procedures and in accordance with the terms and
provisions of this Agreement.

                  (b) (i) Except as otherwise proved in subsection (ii) of this
Section 11.05, the Sub-Servicer shall cause to be maintained with respect to
each Contract one or more 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, however, that such Insurance Policies may
provide for customary deductible amounts, and, provided, further, that the
amount of coverage provided by each 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 Insurance Policy caused to be maintained by either
Servicer Party shall contain a standard loss payee clause in favor of such
Servicer Party and its successors and assigns. If any Obligor is in default in
the payment of premiums on its 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.

                  (ii) The applicable Servicer Party may, in lieu of causing
individual Insurance Policies to be maintained with respect to each Manufactured
Home pursuant to subsection (i) of this Section 11.05, and the Servicer shall,
to the extent that the related Contract does not require the Obligor to maintain
a Insurance Policy with respect to the related Manufactured Home, maintain one
or more blanket insurance policies covering losses as provided in subsection (i)
of this Section 11.05 resulting from the absence or insufficiency of individual
Insurance Policies. Any such blanket 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 Collection
Account, on the



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Business Day next preceding the Determination Date following the Collection
Period in which the Insurance Proceeds from claims in respect to 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 Insurance
Policies maintained pursuant to subsection (i) of this Section 11.05(b).

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

Any cost incurred by the Servicer in maintaining any of the foregoing insurance,
for the purposes of calculating monthly distributions to the Investors and the
Banks, shall be not added to the amount owing under the Contract,
notwithstanding that the terms of the Contract so permit.

                  (c) The applicable Servicer Party may sue to enforce or
collect upon the Insurance Policies, in its own name, if possible, or as agent
of the Seller, the Investors and the Banks. If the applicable Servicer Party
elects to commence a legal proceeding to enforce an Insurance Policy, such
Servicer Party shall provide notice thereof and the act of commencement shall be
deemed to be an automatic assignment of the rights of the Seller, the Agent, the
Investors and the Banks under such Insurance Policy to such Servicer Party for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that such Servicer Party may not enforce an Insurance
Policy on the grounds that it is not a real party in interest or a holder
entitled to enforce the Insurance Policy, the Seller shall take such steps as
such Servicer Party deems necessary to enforce such Insurance Policy, including
bringing suit in its name. The Servicer shall deposit into the Collection
Account or, as may be required hereunder, into the Collection Account, as soon
as practicable, but in no event later than one Business Days after receipt
thereof, all Insurance Proceeds received by it.

                  (d) The Servicer shall perform all administrative
responsibilities relating to Dealers in respect of the Contracts. The Servicer
shall use diligent efforts to pursue any claims with respect to Dealer Recourse.

                  SECTION 11.06. Covenants, Representations and Warranties of
Servicer Parties. Unless otherwise indicated in this Section 11.06, each of the
Servicer Parties hereby makes the following representations, warranties and
covenants, in respect of itself, to the other parties hereto and the Investors
and the Banks shall rely in making the Purchases:

                  (a) Until the later of (x) the Facility Termination Date and
(y) the date on which no Capital Investment or Yield on any Receivable Interest
shall be outstanding or the date all Other Amounts owed hereunder to the
Investors, the Bank, or the Agent are paid in full:




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<PAGE>


                  (i) The collateral securing each Pool Receivable shall not be
released in whole or in part from the security interest granted by the related
Contract, except upon payment in full of such Pool Receivable or as otherwise
contemplated herein;

                  (ii) Such Servicer Party shall do nothing to impair the rights
of the Seller, the Investors or the Banks in the Pool Receivables or the
Insurance Policies;

                  (iii) Such Servicer Party shall not extend or otherwise amend
the terms of any Pool Receivable, except to the extent permitted by the Agent or
otherwise in accordance with Article XI;

                  (iv) Such Servicer Party shall service the Pool Receivables as
required by the terms of this Agreement and in compliance with the current
Credit and Collection Policy and such Servicer Party shall not change the manner
in which it services the Pool Receivables in any way that can have an adverse
effect on the Pool Receivables;

                  (v) Such Servicer Party shall comply with the laws of each
state in which a Pool Receivable is located, including, without limitation, all
federal and state laws regarding the collection and enforcement of consumer
debt;

                  (vi) Such Servicer Party shall give the Agent at least 30 days
prior written notice of any relocation of its principal executive office if, as
a result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement. Such Servicer Party shall at all
times maintain each office from which it services the Pool Receivables and its
principal executive office within the United States of America;

                  (vii) Such Servicer Party shall maintain its computer systems
so that, from and after the time of the first Purchase under this Agreement,
such Servicer Party's master computer records (including archives) that shall
refer to the Pool Receivables indicate clearly that Receivable Interests in such
Pool Receivables have been conveyed to, and are owned by, the Investors and the
Banks;

                  (viii) The Servicer shall take such steps as are necessary to
maintain perfection of the Seller's security interest created by each Contract
in the related Manufactured Home and any related Mortgage or Mortgaged Property.
The Servicer is hereby authorized to take such steps as are necessary to
re-perfect such security interest in the event of the relocation of a
Manufactured Home or for any other reason. Servicer shall, at the request of the
Agent, deliver to the Custodian a power of attorney authorizing the Custodian
to, among other things, record, at the expense of Seller, assignments of
Mortgages securing Land and Home Contracts, if directed to do so by the Agent
after the failure of the Servicer to take such action. The representations,
warranties and covenants set forth in this clause (viii) are made solely by the
Servicer;





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<PAGE>

                  (ix) If an Incipient Termination Event or Termination Event
has occurred, such Servicer Party shall, immediately upon the written direction
of the Agent, (i) direct all Obligors to make payments to such account as
directed by the Agent and (ii) take all actions necessary to name the Agent or
such other Person designated by the Agent as the loss payee under the Insurance
Policies relating to the Pool Receivables;

                  (x) Such Servicer Party will not make any change in the Credit
and Collection Policy that would impair the collectibility of any portion of the
Pool Receivables, other than an inconsequential portion thereof, or the ability
of such Servicer Party to perform its obligations under this Agreement. In the
event that such Servicer Party makes any change to the Credit and Collection
Policy, other than a change that would impair the collectibility of only an
inconsequential portion of the Pool Receivables it shall, contemporaneously with
such change, provide the Agent with an updated Credit and Collection Policy and
a summary of all changes;

                  (xi) The Sub-Servicer shall furnish, or cause to be furnished,
to the Agent:

                                    (1) as soon as available and in any event
                         within 120 days after the end of each fiscal year of
                         CIT, a copy of the audited consolidated financial
                         statements for such year of CIT and its consolidated
                         Subsidiaries, certified by independent accountants of
                         nationally recognized standing; and

                                    (2) as soon as available and in any event
                         within 60 days after the end of each of the first three
                         quarters of each fiscal year of the CIT, a consolidated
                         balance sheet of CIT and its consolidated Subsidiaries
                         as of the end of such quarter and including the prior
                         comparable period, and consolidated statements of
                         income of CIT and its consolidated Subsidiaries for
                         such quarter and for the period commencing at the end
                         of the previous fiscal year and ending with the end of
                         such quarter prepared in accordance with GAAP, such
                         balance sheet and statements of income to be certified
                         by the chief financial officer or chief accounting
                         officer of CIT identifying such balance sheets or
                         statements as being the balance sheets or statements
                         described in this paragraph (2) and stating that the
                         information set forth therein fairly presents the
                         financial condition of CIT and its consolidated
                         Subsidiaries as of and for the periods then ended,
                         subject to year-end adjustments consisting only of
                         normal, recurring accruals and subject to the auditors'
                         year end report.

                  The requirements of clauses (1) and (2) of this Section
                  11.06(a)(xi) may be satisfied by delivery, within the time
                  periods required by such clauses, of the Form 10-K and Form
                  10-Q filed by CIT with the Securities and Exchange Commission
                  and containing the applicable financial statements.

                  (xii) Such Servicer Party hereby agrees that the Agent shall
be a third-party beneficiary of the terms and provisions of Section 2.13 of the
Global Servicing Agreement and hereby agrees that the



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Agent shall have the right to enforce the terms and provisions of such Section
2.13 as if it were a party to the Global Servicing Agreement. Such Servicer
Party will not amend, supplement or terminate Section 2.13 of the Global
Servicing Agreement (as in effect on the date hereof) without the prior written
consent of the Agent; and

                  (xiii) Such Servicer Party will provide the Agent with a copy
of any notice, demand or request it shall provide or make pursuant to Section
2.13 of the Global Servicing Agreement (as in effect on the date hereof).

                  (b) Unless otherwise indicated below, each of the Servicer
Parties represents and warrants, in respect of itself, to the Seller, the Agent,
the Investors and the Banks that:

                  (i) Such Servicer Party is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and is duly qualified to do business, and is in good standing, in
every jurisdiction where the nature of its business requires it to be so
qualified. Such Servicer Party has full corporate power and authority to execute
and deliver this Agreement and the Transaction Documents to which it is a party
and to carry out its terms and their terms, respectively;

                  (ii) The execution, delivery and performance by such Servicer
Party of the Transaction Documents to which it is a party and the other
documents to be delivered by it hereunder, (i) have been duly authorized by all
necessary corporate action, (ii) do not contravene (1) such Servicer Party's
charter or by-laws, (2) any law, rule or regulation applicable to such Servicer
Party, (3) any contractual restriction binding on or affecting such Servicer
Party or its property or (4) any order, writ, judgment, award, injunction or
decree binding on or affecting such Servicer Party or its property, and (iii) do
not result in or require the creation of any lien, security interest or other
charge or encumbrance upon or with respect to any of its properties (except for
the interest created pursuant to this Agreement). Each of the Transaction
Documents as to which such Servicer Party is a party has been duly executed and
delivered by such Servicer Party;

                  (iii) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by such Servicer Party
of the Transaction Documents or any other document to be delivered by it
thereunder;

                  (iv) This Agreement and the Transaction Documents to which it
is a party shall constitute legal, valid and binding obligations of such
Servicer Party enforceable against such Servicer Party in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the availability of
specific remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law;

                  (v) There are no pending or, to such Servicer Party's
knowledge, threatened action or proceeding against such Servicer Party, before
any court, governmental agency or arbitrator (A) asserting



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the invalidity of this Agreement or any of the Transaction Documents, (B)
seeking to prevent the consummation of any of the transactions contemplated by
this Agreement or any of the Transaction Documents, (C) seeking any
determination or ruling that might adversely affect the performance by such
Servicer Party of its obligations under, or the validity or enforceability of,
this Agreement or any of the Transaction Documents, or (D) that would have a
material adverse effect on the Pool Receivables;

                  (vi) The balance sheets of the Parent and its Subsidiaries as
at December 29, 2001, and the related statements of income of the Parent and its
Subsidiaries for the fiscal year ended December 29, 2001, copies of which have
been furnished to the Agent, fairly present the financial condition of the
Parent and its Subsidiaries as at such date and the results of the operations of
the Parent and its Subsidiaries for the period ended on such date, all in
accordance with GAAP consistently applied, and since December 29, 2001 there has
been no material adverse change in the business, operations, property or
financial or other condition of the Parent. The representations and warranties
set forth in this clause (vi) are made solely by the Servicer; and

                  (vii) There is no pending or threatened action or proceeding
affecting the Parent or any of its Subsidiaries before any court, governmental
agency or arbitrator which, if adversely determined, would adversely affect the
financial condition or operations of the Parent and Subsidiaries taken as a
whole or the ability of the Parent, the Servicer or the Seller to perform their
respective obligations under the Transaction Documents, or which purports to
affect the legality, validity or enforceability of the Transaction Documents;
neither the Parent nor any Subsidiary is in default with respect to any order of
any court, arbitration or governmental body except for defaults with respect to
orders of governmental agencies which defaults are not material to the business
or operations of the Parent and its Subsidiaries, taken as a whole. The
representations and warranties set forth in this clause (vii) are made solely by
the Servicer.

                  Notwithstanding anything to the contrary contained in this
Section 11.06, all representations, warranties and covenants made by
Sub-Servicer in subsections (a) and (b) of this Section 11.06 in respect of
itself shall also be deemed to be made by Servicer, and Servicer shall be
responsible and liable, in accordance with the terms and provisions of this
Agreement and applicable law, for any breach of any of such representations,
warranties and covenants by Sub-Servicer. The Sub-Servicer shall not be
responsible or liable for any representations, warranties or covenants made in
this Agreement by any party to this Agreement, except for those representations,
warranties and covenants made in this Agreement by the Sub-Servicer.

                  SECTION 11.07. Servicing and Sub-Servicing Fee; Payment of
Certain Expenses by Servicer and Sub-Servicer. (a) Subject to, and in accordance
with, Section 5.02, on each Distribution Date, the Servicer shall be entitled to
receive out of the Collection Account a fee (the "Servicing Fee"), in respect of
the immediately-preceding Collection Period, equal to the product of (A)
one-twelfth (1/12) of 0.10 % per annum and (B) the average daily Aggregate
Outstanding Balance of All Receivables in the Receivables Pool during such
Collection Period. The Servicing Fee shall be due from the date of purchase of
any Receivable Interest hereunder until the later of the Termination Date for
such Receivable Interest or the date on which the Capital Investment is reduced
to zero. Upon receipt of the prior written consent to



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the Agent, the Servicer (if not HomePride, the Seller or its designee or an
Affiliate of HomePride or the Seller) may elect to be paid, a Servicing Fee
calculated at a different percentage per annum on the average daily Aggregate
Outstanding Balance of All Receivables in the Receivables Pool, but in no event
in excess of 110% of the reasonable costs and expenses of the Servicer in
performing its duties and obligations hereunder with respect to the
administration and collection of the Receivables in the Receivables Pool. The
Servicing Fee shall be payable only from Collections pursuant to, and subject to
the priority of payments set forth in, Section 5.02. So long as HomePride is
acting as the Servicer hereunder, amounts paid as the Servicing Fee pursuant to
this Section 11.07(a) shall reduce, on a dollar-for-dollar basis, the
obligation of HomePride SPV to pay the "Servicing Fee" pursuant to Section 6.03
of the Purchase and Contribution Agreement, provided that such obligation of
HomePride SPV shall in no event be reduced below zero.

                  (b) Subject to, and in accordance with, Section 5.02, on each
Distribution Date, the Sub-Servicer shall be entitled to receive out of the
Collection Account a fee (the "Sub-Servicing Fee"), in respect of the
immediately preceding Collection Period, equal to the product of (A) one twelfth
(1/12) of 1.00% per annum and (B) the average daily Aggregate Outstanding
Balance of All Receivables in the Receivables Pool during such Collection
Period. The Sub-Servicing Fee shall be due from the date of purchase of any
Receivable Interest hereunder until the later of the Termination Date for such
Receivable Interest or the date on which the Capital Investment is reduced to
zero. Upon receipt of the prior written consent of the Agent, the Sub-Servicer
(if not CIT Group/Sales, an Affiliate of CIT Group/Sales, the Seller, or a
designee or Affiliate of the Seller, or an Affiliate of HomePride) may elect to
be paid, a Sub-Servicing Fee calculated at a different percentage per annum as
the daily average Aggregate Outstanding Balance of all Receivables in the
Receivables Pool, but in no event in excess of 110% of the reasonable costs and
expenses of Sub-Servicer in performing its duties and obligations hereunder
with respect to the administration and collection of the Receivables in the
Receivable Pool. The Sub-Servicing Fee shall be payable only from Collections
pursuant to, and subject to the priority of payments set forth in, Section 5.02.

                  (c) Except as otherwise provided herein, each Servicer Party
shall be required to pay all expenses incurred by it in connection with its
servicing and custodial activities under this Agreement (including taxes imposed
on such Servicer Party). Each Servicer Party shall be liable for the fees and
expenses of the Independent Accountants retained by it pursuant to Section
11.10.

                  SECTION 11.08. Servicer's Certificate. (a) On each
Determination Date, the Servicer shall deliver to the Seller and the Agent a
Servicer's Certificate executed by a Responsible Officer of the Servicer. Pool
Receivables purchased by the Servicer and each Pool Receivable which became a
Liquidated Receivable or which was paid in full during the related Collection
Period shall be identified by account number (as set forth in the Schedule of
Receivables attached thereto).

                  (b) In addition to the information required by Section 11.09,
the Servicer shall include in the copy of the Servicer's Certificate delivered
to the Seller and the Agent a certification as to (i) whether any Termination
Event or Incipient Termination Event has occurred as of such Determination Date
and (ii) whether any Termination Event or Incipient Termination Event that may
have occurred as of a prior Determination Date is deemed cured as of such
Determination Date.




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<PAGE>

                  SECTION 11.09. Annual Statement as to Compliance; Notice of
Servicer Termination Event. (a) Each Servicer Party shall deliver to the Seller
and the Agent, on or before March 31st of each calendar year, beginning on the
first March 31st next following the Closing Date, an Officer's Certificate for
such Servicer Party, dated as of March 31st of such year, stating that (i) a
review of the activities of such Servicer Party during the preceding calendar
year (or such portion thereof as shall have elapsed from the Closing Date to the
end of such calendar year) and of its performance under this Agreement has been
made under such officer's supervision, and (ii) to such officer's knowledge,
based on such review, such Servicer Party has fulfilled in all material respects
all its obligations under this Agreement throughout such period, or, if there
has been a material default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof.

                  (b) Each Servicer Party shall deliver to the Seller and the
Agent, promptly after having obtained knowledge thereof, but in no event later
than two Business Days thereafter, written notice in an Officer's Certificate of
such Servicer Party of any event which with the giving of notice or lapse of
time, or both, would become a Servicer Termination Event under Section 13.01.

                  SECTION 11.10. Annual Independent Accountant's Report. (a)
Each Servicer Party shall, at its expense, cause a firm of nationally recognized
independent certified public accountants acceptable to the Agent (the
"Independent Accountants"), who may also render other services to such Servicer
Party or to the Seller, to deliver to the Seller and the Agent, on or before
March 31st of each calendar year, beginning on the first March 31st (or other
applicable date) after the Closing Date, with respect to the preceding calendar
year (or such other period as shall have elapsed from the Closing Date to the
end of such calendar year), a statement (the "Accountant's Report") to the Agent
to the effect that (i) such firm has audited the financial statements of such
Servicer Party for such Servicer Party's most recently ended calendar year and
issued its report thereon; (ii) such audit included tests of the records and
documents relating to the manufactured housing installment sale contracts and
mortgage loans serviced by such Servicer Party for others in accordance with the
requirements of the Uniform Single Attestation Program for Mortgage Bankers, or
any successor program promulgated by the accounting profession ("USAP"); and
(iii) such other statements as are contemplated under USAP, including, if called
for under USAP, a statement as to whether such Servicer Party's management's
written assertion to such firm (which shall be attached to the statement of such
firm) that its servicing during such calendar year substantially complied with
USAP's minimum servicing standards (except in a manner as such firm believes to
be immaterial and for other exceptions that, in the opinion of such firm, GAAP
standards require it to report).

                  (b) The Accountants' Report shall indicate that the firm
preparing such Report is independent of such Servicer Party and the Seller
within the meaning of the Code of Professional Ethics of the American Institute
of Certified Public Accountants.

                  SECTION 11.11. Access to Certain Documentation and Information
Regarding Receivables. Each Servicer Party shall provide to representatives of
the Seller and the Agent reasonable access to the documentation regarding the
Pool Receivables. Nothing in this Section 11.11 shall derogate





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<PAGE>

from the obligation of such Servicer Party to observe any applicable law
prohibiting disclosure of information regarding the Obligors or any other
matters, and the failure of such Servicer Party to provide access as provided in
this Section 11.11, as a result of such obligation, shall not constitute a
breach of this Section 11.11.

                  SECTION 11.12. Fidelity Bond. The Servicer shall maintain a
fidelity bond (or other comparable coverage) insuring against wrongful actions
of employees involved in servicing the Pool Receivables in an amount not less
than $5,000,000 and an "errors and omissions" insurance policy in an amount of
not less than $5,000,000.

                  SECTION 11.13. Insurance. The Servicer shall maintain
customary amounts and types of insurance coverage for a corporation engaged in
similar business and having a similar net worth.

                  SECTION 11.14. Accounts. (a) As and when required under the
terms of this Agreement, the Servicer Parties shall establish the Lock-Box
Account in the name of the Seller for the benefit of the Agent for the purpose
of receiving Collections and other amounts to be paid hereunder. The Lock-Box
Account shall be an Eligible Account and shall be a segregated trust or
custodial account established and maintained with the Lock-Box Bank.

                  (b) The Servicer shall establish the Collection Account in the
name of the Seller for the benefit of the Agent for the purpose of receiving
Collections from the Specified Amount and Lock-Box Account. The Collection
Account shall be an Eligible Account and initially shall be a segregated
non-interest bearing trust or custodial account established and maintained with
the Collection Account Bank.

                  (c) The Servicer shall establish the Reserve Account in the
name of the Seller for the benefit of the Agent for the purpose of holding the
Required Reserve Account Amount. The Reserve Account shall be an Eligible
Account and initially shall be a segregated non-interest bearing trust or
custodial account established and maintained with the Collection Account Bank.

                  (d) The Servicer shall establish the Excess Collections
Account in the name of the Seller for the benefit of the Agent. The Excess
Collections Account shall be an Eligible Account and initially shall be a
segregated non-interest bearing trust or custodial account established and
maintained with the Collection Account Bank.

                  (e) All or a portion of the amounts on deposit in the
Collection Account, the Reserve Account, the Lock-Box Accounts and the Excess
Collections Account shall be invested and reinvested by the Agent by written
direction to the Collection Account Bank or the Lock-Box Bank, as the case may
be, in one or more Permitted Investments bearing interest or sold at discount.
No such investment shall mature later than One Business Day prior to the next
Distribution Date. All income or other gains from investment of moneys deposited
in the Collection Account, the Reserve Account, the Lock-Box Account and the
Excess Collections Account shall be deposited by the Agent in the Collection
Account immediately upon receipt, and any loss resulting from such investment
shall be deducted from the amount on deposit



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<PAGE>

in the applicable account. If any amounts are needed for disbursement from the
Collection Account, the Excess Collections Account, the Lock-Box Accounts or the
Reserve Account and sufficient uninvested funds are not available therein to
make such disbursement, the Agent shall cause to be sold or otherwise converted
to cash a sufficient amount of the investments in such Account to make such
disbursement. The Collection Account Bank shall have no obligation to invest and
reinvest any cash held in the absence of timely and specific written investment
direction from the Agent (including any written standing investment direction).
In no event shall the Collection Account Bank be liable for the Agent's
selection of investments or for investment losses incurred thereon. The
Collection Account Bank shall have no liability in respect of losses incurred as
a result of the liquidation of any investment prior to its stated maturity or
the failure of the Agent to provide timely written investment direction.

                  (f) If at any time the Collection Account, the Excess
Collections Account, the Lock-Box Accounts or the Reserve Account ceases to be
an Eligible Account, the Agent shall transfer such account to another
institution such that such account shall meet the requirements of an Eligible
Account.

                  (g) None of the Seller, Servicer or Sub-Servicer shall create,
incur, assume or suffer to exist any Lien (other than a Lien contemplated under
this Agreement) upon the Lock-Box Account, Collection Account, Reserve Account
or Excess Collections Account; provided, that, with the written consent of the
Agent, a Lien may be placed upon the Lock-Box Account so long as the Agent is
also granted a Lien thereon pursuant to an intercreditor arrangement
satisfactory to the Agent. Any breach of this Section 11.14(g) shall constitute
an immediate Event of Default hereunder.

                                   ARTICLE XII

                                  THE SERVICER

                  SECTION 12.01. Liability of Servicer Parties; Indemnities. (a)
Without limiting any other rights that the Agent, the Collection Account Bank,
any Investor, any Bank or any of their respective Affiliates (each, a "Special
Indemnified Party") may have hereunder or under applicable law, and in
consideration of its appointment as a Servicer Party hereunder, such Servicer
Party, except to the extent otherwise indicated below, hereby agrees to
indemnify each Special Indemnified Party from and against any and all claims,
losses and liabilities (including reasonable attorneys' fees) (all of the
foregoing being collectively referred to as "Special Indemnified Amounts")
arising out of, or resulting from, any of the following (excluding, however, (a)
Special Indemnified Amounts to the extent found in a final non-appealable
judgment of a court of competent jurisdiction to have resulted from gross
negligence or willful misconduct on the part of such Special Indemnified Party,
(b) recourse for uncollectible Receivables or (c) any income taxes or any other
tax or fee measured by income incurred by such Special Indemnified Party arising
out of or as a result of this Agreement or the ownership of Receivable Interests
or in respect of any Receivable or any Contract):

                  (i) any representation made or deemed made by such Servicer
Party under or in connection with this Agreement which shall have been incorrect
in any material respect when made;





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<PAGE>

                  (ii) the failure by such Servicer Party to comply with any
applicable law, rule or regulation with respect to any Pool Receivable or
Contract;

                  (iii) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to any
Receivables in, or purporting to be in, the Receivables Pool, the Contracts and
the Related Security and Collections in respect thereof, whether at the time of
any purchase or reinvestment or at any subsequent time; or the failure of any
Pool Receivable or Contract to conform to any applicable law, rule or regulation
with respect to such Pool Receivable or Contract; provided, however, that solely
the Servicer shall be required to indemnify each Special Indemnified Party from
and against Special Indemnified Amounts arising out of, or resulting from, any
failure described in this clause (iii);

                  (iv) any failure of such Servicer Party to perform its duties
or obligations in accordance with the provisions of this Agreement;

                  (v) the commingling of Collections of Pool Receivables at any
time by such Servicer Party with other funds;

                  (vi) any action or omission by such Servicer Party reducing or
impairing the rights of the Investors or the Banks with respect to any Pool
Receivable or the value of any Pool Receivable;

                  (vii) with respect to the Servicer only, any Servicing Fees,
or other costs and expenses, payable to any replacement or Substitute Servicer
in excess of the Servicing Fee payable to the Servicer, but only in the event
that the Servicer is terminated pursuant to Article VIII hereof or resigned in
violation of Section 12.05 hereof; or

                  (viii) with respect to the Sub-Servicer only, any
Sub-Servicing Fees, or other costs and expenses, payable to any replacement or
Substitute Sub-Servicer in excess of the Sub-Servicing Fee payable to the
Sub-Servicer, but only in the event that the Sub-Servicer is terminated pursuant
to Article VIII hereof or resigns in violation of Section 12.05 hereof; or

                  (ix) any claim brought by any Person other than a Special
Indemnified Party arising from any activity by such Servicer Party or its
Affiliates in servicing, administering or collecting any Receivable.

                  Notwithstanding anything to the contrary contained in this
Section 12.01, the Servicer shall be liable and responsible for all Special
Indemnified Amounts which shall be owed by the Sub-Servicer to any Special
Indemnified Party pursuant to the terms and provisions of this Section 12.01.

                  SECTION 12.02. Consolidations, Mergers and Sales of Assets.
Each Servicer Party shall not merge or consolidate with any other corporation or
accept a merger of any other corporation into such Servicer Party or permit the
Servicer Party to be merged into any other corporation, or sell its




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properties and assets as, or substantially as, an entirety; provided, however,
that nothing contained in this Agreement shall be deemed to prevent (i) the
merger into a Servicer Party of another corporation, (ii) the consolidation of a
Servicer Party and another corporation, (iii) the merger a Servicer Party into
another corporation, (iv) the sale of the property or assets of a Servicer Party
to another corporation, so long as (a) no Termination Event, Incipient
Termination Event or Event of Default shall have occurred and be continuing, (b)
any such action shall be with a corporation engaged solely in the same line of
business as such Servicer Party, or in a reasonably related business, (c) after
the merger, consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity shall be an Eligible Servicer or Eligible
Sub-Servicer, as applicable, and shall be capable of fulfilling the duties of
such Servicer Party contained in this Agreement, (d) with respect to clauses
(ii), (iii) and (iv) above, the surviving corporation of the merger or the
purchaser of the assets of such Servicer Party as the case may be, shall
expressly assume the obligations of such Servicer Party under this Agreement and
the other relevant Transaction Documents and expressly agree to be bound by all
other provisions applicable to such Servicer Party under this Agreement or such
other relevant Transaction Document and (e) in the case of any such transaction
proposed by the Servicer (except to the extent CIT Group/Sales shall be the
Servicer hereunder), the Servicer shall have received the prior written consent
of the Agent thereof.

                  SECTION 12.03. Limitation on Liability of Servicer Parties and
Others. Each Servicer Party and its respective directors, officers, employees
and agents of the Servicer shall not be under any liability to the Seller, the
Investors, the Banks, the Agent or the Custodian, except as provided in this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement; provided, however, that this provision shall not
protect such Servicer Party or any such person against any liability that would
otherwise be imposed by reason of a breach of this Agreement or willful
misfeasance, bad faith or negligence in the performance of its duties. Each
Servicer Party and any director, officer, employee or agent of such Servicer
Party may rely in good faith on the written advice of counsel or on any document
of any kind prima facie properly executed and submitted by any Person respecting
any matters arising under this Agreement.

                  SECTION 12.04. Delegation of Duties. (a) So long as HomePride
is the Servicer, the Servicer may delegate duties under this Agreement to an
Affiliate of HomePride without the prior written consent of the Agent or perform
other specific duties through such sub- contractors in accordance with its
customary servicing policies and procedures without the prior consent of the
Agent; provided, however, that no such delegation or subcontracting of duties by
the Servicer shall relieve the Servicer of its responsibility with respect to
such duties. Notwithstanding the foregoing, neither HomePride nor any other
party acting as Servicer hereunder shall delegate all or substantially all of
its duties hereunder without the prior written consent of the Agent.

                  (b) So long as CIT Group/Sales is the Sub-Servicer, the
Sub-Servicer may delegate duties under this Agreement to CIT or to an Affiliate
of CIT without the prior written consent of the Agent or perform other specific
duties through such sub-contractors in accordance with its customary servicing
policies and procedures without the prior consent of the Agent; provided,
however, that no such delegation or subcontracting of duties by the Sub-Servicer
shall relieve the Sub-Servicer of its responsibility with





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respect to such duties. Notwithstanding the foregoing, neither CIT Group/Sales
nor any other party acting as Sub-Servicer hereunder shall delegate all or
substantially all of its duties hereunder without the prior written consent of
the Agent.

                  SECTION 12.05. Servicer Parties Not to Resign. Subject to the
provisions of Section 12.02, neither Servicer Party shall resign from the
obligations and duties imposed on it by this Agreement as Servicer or
Sub-Servicer, as the case may be, except upon a determination that by reason of
a change in legal requirements the performance of its duties under this
Agreement would cause it to be in violation of such legal requirements in a
manner which would result in a material adverse effect on such Servicer Party,
and the Agent does not elect to waive the obligations of such Servicer Party to
perform the duties which render it legally unable to act or to delegate those
duties to another Person. Any such determination permitting the resignation of
such Servicer Party shall be evidenced by an Opinion of Counsel to such effect
delivered to the Agent. No resignation of such Servicer Party shall become
effective until an entity acceptable to the Agent shall have assumed the
responsibilities and obligations of such Servicer Party; provided, however, that
in the event a successor is not appointed within 60 days after such Servicer
Party has given notice of its resignation as permitted by this Section 12.05,
such Servicer Party may petition a court for its removal.

                                  ARTICLE XIII

                           SERVICER TERMINATION EVENTS

                  SECTION 13.01. Servicer Termination Event. For purposes of
this Agreement, each of the following shall constitute a "Servicer Termination
Event":

                  (a) Any failure by either Servicer Party or, so long as
HomePride or an Affiliate of HomePride is the Servicer, the Seller to make when
due any payment or deposit to be made by it under this Agreement, and such
failure shall remain unremedied for two (2) Business Days;

                  (b) Failure by the Servicer to deliver the Servicer's
Certificate required on each Determination Date, and such failure shall remain
unremedied for two (2) Business Days;

                  (c) Default on the part of either Servicer Party duly to
observe or perform any other term, covenant or agreement of such Servicer Party
set forth in this Agreement (and, as to HomePride, if HomePride is the Servicer,
the Purchase and Contribution Agreement or the Purchase and Sale Agreement), and
such default shall result in a Material Adverse Effect in respect of such
Servicer Party and shall remain unremedied for a fifteen (15)-day period
following notice thereof by the Agent or the other Servicer Party; provided,
however, that if such default is of a nature such that it cannot be remedied
within such fifteen (15)-day period and such Servicer Party is making diligent
efforts to remedy such default, then such default shall not constitute a
Servicer Termination Event unless it shall remain unremedied for a thirty
(30)-day period following such notice thereof; provided further, however, that
no such notice shall be required if the applicable Servicer Party shall have
knowledge (or should have knowledge, as a prudent





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servicer) of such default and such time periods shall be determined without
regard to the giving of such notice.

                  (d) The occurrence of an Event of Bankruptcy with respect to
either Servicer Party;

                  (e) Any representation, warranty or statement of either
Servicer Party made in this Agreement or any certificate, report or other
writing delivered by it pursuant hereto (or any of its officers) shall prove to
be incorrect or untrue as of the time when the same shall have been made or
deemed to have been made or delivered and, as a result thereof, a Material
Adverse Effect shall occur with respect to such Servicer Party;

                  (f) Failure by the Parent or any of its Subsidiaries to pay
when due amounts due under any agreement to which any such Person is a party and
under which any Debt greater than $5,000,000 is governed; or the default by the
Parent or any of its Subsidiaries in the performance of any term, provision or
condition contained in any agreement or instrument under which any Debt greater
than $5,000,000 was created or is governed; or any Debt of the Parent or any of
its Subsidiaries greater than $5,000,000 shall be declared to be due and payable
or required to be prepaid (other than by a regularly scheduled payment),
redeemed, purchased or defeased or an offer to repay, redeem, purchase or
defease such Debt shall be required to be made, in each case, prior to the date
of maturity thereof;

                  (g) HomePride shall have been replaced as "servicer" in
connection with any Term Securitization undertaken by HomePride;

                  (h) There shall have occurred any material adverse change in
the operations of either Servicer Party since the end of the last fiscal year of
such Servicer Party ending prior to the date of its appointment as a Servicer
Party hereunder or any other event shall have occurred which materially and
adversely affects such Servicer Party's ability to either collect the
Receivables or to perform under this Agreement;

                  (i) The occurrence of a Termination Event described under
Section 14.01(k) or 14.01(l);

                  (j) A default shall occur under the, Parent Guaranty, CIT
Guaranty or Section 2.13 of the Global Servicing Agreement or the Parent
Guaranty, CIT Guaranty or Section 2.13 of the Global Servicing Agreement, or any
material portion of any of the foregoing, shall not be in full force and effect
or enforceable in accordance with its respective terms; or

                  (k) The occurrence of an Event of Default.

                  SECTION 13.02. Consequences of a Servicer Termination Event.
(a) If a Servicer Termination Event shall occur and be continuing, the Agent, by
written notice given to the Servicer Parties, may terminate all of the rights
and obligations of the Servicer Parties under this Agreement; provided,




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<PAGE>

however, that notwithstanding such termination, the Servicer and Sub-Servicer
shall be entitled to receive all accrued (through the occurrence of the Servicer
Termination Event) and unpaid Servicing Fees and Sub-Servicing Fees,
respectively, and all expense reimbursements owed to the Servicer and
Sub-Servicer, respectively, pursuant to the terms of this Agreement. On or after
the receipt by the Servicer Parties of such written notice, all authority,
power, obligations and responsibilities of the Servicer Parties under this
Agreement automatically shall pass to, be vested in and become obligations and
responsibilities of the Person appointed as Successor Servicer pursuant to
Section 13.03.

                  Notwithstanding any provision of this Agreement to the
contrary, if a Servicer Termination Event shall occur solely due to a failure,
breach, action, inaction, event or circumstance by, or related to, the
Sub-Servicer (a "Limited Servicer Termination Event"), then the Servicer shall
have (i) a period of thirty (30) days from the occurrence of such Limited
Servicer Termination Event to identify a replacement for such Sub-Servicer,
which replacement shall be an Eligible Sub-Servicer (a "Successor Sub-Servicer")
and (ii) an additional period of time, commencing on the date of the date of the
identification of such Successor Sub-Servicer and ending on the sixtieth (60th)
day following the occurrence of such Limited Servicer Termination Event, to
cause such Successor Sub-Servicer to assume all obligations, duties and
liabilities of the Sub-Servicer hereunder. If the Servicer shall so identify a
Successor Sub-Servicer and cause such Successor Sub-Servicer to assume all
obligations, duties and liabilities of the Sub-Servicer hereunder in the time
periods set forth in the immediately-preceding sentence (a "Sub-Servicer
Replacement Event"), then such Limited Servicer Termination Event shall not
constitute a Servicer Termination Event hereunder. The Sub-Servicer agrees that
it shall continue to perform, in all material respects, all of the obligations
and duties of Sub-Servicer hereunder during the period commencing on the date of
occurrence of such Limited Servicer Termination Event and ending on the date of
occurrence of such Sub-Servicer Replacement Event.

                  Any Successor Sub-Servicer shall be entitled to such
compensation (whether payable out of the Collection Account or otherwise) as the
Sub-Servicer would have been entitled to under this Agreement if the
Sub-Servicer had not resigned or been terminated hereunder. If any Successor
Sub-Servicer is appointed for any reason, additional compensation may be paid to
such Successor Sub-Servicer as approved by the Agent. The Successor Sub-Servicer
appointed hereunder is authorized and empowered by this Agreement to execute and
deliver, on behalf of the prior Sub-Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments and to do or accomplish all other
acts or things necessary or appropriate to effect its succession as Successor
Sub-Servicer hereunder, including, without limitation, completing the transfer
and endorsement of the Pool Receivables in accordance with the terms hereof or
otherwise. The prior Sub-Servicer agrees to continue to perform the obligations
and duties of Sub-Servicer hereunder until the Successor Sub-Servicer shall
have assumed such obligations and duties, and also agrees to cooperate with the
Successor Sub-Servicer in effecting the termination of the responsibilities and
rights of the prior Sub-Servicer under this Agreement, including, without
limitation and at the prior Sub-Servicer's expense, the transfer to the
Successor Sub-Servicer, for administration by it, of all cash amounts that shall
at the time be held by the prior Sub-Servicer for deposit, or have been
deposited by the prior Sub-Servicer, in the Collection Account or thereafter
received with respect to the Pool Receivables and the delivery to the Custodian
or Successor Sub-Servicer, as designated by the






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<PAGE>

Servicer or Agent, of all Receivable Files, and all files and records relating
to the Pool Receivables and a Computer Tape containing all information necessary
to enable the Successor Sub-Servicer to service the Pool Receivables. The
terminated Sub-Servicer shall grant the Agent and any Successor Sub-Servicer
access to the terminated Sub-Servicer's premises at the terminated
Sub-Servicer's expense.

                  (b) Upon the occurrence of a Servicer Termination Event, each
Servicer Party shall, if so requested by the Agent, deliver to any Successor
Servicer all files and records relating to the Pool Receivables in its
possession within five (5) Business Days after demand therefor and a Computer
Tape or diskette containing as of the close of business on the date of demand
all of the data maintained by such prior Servicer Party in computer format in
connection with servicing the Pool Receivables.

                  (c) Within two Business Days of written demand by the Agent
following the occurrence of a Servicer Termination Event or a Termination Event,
the Servicer shall cause, or shall cause the Seller to cause delivery to the
Agent of (x) as to each Contract, other than a Land and Home Contract, the
assignment of the Contract (which may be in a blanket form that also covers
other Contracts or contracts) from HomePride to HomePride SPV and, in turn, from
HomePride SPV to Seller and, further in turn, from Seller to the Agent and (y)
as to each Land and Home Contract and Mortgage Loan, an original assignment of
the related Mortgage, in recordable form, showing an assignment from HomePride
to HomePride SPV and, in turn, from HomePride SPV to Seller and, further in
turn, from Seller to the Agent.

                  (d) Upon written demand of the Agent following the occurrence
of a Servicer Termination Event or a Termination Event, the Servicer shall
ensure that:

                  (i) for each Contract where the related Manufactured Home is
located in a jurisdiction in which notation of the Seller's security interest in
such Manufactured Home on the related Title is required or permitted to perfect
such security interest, the Title shall show, or if a new or replacement Title
with respect to such Manufactured Home is being applied for such Title will be
issued within 180 days of such written demand and will show, the Seller as the
holder of a first priority security interest in such Manufactured Home;

                  (ii) for each Contract where the related Manufactured Home is
located in a jurisdiction in which the filing of a financing statement or the
making of a fixture filing under the UCC is required to perfect the Seller's or
the Agent's security interest in manufactured housing, such filings or
recordings shall be duly made within ten (10) Business Days of such written
demand and show the Seller and/or the Agent as the secured party; and

                  (iii) for each Contract where the related Manufactured Home
secures a Land and Home Contract, the related land securing such Land and Home
Contract shall be subject to a Mortgage properly filed in the appropriate public
recording office showing the assignment from HomePride to HomePride SPV and, in
turn, from HomePride SPV to the Seller and, further in turn, from the Seller to
the Agent, as mortgagee under such Mortgage within 10 Business Days of such
written demand.






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                  SECTION 13.03. Appointment of Successor Servicer. (a) On and
after (i) the delivery of a notice of termination to the Servicer Parties
pursuant to Section 13.02 or (ii) the resignation of the Servicer pursuant to
Section 12.05, the Agent may exercise at any time its right to appoint, as
successor to the Servicer, a Person other than the Person serving as Servicer at
the time, if such Person shall consent and agree to the terms hereby (a
"Successor Servicer"). Upon the occurrence of either of the events described in
clauses (i) and (ii) of the immediately-preceding sentence, the Agent shall have
the option to appoint CIT Group/Sales as Successor Servicer hereunder, and CIT
Group/Sales agrees to accept such appointment if so made by the Agent. If either
of the events described in clauses (i) and (ii) of the second
immediately-preceding sentence shall occur and the Agent shall not exercise its
option described in the immediately-preceding sentence, then, provided that, at
such time (x) CIT Group/Sales shall not be in default of its obligations and
duties contained herein, (y) no Limited Servicer Termination Event shall have
occurred and (z) CIT Group/Sales shall be an Eligible Sub-Servicer, the Agent
shall be required to negotiate with CIT Group/Sales, on an exclusive basis, for
a period of 10 days in an effort to reach an agreement whereby CIT Group/Sales
shall become the Successor Servicer hereunder. If CIT Group/Sales shall become
the Successor Servicer hereunder, then (A) CIT Group/Sales shall perform, and be
responsible for, all covenants, obligations, duties, liabilities,
representations and warranties of Servicer hereunder and (B) there shall no
longer be a Sub-Servicer under this Agreement and, in such case, all covenants,
obligations, duties, liabilities, representations and warranties which were
theretofore covenants, obligations, duties, liabilities, representations and
warranties of the Sub-Servicer hereunder shall become covenants, obligations,
duties, liabilities, representations and warranties of CIT Group/Sales, in its
capacity as Successor Servicer hereunder, and all rights, benefits and
privileges which were theretofore rights, benefits and privileges of the
Sub-Servicer hereunder shall become rights, benefits and privileges of CIT
Group/Sales, in its capacity as Successor Servicer hereunder.

                  (b) Any Successor Servicer shall be entitled to such
compensation (whether payable out of the Collection Account or otherwise) as the
Servicer would have been entitled to under this Agreement if the Servicer had
not resigned or been terminated hereunder. If any Successor Servicer is
appointed for any reason, additional compensation may be paid to such Successor
Servicer as approved by the Agent. In addition, any Successor Servicer shall be
entitled to reasonable transition expenses incurred in acting as Successor
Servicer which will be payable pursuant to Section 5.02.

                  (c) The Successor Servicer appointed hereunder is authorized
and empowered by this Agreement to execute and deliver, on behalf of the prior
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and to do or accomplish all other acts or things necessary or
appropriate to effect its succession as Successor Servicer hereunder, including,
without limitation, completing the transfer and endorsement of the Pool
Receivables in accordance with the terms hereof or otherwise. The prior Servicer
agrees to continue to perform the obligations and duties of Servicer hereunder
until the Successor Servicer shall have assumed such obligations and duties, and
also agrees to cooperate with the Successor Servicer in effecting the
termination of the responsibilities and rights of the prior Servicer under this
Agreement, including, without limitation and at the prior Servicer's expense,
the transfer to the Successor Servicer, for administration by it, of all cash
amounts that shall at the time be held by the prior Servicer for deposit, or
have been deposited by the prior Servicer, in the Collection Account






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or thereafter received with respect to the Pool Receivables and the delivery to
the Custodian or Successor Servicer, as designated by the Successor Servicer or
Agent, of all Receivable Files, and all files and records relating to the Pool
Receivables and a Computer Tape containing all information necessary to enable
the Successor Servicer to service the Pool Receivables.

                  (d) The terminated Servicer shall grant the Agent and any
Successor Servicer access to the terminated Servicer's premises at the
terminated Servicer's expense.

                  SECTION 13.04. Certain Rights of the Agent. The Seller hereby
transfers to the Agent, the exclusive ownership and control of the Lock-Box
Accounts to which the Obligors of Pool Receivables shall make payments at the
times set forth in this Agreement. At any time following the designation of a
Successor Servicer (other than the Seller, HomePride or any Affiliate of the
Seller or HomePride) pursuant to Section 13.03 hereof or after the occurrence
and during the occurrence of a Servicer Termination Event or a Termination
Event:

                  (i) The Agent may direct that payment of all amounts payable
under any Contract be made directly to the Agent or its designee in accordance
with the terms hereof.

                  (ii) The Seller shall, at the Agent's request and at the
Seller's expense, notify each Obligor of Pool Receivables of the ownership of
Receivable Interests under this Agreement and direct that payments be made
directly to the Agent or its designee in accordance with the terms hereof.

                  (iii) The Seller shall, at the request of the Agent, (A)
assemble all of the Records, and shall make the same available to the Agent or
its designee at a place selected by the Agent or its designee, and (B) segregate
all cash, checks and other instruments received by it from time to time
constituting Collections of Pool Receivables in a manner acceptable to the Agent
and shall, promptly upon receipt, remit all such cash, checks and instruments,
duly endorsed or with duly executed instruments of transfer, to the Agent or its
designee in accordance with the terms hereof.

                  (iv) Each of the Seller, HomePride and CIT Group/Sales hereby
authorizes the Agent to take any and all steps in its name and on its behalf
necessary or desirable, in the determination of the Agent, to collect all
amounts due under any and all Pool Receivables, including, without limitation,
endorsing, placing and/or signing its name on checks, documents and instruments
representing Pool Receivables and/or Collections thereon and enforcing the Pool
Receivables, the Related Security and the related Contracts.





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                                   ARTICLE XIV

                               TERMINATION EVENTS

                  SECTION 14.01. Termination Events. Each of the following shall
constitute a "Termination Event" under this Agreement:

                  (a) One or more final, non-appealable judgments or decrees for
the payment of money in an aggregate amount in excess of $5,000,000 (net of
insurance proceeds received in respect of any such judgment or decree) shall be
entered against the Parent and/or its Subsidiaries and remain outstanding; or

                  (b) An Event of Default shall have occurred and be continuing;
or

                  (c) The amount on deposit in the Reserve Account at any time
shall be less than the Required Reserve Account Amount at such time; or

                  (d) The Internal Revenue Service shall file notice of a lien
against the Seller pursuant to Section 6323 of the Internal Revenue Code with
regard to any of the assets of the Seller;

                  (e) A Servicer Termination Event shall have occurred and be
continuing; or

                  (f) The failure of the Parent, HomePride or any Subsidiary of
the Parent or HomePride to pay when due any amounts due under any agreement to
which any such Person is a party and under which Debt greater than $5,000,000 is
governed; or the default by the Parent, HomePride or any Subsidiary of the
Parent in the performance of any term, provision or condition contained in any
agreement or instrument to which any such Person is a party and under which any
Debt owing by the Parent, HomePride or any Subsidiary of the Parent greater than
$5,000,000 was created or is governed, regardless of whether such event is an
"event of default" or "default" under any such agreement; or any Debt owing by
the Parent, HomePride or any Subsidiary of the Parent greater than $5,000,000
shall be declared to be due and payable or required to be prepaid (other than by
a regularly scheduled payment), redeemed, purchased or defeased, or an offer to
repay, redeem, purchase or defease such Debt shall be required to be made, in
each case prior to the date of maturity thereof; or

                  (g) An "Event of Termination" or "Facility Termination Date"
shall occur under the Purchase and Contribution Agreement; or

                  (h) An "Event of Termination" or "Facility Termination Date"
shall occur under the Purchase and Sale Agreement; or

                  (i) The Facility Termination Date shall have occurred
hereunder;

                  (j) The Parent's long term public senior unsecured debt
securities shall (i) be rated less



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than B- by S&P or B3 by Moody's or (ii) no longer be rated by both S&P and
Moody's; or

                  (k) (i) an ERISA Event shall have occurred; or (ii) a notice
of Lien shall have been filed by the PBGC against the Parent or any of its
Subsidiaries under Section 412(n) of the Code or Section 302(f) of ERISA for a
failure to make a required installment or other payment to a plan to which
Section 412(n) of the Code or Section 302(f) of ERISA applies unless there shall
have been delivered to the Administrative Agent proof of release of such Lien;
or

                  (l) As of any date of determination, the Tier 1 Delinquency
Ratio for all Pool Receivables averaged over the three Collection Periods
preceding such date of determination (or such lesser number of Collection
Periods that shall have elapsed since the Closing Date) exceeds 2 1/2%; or

                  (m) As of any date of determination, the
Delinquency/Repossession Ratio for all Pool Receivables for the Collection
Period immediately preceding such date of determination exceeds 3%;

                  (n) As of any date of determination, the Excess Collections
Percentage averaged over the three Collection Periods preceding such date of
determination (or such lesser number of Collection Periods which shall have
elapsed since the Closing Date) shall be less than 4.0%; or

                  (o) The Seller's Parent shall cease to own 100% of the Capital
Stock of the Seller; or

                  (p) The Agent shall not have obtained the Minimum Shadow
Rating for the financing facility provided hereunder on or prior to the sixtieth
(60th) day following the Closing Date.

                  SECTION 14.02. Effect of Termination Event. Upon the
occurrence of a Termination Event (and, in the case of a Termination Event under
paragraph (i) above, the passage of 30 days without the Capital Investment, plus
all Yield, Fees and Other Amounts having been paid in full pursuant to the terms
hereof), any or all of the following actions may be taken by notice to the
Seller: (i) the Agent may declare the Facility Termination Date to have occurred
(in which case the Facility Termination Date shall be deemed to have occurred),
(ii) without limiting any right under this Agreement to replace the Servicer
Parties, the Agent may designate another Person to succeed HomePride as the
Servicer and/or CIT Group/Sales as the Sub-Servicer; provided, that,
automatically upon the occurrence of any event (without any requirement for the
passage of time or the giving of notice) described in paragraph (a) of Section
14.03, the Facility Termination Date shall occur, HomePride (if it is then
serving as the Servicer) shall cease to be the Servicer and CIT Group/Sales
shall cease to be the Sub-Servicer, and the Agent or its designee shall become
the Servicer and (iii) at the option of the Agent in its sole discretion, the
Agent may instruct the Servicer to take all additional steps, if any, as are
necessary or desirable, in the determination of the Agent, to create and/or
maintain perfection of the security interest in the Mortgaged Property or
Manufactured Home related to each Pool Receivable (and the proceeds thereon) on
behalf of the Seller and to create and/or maintain perfection of the security
interest in the security interest of the Seller in the Mortgaged Property or
Manufactured Home related to each Pool Receivable (and the proceeds thereon) on
behalf of the Agent (for the benefit of the Investors and the Banks), including,
without limitation, having a notation




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of the Seller's and/or the Agent's security interest recorded on the relevant
Title or other applicable records of title, endorsing any Mortgage Note to the
Seller or the Agent (as the Agent may request) and preparing and recording
assignments to the Seller or the Agent (as the Agent may request) of any
Mortgages (or completing any existing assignments of Mortgages previously
delivered in blank in the name of the Seller and/or Agent, as assignee(s), and
recording any of such assignments, all as directed by the Agent), and if the
Servicer fails to take all such steps, the Agent may take such steps at the sole
expense of the Seller, and each of the Seller and the Servicer hereby grants to
the Agent an irrevocable power of attorney and license to take any and all such
steps in the Seller's or the Servicer's name, as applicable, and on behalf of
the Seller or the Servicer, as are necessary or desirable, in the determination
of the Agent to create and/or maintain perfection of such security interests of
the Seller and the Agent (for the benefit of the Investors and the Banks).

                  SECTION 14.03. Events of Default. Each of the following shall
constitute an "Event of Default" under this Agreement:

                  (a) An Event of Bankruptcy shall have occurred with respect to
the Seller, the Seller's Parent, either Servicer Party, the Parent or any
Significant Subsidiary of any of the foregoing; or

                  (b) There shall have occurred a Change of Control; or

                  (c) A material adverse change shall have occurred in (i) (A)
the business, financial condition, results of operations or properties of the
Parent and its Subsidiaries, taken as a whole, or (B) the ability of the
Servicer or the Parent to perform its obligations under any of the Transaction
Documents to which it is a party; (ii) the value, collectibility or
enforceability of the Pool Receivables, taken as a whole; (iii) the practical
realization by the Investors or the Banks of the benefits or security afforded
under any of the Transaction Documents; (iv) the ability of the Servicer to
execute a Take-Out Securitization involving the Pool Receivables; or (v) the
first priority perfected ownership interest to the extent of the pertinent
Receivable Interest in each applicable Pool Receivable and the Related Security
and Collections with respect thereto; or

                  (d) HomePride, or an Affiliate of HomePride acceptable to the
Agent, shall resign as, or otherwise cease to act as, Servicer hereunder, or CIT
Group/Sales shall resign as, or otherwise cease to act as, Sub-Servicer
hereunder, in each case in violation of the terms of this Agreement (any such
resignation to constitute an Event of Default hereunder upon the effective date
of such resignation); or

                  (e) The Seller shall default under or fail to maintain in
effect any Interest Rate Hedges assigned to the Agent or the Seller shall fail
to purchase any Interest Rate Hedge when the Agent requests that such Interest
Rate Hedge be purchased in accordance with the terms hereof (whether or not
there exists sufficient funds in the Reserve Account to purchase such Interest
Rate Hedge); or

                  (f) A default in the payment when due of any Yield, any Fees,
Other Amounts or any Capital Investment or any other payment or deposit to be
made hereunder and such failure shall remain




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unremedied for one (1) Business Day, or a Capital Deficiency shall exist and
shall not be cured within two (2) Business Days of the date of calculation of
such Capital Deficiency by the Agent; or

                  (g) (i) Any Transaction Document shall (except in accordance
with its terms), in whole or in part, terminate, cease to be effective or cease
to be the legally valid, binding and enforceable obligation of the Seller or
either Servicer Party; or (ii) the Seller or either Servicer Party or any other
party shall, directly or indirectly, contest in any manner such effectiveness,
validity, binding nature or enforceability; or (iii) any Purchase pursuant to
this Agreement shall for any reason (other than pursuant to the terms hereof)
cease to create, or any Receivable Interest shall for any reason cease to be, a
valid and perfected first priority undivided percentage ownership or security
interest to the extent of the pertinent Receivable Interest in each applicable
Pool Receivable and the Related Security and Collections with respect thereto;
or (iv) the security interest created pursuant to Section 10.01 shall for any
reason cease to be a valid and perfected first priority security interest in the
collateral security referred to in that section; or

                  (h) Any representation or warranty of the Parent, the Seller
or either Servicer Party (or any of their respective officers) made or deemed to
have been made hereunder or in any other Transaction Document or any other
writing or certificate furnished by or on behalf of the Parent, Seller or either
Servicer Party to the Agent for purposes of or in connection with this Agreement
or any other Transaction Document (including any Servicer's Certificate
delivered pursuant to Section 11.08) shall prove to have been incorrect or
untrue in any material respect when made or deemed made or delivered; or

                  (i) One or more judgments for the payment of money in an
aggregate amount in excess of $10,000 shall be entered against the Seller; or

                  (j) The Adjusted Consolidated Tangible Net Worth shall, at any
time, be less than $305,000,000; or

                  (k) The Interest Coverage Ratio as of the end of any fiscal
quarter of the Parent shall be less than the Required Interest Coverage Ratio
for such fiscal quarter; or

                  (l) (i) Any Interest Rate Hedge purchased in connection
herewith shall cease to be in full force and effect, (ii) the Eligible
Counterparty shall default in the observance or performance of any of the terms
and provisions of any Interest Rate Hedge purchased in connection herewith or
(iii) any interest rate hedge agreement purchased in connection herewith shall
fail to, or cease to, satisfy the definition of "Interest Rate Hedge"; or

                  (m) The transactions contemplated under the 2002 Indenture
have not closed within two (2) Business Days from the Closing Date; or

                  (n) The occurrence of any event described in Section 11.14(g)
as constituting an Event of Default; or





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                  (o) Any default shall occur under the Parent Guaranty, or the
Parent Guaranty or any material portion thereof, shall not be in full force and
effect or enforceable in accordance with its terms; or

                  (p) Any default shall occur under the Limited Recourse
Guaranty, or the Limited Recourse Guaranty or any material portion thereof,
shall not be in full force and effect or enforceable in accordance with its
terms; or

                  (q) Any default shall occur under the CIT Guaranty, or the CIT
Guaranty or any material portion thereof, shall not be in full force and effect
or enforceable in accordance with its terms; or

                  (r) Any default shall occur under the Management Agreement, or
the Management Agreement or any material portion thereof, shall not be in full
force and effect or enforceable in accordance with its terms; or

                  (s) Any default shall occur under Section 2.13 of the Global
Servicing Agreement, or Section 2.13 of the Global Servicing Agreement or any
material portion thereof, shall not be in full force and effect and enforceable
in accordance with its terms;

                  (t) The Seller or either Servicer Party shall fail to perform
or observe in any material respect any covenant of agreement contained in this
Agreement, or any other Transaction Document, on its part to be performed or
observed which is not referred to, or described, above in this Section 14.03,
and such failure shall remain unremedied for thirty (30) days; and

                  (u) if the Capital Investment, plus all Yield, Fees and Other
Amounts have not been paid in full pursuant to the terms hereof by the 30th day
following the Facility Termination Date.

                  Upon the occurrence of an Event of Default, (i) the Agent,
Banks and Investors shall have the same rights and remedies afforded to them
under Section 14.02 upon the occurrence of a Termination Event and (ii) the then
outstanding Yield, any Fees, Other Amounts or any Capital Investment shall be
due and payable and the Administrative Agent may proceed to sell, dispose of, or
otherwise liquidate the Receivables and the Related Property in a commercially
reasonable manner and on commercially reasonable terms, which shall include the
solicitation of competitive bids and the Agent shall proceed to consummate the
sale, liquidation or disposition of the Receivables and the Related Property as
provided above with the highest bidder for the Receivables and the Related
Property. The Seller or any of its Affiliates shall be permitted to bid for the
Receivables and the Related Property. All reasonable costs and expenses incurred
by the Agent in such sale shall be reimbursed to the Agent as provided herein.
The proceeds from the sale, disposition or liquidation of the Receivables shall
be treated as Collections on the Receivables and such proceeds shall be applied
in accordance with Section 5.02(c).





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                                   ARTICLE XV

                                    THE AGENT

                  SECTION 15.01. Authorization and Action. Each Investor and
each Bank hereby appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement as are delegated
to the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto.

                  SECTION 15.02. Exculpation. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them as Agent under or in connection with this
Agreement (including, without limitation, the Agent's servicing, administering
of Pool Receivables as Servicer), except for its or their own gross negligence
or willful misconduct. Without limiting the generality of the foregoing, the
Agent: (a) may at its own expense consult with legal counsel (including counsel
for the Seller and the Servicer), independent certified 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; (b) makes no warranty or representation to any
Investor or Bank (whether written or oral) and shall not be responsible to any
Investor or Bank for any statements, warranties or representations (whether
written or oral) made in or in connection with this Agreement; (c) 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 on the part of the
Seller, the Servicer or any Custodian or to inspect the property (including the
books and records) of the Seller, the Servicer or any Custodian; (d) shall not
be responsible to any Investor or Bank for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto; and (e) shall incur
no liability under or in respect of this Agreement by acting upon any notice
(including notice by telephone), consent, certificate or other instrument or
writing (which may be by telecopier or telex) believed by it to be genuine and
signed or sent by the proper party or parties.

                  SECTION 15.03. CSFB and Affiliates. The obligation of CSFB to
purchase Receivable Interests under this Agreement may be satisfied by CSFB or
any of its Affiliates. With respect to any Receivable Interest or interest
therein owned by it, CSFB shall have the same rights and powers under this
agreement as any Bank and may exercise the same as though it were not the Agent.
CSFB and any of its Affiliates may generally engage in any kind of business with
the Seller, the Servicer, any Custodian or any Obligor, any of their respective
Affiliates and any Person who may do business with or own securities of the
Seller, the Servicer, any Custodian or any Obligor or any of their respective
Affiliates, all as if CSFB were not the Agent and without any duty to account
therefor to the Investors.

                  SECTION 15.04. Bank's Purchase Decision. Each Bank
acknowledges that it has, independently and without reliance upon the Agent, any
of its Affiliates or any other Bank and based on such documents and information
as it has deemed appropriate, made its own evaluation and decision to enter into
this Agreement. Each Bank also acknowledges that it will, independently and
without reliance




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upon the Agent, any of its Affiliates or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own decisions in taking or not taking action under this Agreement.

                  SECTION 15.05. Notice by Agent. The Agent shall notify the
Servicer of any purchase by CSFB of any Receivable Interest under any Asset
Purchase Agreement entered into by the Conduit and CSFB.

                                   ARTICLE XVI

                                 INDEMNIFICATION

                  SECTION 16.01. Indemnities by the Seller. Without limiting any
other rights that the Agent, the Investors, the Collection Account Bank, the
Banks or any of their respective Affiliates (each, an "Indemnified Party") may
have hereunder or under applicable law, the Seller hereby agrees to indemnify
each Indemnified Party from and against any and all claims, losses and
liabilities (including reasonable attorneys' fees) (all of the foregoing being
collectively referred to as "Indemnified Amounts") arising out of or resulting
from this Agreement or the other Transaction Documents or the use of proceeds of
purchases or reinvestments or the ownership of Receivable Interests or in
respect of any Receivable or any Contract, excluding, however, (a) Indemnified
Amounts to the extent found in a final non-appealable judgment of a court of
competent jurisdiction to have resulted from gross negligence or willful
misconduct on the part of such Indemnified Party, (b) recourse (except as
otherwise specifically provided in this Agreement) for uncollectible Receivables
or (c) any income taxes incurred by such Indemnified Party arising out of or as
a result of this Agreement or the ownership of Receivable Interests or in
respect of any Receivable or any Contract. Without limiting or being limited by
the foregoing, the Seller shall, after written demand (which written demand
shall set forth reasonable evidence of any such Indemnified Amounts), pay, from
Collections and amounts on deposit in the Excess Collections Account and Reserve
Account in accordance with Section 5.02, to each Indemnified Party any and all
amounts necessary to indemnify such Indemnified Party from and against any and
all Indemnified Amounts relating to or resulting from any of the following:

                  (i) the characterization in any Servicer's Certificate or
other written statement made by or on behalf of the Seller of any Receivable as
an Eligible Receivable or as included in the Net Receivables Pool Balance which,
as of the date of such Servicer's Certificate or other statement, is not an
Eligible Receivable or should not be included in the Net Receivables Pool
Balance;

                  (ii) any representation or warranty or statement made or
deemed made by the Seller (or any of its officers) under or in connection with
this Agreement or any of the other Transaction Documents which shall have been
incorrect in any material respect when made;

                  (iii) the failure by the Seller or HomePride to comply with
any applicable law, rule or regulation with respect to any Pool Receivable or
the related Contract; or the failure of any Pool Receivable




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or the related Contract to conform to any such applicable law, rule or
regulation;

                  (iv) the failure to vest in the Investors or the Banks, as the
case may be, (a) a perfected undivided percentage ownership or security
interest, to the extent of each Receivable Interest, in the Receivables in, or
purporting to be in, the Receivables Pool and the Related Security and
Collections in respect thereof, or (b) a perfected security interest as provided
in Section 10.01, in each case free and clear of any Lien;

                  (v) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to any
Receivables in, or purporting to be in, the Receivables Pool and the Related
Security and Collections in respect thereof, whether at the time of any purchase
or reinvestment or at any subsequent time;

                  (vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool (including, without
limitation, a defense based on such Receivable or the related Contract not being
a legal, valid and binding obligation of such Obligor enforceable against it in
accordance with its terms), any claim resulting from the sale, or purported
sale, of a Receivable Interest in a Receivable in the Receivables Pool
notwithstanding any provision in the related Contract that requires the consent
of the applicable Obligor to the transfer, sale or assignment of the rights and
duties of the Seller, the Dealer or HomePride thereunder, or any other claim
resulting from the sale of the services related to such Receivable or the
furnishing or failure to furnish such services or relating to collection
activities with respect to such Receivable (if such collection activities were
performed by the Seller or any of its Affiliates acting as Servicer);

                  (vii) any failure of the Seller to perform its duties or
obligations in accordance with the provisions hereof or to perform its duties or
obligations under the Contracts;

                  (viii) any products liability or other claim arising out of or
in connection with services which are the subject of any Contract;

                  (ix) the commingling of Collections of Pool Receivables at any
time with other funds;

                  (x) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of purchases or reinvestments or the
ownership of Receivable Interests or in respect of any Receivable or Related
Security or Contract;

                  (xi) any failure of the Seller to comply with its covenants
contained in this Agreement or any other Transaction Document;

                  (xii) any claim brought by any Person other than an
Indemnified Party arising from any activity by the Seller or any Affiliate of
the Seller in servicing, administering or collecting any Receivable;




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<PAGE>

or

                  (xiii) the failure of the Seller or HomePride to pay when due
any taxes, including without limitation, sales, excise or personal property
taxes payable in connection with any of the Contract;

                  (xiv) any inability to obtain any judgment in or utilize the
court or other adjudication system of, any state in which an Obligor may be
located as a result of the failure of the Seller or HomePride to qualify to do
business or file any notice of business activity report or any similar report;

                  (xv) any failure of the Seller to give reasonably equivalent
value to HomePride in consideration of the purchase by the Seller from HomePride
of any Receivable, or any attempt by any Person to void, rescind or set aside
any such transfer under statutory provisions or common law or equitable action,
including, without limitation, any provision of the Bankruptcy Code; or

                  (xvi) any Purchase is, for any reason, characterized as other
than debt for federal or state income tax purposes.

                                  ARTICLE XVII

                                  MISCELLANEOUS

                  SECTION 17.01. No Waiver; Remedies. No failure on the part of
any Investor, any Bank, the Agent, any Indemnified Party or any Affected Person
to exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise by
any of them of any right, power or remedy hereunder preclude any other or
further exercise thereof, or the exercise of any other right, power or remedy.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.

                  SECTION 17.02. Amendments. No amendment or waiver of any
provision of this Agreement or consent to any departure by the Seller therefrom
shall be effective unless in a writing signed by the Agent, as agent for the
Investors and the Banks (and, in the case of any amendment, also signed by the
Seller and HomePride), and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by the Custodian or the Collection Account Bank, as the case
may be, in addition to the Agent, affect the rights or duties of the Custodian
or the Collection Account Bank, as the case may be, under this Agreement;
provided, further, that no amendment, waiver or consent shall affect the rights
or duties of a Servicer Party under this Agreement, unless such amendment,
waiver or consent shall be in writing and signed by such Servicer Party.

                  SECTION 17.03. Notices, Etc. All notices and other
communications hereunder shall, unless otherwise stated herein, be in writing
(which shall include facsimile communication) and faxed or delivered, to each
party hereto, at its address set forth under its name on the signature pages
hereof or



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at such other address as shall be designated by such party in a written notice
to the other parties hereto. Notices and communications by facsimile shall be
effective when sent, and notices and communications sent by other means shall be
effective when received.

                  SECTION 17.04. Assignability. (a) This Agreement and the
Investors' rights and obligations herein (including ownership of each Receivable
Interest) shall be assignable by the Investors and their successors and assigns.
Each assignor of a Receivable Interest or any interest therein shall notify the
Agent and the Seller of any such assignment. Each assignor of a Receivable
Interest or any interest therein may, in connection with the assignment,
disclose to the assignee or participant any information relating to the Seller,
HomePride SPV or the Servicer Parties, including the Receivables, furnished to
such assignor by or on behalf of the Seller or by the Agent.

                  (b) Each Bank may assign to any Eligible Assignee or to any
other Bank all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Bank Commitment and any
Receivables Interests or interests therein owned by it). The parties to each
such assignment shall execute and deliver to the Agent an Assignment and
Acceptance, with a copy thereof to be sent to the Servicer. In addition, CSFB or
any of its Affiliates may assign any of its rights (including, without
limitation, rights to payment of Capital Investment and Yield) under this
Agreement to any Federal Reserve Bank without notice to or consent of the Seller
or the Agent.

                  (c) This Agreement and the rights and obligations of the Agent
herein shall be assignable by the Agent and its successors and assigns.

                  (d) The Seller may not assign its rights or obligations
hereunder or any interest herein without the prior written consent of the Agent.

                  (e) Notice of each assignment made by a Person pursuant to
Sections 17.04(a), (b) and (c) shall be sent by the assignor Person to the
Seller and HomePride.

                  SECTION 17.05. Costs, Expenses and Taxes. (a) In addition to
the rights of indemnification granted under Section 16.01 hereof, the Seller
agrees to pay on demand all costs and expenses in connection with the
preparation, execution, delivery and administration (including periodic auditing
and the other activities contemplated in Section 9.19) of this Agreement, any
Asset Purchase Agreement and the other documents and agreements to be delivered
hereunder, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Agent, CSFB, Conduit and their respective Affiliates
with respect thereto and with respect to advising the Agent, CSFB, Conduit and
their respective Affiliates as to their rights and remedies under this
Agreement, and all costs and expenses, if any (including reasonable counsel fees
and expenses), of the Agent, CSFB, the Investors, the Banks and their respective
Affiliates, in connection with the enforcement of this Agreement and the other
documents and agreements to be delivered hereunder.

                  (b) The Seller also shall pay on demand all other costs,
expenses and taxes (excluding




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<PAGE>

the cost of auditing Conduit's books by certified public accountants, the cost
of rating Conduit's commercial paper by independent financial rating agencies
and income taxes) incurred by Conduit or any stockholder of Conduit ("Other
Costs"), including the taxes (excluding income taxes) resulting from Conduit's
operations, and the reasonable fees and out-of-pocket expenses of counsel for
any stockholder of Conduit with respect to advising as to rights and remedies
under this Agreement, the enforcement of this Agreement or advising as to
matters relating to Conduit's operations; provided that the Seller and any other
Persons who from time to time sell receivables or interests therein to Conduit
("Other Sellers") each shall be liable for such Other Costs ratably in
accordance with the usage under their respective facilities; and provided
further that if such Other Costs are attributable to the Seller and not
attributable to any Other Seller, the Seller shall be solely liable for such
Other Costs.

                  SECTION 17.06. No Proceedings. Each of the Seller, the Agent,
each Investor, each Bank each assignee of a Receivable Interest or any interest
therein and each entity which enters into a commitment to purchase Receivable
Interest or interests therein hereby agrees that it will not institute against
Conduit any proceeding of the type referred to in clause (a) of the definition
of Event of Bankruptcy so long as any commercial paper or other senior
indebtedness issued by Conduit shall be outstanding or there shall not have
elapsed one year plus one day since the last day on which any such commercial
paper or other senior indebtedness shall have been outstanding.

                  SECTION 17.07. Confidentiality. (a) Each of the Seller and the
Servicer Parties agrees to maintain the confidentiality of this Agreement in
communications with third parties and otherwise; provided that this Agreement
may be disclosed (i) to third parties to the extent such disclosure is made
pursuant to a written agreement of confidentiality in form and substance
satisfactory to the Agent, (ii) to the legal counsel and auditors of such Person
if they agree to hold it confidential and (iii) to the extent required by
applicable law or regulation or by any court, regulatory body or agency having
jurisdiction over such party; and provided, further, that such party shall have
no obligation of confidentiality in respect of any information which may be
generally available to the public or becomes available to the public through no
fault of such party.

                  (b) Each Investor, each Bank and the Agent agrees to maintain
the confidentiality of all information with respect to the Seller, HomePride,
the Parent, the Custodian, each Servicer Party or the Receivables (including the
Servicer's Certificates) furnished or delivered to it pursuant to this
Agreement; provided, that such information may be disclosed (i) to such party's
legal counsel and auditors and to such party's assignees and participants and
potential assignees and participants and their respective counsel if they agree
to hold it confidential, (ii) to the rating agencies and the providers of credit
enhancement or liquidity for each Investor, and (iii) to the extent required by
applicable law or regulation or by any court, regulatory body or agency having
jurisdiction over such party; and provided, further, that such party shall have
no obligation of confidentiality in respect of any information which may be
generally available to the public or becomes available to the public through no
fault of such party.

                  SECTION 17.08. Captions and Cross References. The various
captions (including, without limitation, the table of contents) in this
Agreement are provided solely for convenience of reference




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and shall not affect the meaning or interpretation of any provision of this
Agreement. Unless otherwise indicated, references in this Agreement to any
Section, Schedule or Exhibit are to such Section of or Schedule or Exhibit to
this Agreement, as the case may be, and references in any Section, subsection,
or clause to any subsection, clause or subclause are to such subsection, clause
or subclause of such Section, subsection or clause.

                  SECTION 17.09. Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.

                  SECTION 17.10. GOVERNING LAW. THIS AGREEMENT SHALL, IN
ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF),
EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF THE INVESTORS AND
THE BANKS IN THE RECEIVABLES, THE PURCHASE AND CONTRIBUTION AGREEMENT, OR
REMEDIES HEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.

                  SECTION 17.11. Execution in Counterparts. This Agreement may
be executed in any number of counterparts, each of which when so executed shall
be deemed to be an original and all of which when taken together shall
constitute one and the same agreement.

                  SECTION 17.12. WAIVER OF JURY TRIAL. EACH OF THE PARTIES
HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE SELLER, THE AGENT, THE INVESTORS OR ANY
OTHER AFFECTED PERSON. THE SELLER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION
OF EACH OTHER TRANSACTION DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE INVESTORS ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER TRANSACTION DOCUMENT.

                  SECTION 17.13. Survival of Termination. The provisions of
Sections 6.01, 6.02, 12.01, 16.01, 17.05 and 17.06 shall survive any termination
of this Agreement.





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                  SECTION 17.14. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS EXECUTED AND DELIVERED HEREWITH REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

                  SECTION 17.15. Consent to Jurisdiction. (a) Each party hereto
hereby irrevocably submits to the non-exclusive jurisdiction of any New York
State or Federal court sitting in New York City in any action or proceeding
arising out of or relating to this Agreement, and each party hereto hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such New York State court or, to the extent permitted
by law, in such Federal court. The parties hereto hereby irrevocably waive, to
the fullest extent they may effectively do so, the defense of an inconvenient
forum to the maintenance of such action or proceeding. The parties hereto agree
that a final judgment in any such action or proceeding. The parties hereto agree
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.

                  (b) Each of the Seller, Servicer Parties and the Custodian
consents to the service of any and all process in any such action or proceeding
by the mailing of copies of such process to it at its address specified in
Section 17.03. Nothing in this Section 17.15 shall affect the right of the
Investors, any Bank or the Agent to serve legal process in any other manner
permitted by law.

                  SECTION 17.16. Lienholder Nominee. (a) The Agent (individually
and on behalf of the Investors and the Banks) and the Seller hereby appoint
HomePride as their nominee lienholder with respect to the Manufactured Homes
related to Receivables included in the Receivables Pool (each, a "Subject
Manufactured Home"), and HomePride hereby agrees to serve in such capacity as
described herein. As stated lienholder on the Titles to all of the Subject
Manufactured Homes, HomePride agrees to take any and all actions as the Seller
(with the consent of the Agent) or the Agent may request in writing including,
without limitation, all actions for which HomePride's consent, waiver, release,
vote or signature (or other action of similar nature) is necessary or advisable
in the judgment of the Seller or the Agent in order to maintain, preserve and
protect the Seller's security interest in the Subject Manufactured Homes and the
Receivable Interest purchased by the Investors and the Banks hereunder
(provided, however, that, prior to the occurrence of a Servicer Termination
Event or a Termination Event and the request by the Agent for the recordation of
the Seller's lien on such Subject Manufactured Homes' Titles, no such
recordation shall be required) and if HomePride fails to take any or all such
actions, the Agent or any designee of the Agent, may take such actions at the
sole expense of HomePride, and HomePride hereby grants to the Agent and any such
designee an irrevocable power of attorney and license to take any and all such
actions in HomePride's name and on behalf of HomePride. The obligations of
HomePride under this Agreement are in addition to, are not limited by, and in no
way limit, the obligations of HomePride in its capacity as Servicer under this
Agreement.






                                      112
<PAGE>

                  (b) Notwithstanding the fact that HomePride will remain noted
as the lienholder on the Titles with respect to the Subject Manufactured Homes
on and after the date hereof, HomePride, the Seller and the Agent each hereby
agrees that, on and after the date hereof:

                  (i) subject to the other terms and provisions of this
Agreement, the Seller is entitled to all incidents, benefits and risks of a
holder of a first priority perfected security interest in and lien on the
Subject Manufactured Homes;

                  (ii) HomePride has no direct or indirect ownership or other
interest (including any security interest) in any Subject Manufactured Homes;

                  (iii) except in its capacity as Servicer under this Agreement,
HomePride will take no action with respect to the Subject Manufactured Homes
unless such action is consented to by the Agent or otherwise permitted
hereunder; and

                  (iv) HomePride shall not represent to any lender, financing
source or other Person, that it has, or in any other manner hold itself out as
having, a direct or indirect ownership interest or any other rights or interests
in the Subject Manufactured Homes, except for any rights it may have as nominee
lienholder or as Servicer hereunder.

                           [Signature pages to follow]





                                      113
<PAGE>

                  IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.

         SELLER:          GSS HOMEPRIDE CORP.


                          By:
                              --------------------------------------------------
                              Name:
                              Title:

                          47 West 47th St.
                          New York, NY 10036
                          Suite 1715
                          Attn:  Frank B. Bilotta
                          Facsimile No. 212-302-8767


         INVESTOR:        GREENWICH FUNDING CORP.

                          By:  Credit Suisse First Boston, New York Branch, as
                               its Attorney-In-Fact


                               By:
                                  ----------------------------------------------
                                  Name:
                                  Title:

                               By:
                                  ----------------------------------------------
                                  Name:
                                  Title:

                               Eleven Madison Avenue
                               New York, NY  10010
                               Attn:  Asset Finance Dept.
                               Facsimile No.  (212) 325-6677




                                      114
<PAGE>

         BANK:            CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH


                          By:
                             ---------------------------------------------------
                             Name:
                             Title:

                          By:
                             ---------------------------------------------------
                             Name:
                             Title:

                          Eleven Madison Avenue
                          New York, NY  10010
                          Attn:  Asset Finance Dept.
                          Facsimile No. (212) 325-6677


         AGENT:           CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, AS AGENT

                          By:
                             ---------------------------------------------------
                             Name:
                             Title:

                          By:
                             ---------------------------------------------------
                             Name:
                             Title:

                          Eleven Madison Avenue
                          New York, NY  10010
                          Attn:  Asset Finance Dept.
                          Facsimile No. (212) 325-6677




                                      115
<PAGE>

         SERVICER:        HOMEPRIDE FINANCE CORP., AS SERVICER

                          By:
                             ---------------------------------------------------
                             Name:
                             Title:

                          2701 Cambridge Court, Suite 300
                          Auburn Hills, Michigan 48326
                          Attn:  General Counsel Office
                          Facsimile No.  (248) 340-9345


         SUB-SERVICER:    THE CIT GROUP/SALES FINANCING, INC.

                          By:
                             ---------------------------------------------------
                             Name:
                             Title:

                          1 CIT Drive
                          Livingston, NJ 07039
                          Attn: Ron Arrington
                          Facsimile No. (973) 535-5962


                                      116


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>k71231exv10w2.txt
<DESCRIPTION>AMENDMENT NO. 1 TO RECEIVABLES PURCHASE AGREEMENT
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.2

                               AMENDMENT AGREEMENT
                                      NO. 1

                  AMENDMENT AGREEMENT NO. 1, dated as of May 23, 2002 (this
"Amendment"), to the Receivables Purchase Agreement, dated as of April 18, 2002
(as amended, restated and/or otherwise modified from time to time, the "RPA"),
among HomePride Finance Corp. ("HomePride") and GSS HomePride Corp. (the
"Seller"), CIT Group/Sales Financing, Inc. (the "Sub-Servicer"), Greenwich
Funding Corp. (the "Investor"), the financial institutions named therein as
Banks (the "Banks") and Credit Suisse First Boston, New York Branch (the
"Agent"). Capitalized terms not otherwise defined herein shall have the meanings
attributed to them in the RPA.

                  WHEREAS, the parties hereto desire to amend the RPA on the
terms and subject to the provisions hereof;

                  NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the fulfillment of
the conditions set forth below, the parties hereto agree as follows:

                  SECTION 1. Amendments to RPA.

                  1.1 The definition of "Eligible Receivable" in Section 1.01 of
         the RPA is hereby amended by deleting paragraph (rr) thereof in its
         entirety and inserting in its place the following:

                           (rr) which arises under a Contract which has a fixed
                  annual percentage rate and provides for level monthly,
                  bi-weekly or semi-monthly payments of principal and interest
                  and which fully amortize such Contract over its term;

                  1.2 The definition of "Eligible Receivable" in Section 1.01 of
         the RPA is hereby further amended by deleting paragraph (fff) thereof
         in its entirety and inserting in its place the following:

                           (fff) with respect to which, if such Receivable
                  arises under a Manufactured Housing Contract, the related
                  original Title is in the possession of the Custodian;
                  provided, that, if the related Manufactured Home is located in
                  a jurisdiction the laws of which require that the related
                  original Title must be delivered to the related Obligor, then
                  the appropriate document issued by the titling authority in
                  such jurisdiction evidencing the notation of HomePride's
                  perfected, first priority security interest in such
                  Manufactured Home is in the possession of the Custodian;



<PAGE>

                  1.3 The definition of "Eligible Receivable" in Section 1.01 of
         the RPA is hereby further amended by deleting paragraphs (qqq) and
         (rrr) thereof in their entirety and inserting in their place the
         following:

                           (qqq) with respect to which (a) the related Amount
                  Financed (excluding any set up expenses, fees, taxes,
                  insurance, closing costs, discount points, warranty coverage,
                  retailer installed options, park amenities, cost to the
                  related Obligor to acquire or refinance the land on which the
                  related Manufactured Home is or will be located, and site
                  preparation costs otherwise includable in such Amount
                  Financed), when added to the aggregate Amount Financed for all
                  other Eligible Receivables (excluding any set up expenses,
                  fees, taxes, insurance, closing costs, discount points,
                  warranty coverage, retailer installed options, park amenities,
                  cost to the related Obligor to acquire or refinance the land
                  on which the related Manufactured Home is or will be located,
                  and site preparation costs otherwise includable in any such
                  Amount Financed), does not exceed 130% of (b) the sum of (x)
                  the dealer invoice price for the Manufactured Home related to
                  such Receivable plus (y) the aggregate dealer invoice price
                  for the Manufactured Homes related to all other Eligible
                  Receivables;

                           (rrr) which arises under a Contract which is not a
                  Buy-For Contract, other than a Parent/Child Buy-For Contract;

                           (sss) with respect to which the set up fees related
                  to the applicable Manufactured Home and included in the
                  related Amount Financed did not exceed $2,500 per section of
                  such Manufactured Home or $7,500 in the aggregate;

                           (ttt) with respect to which the retailer installed
                  options related to the applicable Manufactured Home and
                  included in the related Amount Financed did not exceed 30% of
                  the dealer invoice for such Manufactured Home;

                           (uuu) with respect to which the insurance premiums
                  related to the applicable Manufactured Home and included in
                  the related Amount Financed did not exceed 20% of such Amount
                  Financed;

                           (vvv) with respect to which the warranty coverage
                  cost related to the applicable Manufactured Home and included
                  in the related Amount Financed did not exceed $1,500; and

                           (www) with respect to which any funds to be disbursed
                  to the related Obligor pursuant to the related Contract have
                  been fully disbursed.

                  1.4 The definition of "Excess Concentration Amount" in Section
         1.01 of the RPA is hereby amended by adding at the end thereof the
         following:






                                       2
<PAGE>
                  and

                           (r) the amount by which the Aggregate Outstanding
                  Balance of all Eligible Receivables in the Receivables Pool
                  which were originated by any one Independent Dealer exceeds
                  the greater of (i) $1,000,000 and (ii) 2% of the Aggregate
                  Outstanding Balance of all Eligible Receivables in the
                  Receivables Pool;

                  1.5 The definition of "Significant Subsidiary" in Section 1.01
         of the RPA is hereby amended by deleting such definition in its
         entirety and inserting in its place the following:

                           "Significant Subsidiary" means any Subsidiary of a
                  Person which fits the definition of Significant Subsidiary
                  contained in Rule 1-02 of Regulation S-X promulgated by the
                  Securities and Exchange Commission, other than a Subsidiary
                  that is a special purpose entity formed for the purpose of
                  securitizing, selling for securitization or otherwise
                  facilitating the securitization of assets of such Person or
                  any other Subsidiary; provided, that, each Affiliated Dealer
                  shall be deemed to be a Significant Subsidiary of the Parent.

                  1.6 The definition of "Subsidiary" in Section 1.01 of the RPA
         is hereby amended by adding the phrase "or other entity" after the word
         "corporation" appearing in the first line thereof.

                  1.7 The following definitions are hereby added in Section 1.1
         of the RPA in their proper alphabetical order:

                                    "Affiliated Dealer" means any Dealer that
                  (i) is a direct or indirect Subsidiary of the Parent and (ii)
                  has originated Receivables that are included in the
                  Receivables Pool.

                                    "Independent Dealer" means any Dealer that
                  is not a direct or indirect Subsidiary of the Parent.

         SECTION 2. Conditions to Effectiveness. The amendments contained in
this Amendment shall not become effective until the following conditions have
been satisfied in full or waived in writing by the Agent:

                  2.1 The Agent shall have received an executed counterpart of
         this Amendment duly executed by each party thereto; and




                                       3
<PAGE>
                  2.2 No event has occurred and is continuing which constitutes
         a Termination Event or would constitute a Termination Event but for the
         requirement that notice be given or time elapse or both.

         SECTION 3. Representations and Warranties. Each of the Seller and the
Servicer reaffirms and restates the representations and warranties set forth in
the RPA and any agreement, document or instrument related thereto, and certifies
that such representations and warranties are true and correct on the date hereof
with the same force and effect as if made on such date, except as they may
specifically refer to an earlier date, in which case they were true and correct
as of such date. In addition, the Seller and the Servicer each represents and
warrants (which representations and warranties shall survive the execution and
delivery hereof) that (a) no Termination Event (nor any event that but for
notice or lapse of time or both would constitute an Termination Event) shall
have occurred and be continuing as of the date hereof nor shall any Termination
Event (nor any event that but for notice or lapse of time or both would
constitute a Termination Event) occur due to this Amendment becoming effective,
(b) the Seller and the Servicer each has the corporate power and authority to
execute and deliver this Amendment and has taken or caused to be taken all
necessary corporate actions to authorize the execution and delivery of this
Amendment, and (c) no consent of any other person (including, without
limitation, shareholders or creditors of the Seller or the Servicer), and no
action of, or filing with any governmental or public body or authority is
required to authorize, or is otherwise required in connection with the execution
and performance of this Amendment other than such that have been obtained.

         SECTION 4. Reference to and Effect on the Documents.

                  4.1 On and after the date on which this Amendment becomes
         effective pursuant to Section 2 of this Amendment, each reference in
         the RPA to "this Agreement" shall refer to the RPA as amended hereby
         and each reference in the RPA to "hereunder", "hereof", "herein", or
         words of like import shall mean and be a reference to the RPA as
         amended hereby. On and after the date on which this Amendment becomes
         effective pursuant to Section 2 of this Amendment, each reference to
         the RPA in any agreement, document or instrument related to the RPA
         shall mean and be a reference to the RPA as amended hereby.

                  4.2 Except as expressly amended above, the RPA shall remain in
         full force and effect and is hereby ratified and confirmed in all
         respects.

                  4.3 The execution and delivery of this Amendment shall not,
         except as expressly provided herein, operate as a waiver of any right,
         power or remedy of the Investor, any Bank or the Agent under the RPA
         nor constitute a waiver of any provision of the RPA.



                                       4
<PAGE>


         SECTION 5. Governing Law. THIS AMENDMENT SHALL, IN ACCORDANCE WITH
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS
OF LAW PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION.


         SECTION 6. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed an original and all
of which when taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.

                          [Signature pages to follow.]















                                       5
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.


         SELLER:                  GSS HOMEPRIDE CORP.


                                  By:    /s/ Frank B. Bilotta
                                     -------------------------------
                                      Name:  Frank B. Bilotta
                                      Title: President


         INVESTOR:                GREENWICH FUNDING CORP.

                                  By:    Credit Suisse First Boston, New York
                                         Branch, as its Attorney-In-Fact


                                         By:    /s/ Mark Lengel
                                            --------------------------------
                                             Name:  Mark Lengel
                                             Title: Vice President


                                         By:    /s/ Joseph Soave
                                            --------------------------------
                                             Name:  Joseph Soave
                                             Title: Vice President



                                       6
<PAGE>
         BANK:                    CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH


                                  By:    /s/ Anthony Giordano
                                     -------------------------------
                                      Name:  Anthony Giordano
                                      Title: Director


                                  By:    /s/ Mark Golombeck
                                     -------------------------------
                                      Name:  Mark Golombeck
                                      Title: Vice President


         AGENT:                   CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
                                  AS AGENT


                                  By:    /s/ Anthony Giordano
                                     -------------------------------
                                      Name:  Anthony Giordano
                                      Title: Director

                                  By:    /s/ Mark Golombeck
                                     -------------------------------
                                      Name:  Mark Golombeck
                                      Title: Vice President


                                       7
<PAGE>


         SERVICER:                HOMEPRIDE FINANCE CORP., AS SERVICER


                                  By:    /s/ John J. Collins
                                     -------------------------------
                                      Name:  John J. Collins
                                      Title: Vice President, Secretary &
                                             General Counsel



         SUB-SERVICER:            THE CIT GROUP/SALES FINANCING, INC.


                                  By:    /s/ Ron G. Arrington
                                     -------------------------------
                                      Name:  Ron G. Arrington
                                      Title: Executive Vice President








                                       8

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>k71231exv10w3.txt
<DESCRIPTION>AMENDMENT & WAIVER AGREEMENT NO. 2
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.3

                         AMENDMENT AND WAIVER AGREEMENT
                                      NO. 2

                  AMENDMENT AND WAIVER AGREEMENT NO. 2, dated as of June 17,
2002 (this "Agreement"), to the (i) Fee Letter Agreement, dated as of April 18,
2002 (as amended and supplemented from time to time, the "Fee Letter"), among
GSS HomePride Corp. (the "Company"), a Delaware corporation, HomePride Finance
Corp. ("HomePride"), a Michigan corporation and Credit Suisse First Boston, New
York Branch, as Agent (the "Agent") and (ii) Receivables Purchase Agreement,
dated as of April 18, 2002 (as amended and supplemented from time to time, the
"RPA"), among the Company, HomePride, as servicer (the "Servicer"), The
CIT/Group Sales Financing, Inc. ("CIT"), a Delaware corporation, as
sub-servicer, Greenwich Funding Corp., the financial institutions set forth on
the signature page thereto, as Banks and the Agent. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed thereto in the
Fee Letter or the RPA (as defined below).

                  WHEREAS, in connection with the RPA and the transactions
contemplated therein, HomePride had entered into that certain Global Servicing
Agreement, dated as of April 18, 2002 (as amended and supplemented from time to
time, the "Global Servicing Agreement"), between HomePride and CIT;

                  WHEREAS, HomePride and the Company have requested the waiver
of certain provisions of the Fee Letter and the RPA and the amendment of certain
provisions of the RPA, in each case, on the terms and subject to the provisions
hereof;

                  NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and subject to the fulfillment of
the conditions set forth below, the parties hereto agree as follows:

                  SECTION 1.  Waiver under the RPA and the Fee Letter.

                  1.1 The Agent hereby waives the provisions of paragraph 2 of
the Fee Letter solely to the extent that such provisions require the Company to
pay to the Agent, for the benefit of the Banks, the amount of the Facility Fee
due on June 13, 2002 (the "June Late Payment"); provided, that, such waiver
shall be automatically revoked if the June Late Payment and the amount of the
Facility Fee which was due on May 13, 2002 (the "May Late Payment", together
with the June Late Payment, the "Late Payment") is not received by the Agent on
or prior to July 15, 2002.

                  1.2 The Agent hereby waives the Termination Event arising
under Section 14.01(p) of the RPA because of the Company's failure to obtain the
Minimum Shadow Rating


<PAGE>


within 60 days after the Closing Date; provided, that, such waiver shall be
automatically revoked if the Minimum Shadow Rating has not been obtained on or
prior to the forty-fifth (45th) day after the date of this Agreement.

                  1.3 The Agent hereby waives (i) the Servicer Termination Event
arising under Section 13.01(j) of the RPA and (ii) the Event of Default arising
under Section 14.03(s) of the RPA related to the default which has occurred
under the second paragraph of Section 2.13 of the Global Servicing Agreement
regarding HomePride's failure to enter into a Reconstitution Agreement (as
defined in the Global Servicing Agreement) with CIT within 60 days after the
date of the Global Servicing Agreement, provided, that such waiver shall be
automatically revoked if HomePride has not entered into a Reconstitution
Agreement with CIT, or another entity approved in writing by the Agent, on or
prior to the sixtieth (60th) day after the date of this Agreement.

                  SECTION 2.  Amendment to the RPA.

                  2.1 Section 9.21 of the RPA is hereby amended by deleting the
words "within 60 days after the Closing Date" where it appears therein and
substituting "within 105 days after the Closing Date" in lieu thereof.

                  SECTION 3.  Agreements of the Parties Hereto.

                  3.1 The parties hereto agree that the failure of the Company
to pay the full amount of the Late Payment to Agent, for the benefit of the
Banks, on or prior to July 15, 2002 shall constitute an Event of Default under
the RPA.

                  3.2 The Agent agrees that no penalties or interest shall be
payable in connection with the Late Payment if the Late Payment shall have been
paid in full by the Company to the Agent on or prior to July 15, 2002.

                  3.3 The parties hereto agree that the waiver set forth in
Section 1.1 herein is effective as of June 13, 2002.

                  3.4 The parties hereto agree that the failure of the Company
to obtain the Minimum Shadow Rating on or prior to the forty-fifth (45th) day
after the date of this Agreement shall constitute a Termination Event.

                  3.5 The parties hereto agree that the failure of HomePride to
enter into a Reconstitution Agreement with CIT, or another entity approved in
writing by the Agent, on or prior to the sixtieth (60th) day after the date of
this Agreement shall constitute a Servicer Termination Event and an Event of
Default.

                  3.6 Any breach of a representation, warranty or covenant
hereunder shall be


                                        2

<PAGE>



deemed to be a breach of a representation, warranty or covenant under the RPA.

                  SECTION 4. Conditions to Effectiveness. The agreements and
waivers contained in this Agreement shall not become effective until the
following conditions have been satisfied in full or waived in writing by the
Agent:

                  (a) the Agent shall have received an executed counterpart of
         this Agreement duly executed by each of the parties hereto;

                  (b) no event has occurred and is continuing which constitutes
         an unwaived Termination Event or an unwaived Incipient Termination
         Event; and

                  (c) the Agent shall have received such approvals, instruments
         or documents as the Agent may reasonably request.

                  SECTION 5. Representations and Warranties. Each of the
Company, HomePride and the Servicer reaffirms and restates its representations
and warranties set forth in the RPA and any agreement, document or instrument
related thereto, and certifies that such representations and warranties are true
and correct on the date hereof with the same force and effect as if made on such
date, except as they may specifically refer to an earlier date, in which case
they were true and correct as of such date. In addition, the Company, HomePride
and the Servicer each represents and warrants (which representations and
warranties shall survive the execution and delivery hereof) that (a) no unwaived
Termination Event or Incipient Termination Event shall have occurred and is
continuing as of the date hereof nor shall any unwaived Termination Event or an
Incipient Termination Event occur due to this Agreement becoming effective, (b)
the Company, HomePride and the Servicer each has the corporate power and
authority to execute and deliver this Agreement and has taken or caused to be
taken all necessary corporate actions to authorize the execution and delivery of
this Agreement, and (c) no consent of any other person (including, without
limitation, shareholders or creditors of the Company, HomePride or the
Servicer), and no action of, or filing with any governmental or public body or
authority is required to authorize, or is otherwise required in connection with
the execution and performance of this Agreement other than such that have been
obtained.

                  SECTION 6.  Effect on the Documents.

                  (a) On and after the date hereof, each reference in the RPA to
         "this Agreement" shall refer to such agreement as amended hereby and
         each reference in the RPA to "hereunder", "hereof", "herein", or words
         of like import shall mean and be a reference to such agreement as
         amended hereby. On and after the date hereof, each reference to the RPA
         in any agreement, document or instrument related thereto shall mean and
         be a reference to such agreement or agreements as amended hereby.

                  (b) Except as expressly amended and/or waived above, each of
         the RPA and


                                        3

<PAGE>



         the Fee Letter shall remain in full force and effect and each of the
         RPA and the Fee Letter is hereby ratified and confirmed in all respects
         by the Company, HomePride and the Servicer.

                  (c) The execution and delivery of this Amendment shall not,
         except as expressly provided herein, operate as a waiver of any right,
         power or remedy of the Agent, any Bank or Investor under the RPA or the
         Fee Letter nor constitute a waiver of any provision thereunder.

                  SECTION 7. Governing Law. THIS AGREEMENT SHALL, IN ACCORDANCE
WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS
OF LAW PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION.

                  SECTION 8. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed an
original and all of which when taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.




                                        4

<PAGE>



                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.


                                     GSS HOMEPRIDE CORP.


                                     By: /s/ Frank B. Bilotta
                                        ---------------------------------
                                           Name:  Frank B. Bilotta
                                           Title: President


                                     HOMEPRIDE FINANCE CORP., individually and
                                     as Servicer

                                     By: /s/ John Collins, Jr.
                                        ---------------------------------
                                           Name:  John Collins, Jr.
                                           Title: Vice President


                                     CREDIT SUISSE FIRST BOSTON, NEW YORK
                                     BRANCH, as Agent

                                     By: /s/ Anthony Giordano
                                        ---------------------------------
                                           Name:  Anthony Giordano
                                           Title: Director


                                     By: /s/ Alberto Zonca
                                        ---------------------------------
                                           Name:  Alberto Zonca
                                           Title: Vice President

                                     THE CIT GROUP/SALES FINANCING, INC., as
                                     Sub-Servicer


                                     By: /s/ Ron G. Arrington
                                        ---------------------------------
                                           Name:  Ron G. Arrington
                                           Title: Executive Vice President


                                        5






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>6
<FILENAME>k71231exv10w4.txt
<DESCRIPTION>AMENDMENT AGREEMENT NO. 3
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.4

                               AMENDMENT AGREEMENT
                                      NO. 3

                  AMENDMENT AGREEMENT NO. 3, dated as of June 21, 2002 (this
"Amendment"), to the Receivables Purchase Agreement, dated as of April 18, 2002
(as amended, restated and/or otherwise modified from time to time, the "RPA"),
among HomePride Finance Corp. ("HomePride") and GSS HomePride Corp. (the
"Seller"), CIT Group/Sales Financing, Inc. (the "Sub-Servicer"), Greenwich
Funding Corp. (the "Investor"), the financial institutions named therein as
Banks (the "Banks") and Credit Suisse First Boston, New York Branch (the
"Agent"). Capitalized terms not otherwise defined herein shall have the meanings
attributed to them in the RPA.

                  WHEREAS, the parties hereto desire to amend the RPA on the
terms and subject to the provisions hereof;

                  NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the fulfillment of
the conditions set forth below, the parties hereto agree as follows:

                  SECTION 1. Amendments to RPA.

                  1.1 The definition of "Eligible Receivable" in Section 1.01 of
         the RPA is hereby amended by deleting the period at the end thereof and
         adding at the end thereof the following:

                  and

                           (xxx) until such time as the Agent has received a "no
                  objection" letter, in form and substance satisfactory to the
                  Agent, from the appropriate regulatory body in the State of
                  Louisiana which explicitly states that both the Conduit and
                  CSFB are exempt from any requirement in such State to obtain
                  any licenses, permits and/or approvals or to submit any
                  notifications or registrations in connection with the
                  transactions contemplated by the Transaction Documents, (i)
                  the Obligor under the Contract related to such Receivable
                  shall not be a resident of such State, (ii) the related
                  Manufactured Home shall not be located in such State and (iii)
                  the Title for such Manufactured Home shall not be, and shall
                  not be required to be, issued by such State or any
                  subdivision, agency, bureau or court thereof; and

                           (yyy) until such time as the Agent has received a "no
                  objection" letter, in form and substance satisfactory to the
                  Agent, from the appropriate regulatory


<PAGE>

                  body in the State of Maryland which explicitly states that
                  both the Conduit and CSFB are exempt from any requirement in
                  such State to obtain any licenses, permits and/or approvals or
                  to submit any notifications or registrations in connection
                  with the transactions contemplated by the Transaction
                  Documents, (i) the Obligor under the Contract related to such
                  Receivable shall not be a resident of such State, (ii) the
                  related Manufactured Home shall not be located in such State
                  and (iii) the Title for such Manufactured Home shall not be,
                  and shall not be required to be, issued by such State or any
                  subdivision, agency, bureau or court thereof; and

                           (zzz) until such time as the Agent has received a "no
                  objection" letter, in form and substance satisfactory to the
                  Agent, from the appropriate regulatory body in the State of
                  New York which explicitly states that each of the Seller, the
                  Conduit and CSFB are exempt from any requirement in such State
                  to obtain any licenses, permits and/or approvals or to submit
                  any notifications or registrations in connection with the
                  transactions contemplated by the Transaction Documents, (i)
                  the Obligor under the Contract related to such Receivable
                  shall not be a resident of such State, (ii) the related
                  Manufactured Home shall not be located in such State and (iii)
                  the Title for such Manufactured Home shall not be, and shall
                  not be required to be, issued by such State or any
                  subdivision, agency, bureau or court thereof;

                           (aaaa) until such time as the Agent has received a
                  "no objection" letter, in form and substance satisfactory to
                  the Agent, from the appropriate regulatory body in the
                  Commonwealth of Pennsylvania which explicitly states that both
                  the Conduit and CSFB are exempt from any requirement in such
                  Commonwealth to obtain any licenses, permits and/or approvals
                  or to submit any notifications or registrations in connection
                  with the transactions contemplated by the Transaction
                  Documents, (i) the Obligor under the Contract related to such
                  Receivable shall not be a resident of such Commonwealth, (ii)
                  the related Manufactured Home shall not be located in such
                  Commonwealth and (iii) the Title for such Manufactured Home
                  shall not be, and shall not be required to be, issued by such
                  Commonwealth or any subdivision, agency, bureau or court
                  thereof; and

                           (bbbb) which relates to a Contract of a type, and was
                  originated by a Dealer or HomePride in a State, that, in each
                  case, was addressed in an Opinion of Counsel delivered in
                  accordance with Section 7.01(l) or Section 7.02(j) hereof and
                  such Opinion of Counsel did not disclose any federal, state or
                  local licensing, registration, notification or similar
                  requirements with respect to such Receivable which are
                  applicable to (i) HomePride, HomePride SPV or the Seller,
                  other than that those that have been satisfied by HomePride,
                  HomePride SPV or the Seller, as applicable, or (ii) the Agent,
                  the Investor or any Bank.



                                       2
<PAGE>

                  1.2 Section 7.02 of the RPA is hereby amended by deleting
         clause (j) thereof and inserting in its place the following:

                           (j) HomePride shall have provided Agent an Opinion of
                  Counsel in a form consistent with the form contemplated by
                  Section 7.01(l) that (i) updates all prior Opinions of Counsel
                  delivered in accordance with Section 7.01(l) and this Section
                  7.02(j) (each, a "Prior Opinion") and (ii) identifies each
                  State of the United States in which HomePride, HomePride SPV
                  or the Seller has satisfied the state and local licensing,
                  registration, notification and similar requirements (each, a
                  "License") with respect to the transactions contemplated by
                  the Transaction Documents (each, a "Consumer Transaction") and
                  states that no other state, local or federal Licenses are
                  required for the Consumer Transactions consummated to date.
                  The Opinion of Counsel referenced in the previous sentence
                  shall be required if, and only if, HomePride shall have
                  consummated any Consumer Transactions not addressed by any
                  Prior Opinion; and

                           (k) The Agent shall have received such other
                  approvals, opinions or documents as it may request.

         SECTION 2. Conditions to Effectiveness. The amendments contained in
this Amendment shall not become effective until the Agent shall have received an
executed counterpart of this Amendment duly executed by each party thereto.

         SECTION 3. Representations and Warranties. Each of the Seller and the
Servicer reaffirms and restates the representations and warranties set forth in
the RPA and any agreement, document or instrument related thereto, and certifies
that such representations and warranties are true and correct on the date hereof
with the same force and effect as if made on such date, except as they may
specifically refer to an earlier date, in which case they were true and correct
as of such date. In addition, the Seller and the Servicer each represents and
warrants (which representations and warranties shall survive the execution and
delivery hereof) that (a) no Termination Event (nor any event that but for
notice or lapse of time or both would constitute an Termination Event) shall
have occurred and be continuing as of the date hereof nor shall any Termination
Event (nor any event that but for notice or lapse of time or both would
constitute a Termination Event) occur due to this Amendment becoming effective,
(b) the Seller and the Servicer each has the corporate power and authority to
execute and deliver this Amendment and has taken or caused to be taken all
necessary corporate actions to authorize the execution and delivery of this
Amendment, and (c) no consent of any other person (including, without
limitation, shareholders or creditors of the Seller or the Servicer), and no
action of, or filing with any governmental or public body or authority is
required to authorize, or is otherwise required in connection with the execution
and performance of this Amendment other than such that have been obtained.



                                       3
<PAGE>

         SECTION 4. Reference to and Effect on the Documents.

                  4.1 On and after the date on which this Amendment becomes
         effective pursuant to Section 2 of this Amendment, each reference in
         the RPA to "this Agreement" shall refer to the RPA as amended hereby
         and each reference in the RPA to "hereunder", "hereof", "herein", or
         words of like import shall mean and be a reference to the RPA as
         amended hereby. On and after the date on which this Amendment becomes
         effective pursuant to Section 2 of this Amendment, each reference to
         the RPA in any agreement, document or instrument related to the RPA
         shall mean and be a reference to the RPA as amended hereby.

                  4.2 Except as expressly amended above, the RPA shall remain in
         full force and effect and is hereby ratified and confirmed in all
         respects.

                  4.3 The execution and delivery of this Amendment shall not,
         except as expressly provided herein, operate as a waiver of any right,
         power or remedy of the Investor, any Bank or the Agent under the RPA
         nor constitute a waiver of any provision of the RPA.

         SECTION 5. Governing Law. THIS AMENDMENT SHALL, IN ACCORDANCE WITH
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS
OF LAW PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION.


         SECTION 6. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed an original and all
of which when taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.

                          [Signature pages to follow.]


                                       4
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.


         SELLER:                  GSS HOMEPRIDE CORP.


                                  By:    /s/ Frank B. Bilotta
                                     -------------------------------
                                      Name:  Frank Bilotta
                                      Title: President


         INVESTOR:                GREENWICH FUNDING CORP.

                                  By:    Credit Suisse First Boston, New York
                                         Branch, as its Attorney-In-Fact


                                  By:    /s/ Mark Lengel
                                     -------------------------------
                                      Name:  Mark Lengel
                                      Title: Vice President


                                  By:    /s/ Mark Golombeck
                                     -------------------------------
                                      Name:  Mark Golombeck
                                      Title: Vice President




                                       5
<PAGE>

         BANK:                    CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH


                                  By:    /s/ Anthony Giordano
                                     -------------------------------
                                      Name:  Anthony Giordano
                                      Title: Director


                                  By:    /s/ Alberto Zonca
                                     -------------------------------
                                      Name:  Alberto Zonca
                                      Title: Vice President


         AGENT:                   CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
                                  AS AGENT


                                  By:    /s/ Anthony Giordano
                                     -------------------------------
                                      Name:  Anthony Giordano
                                      Title: Director

                                  By:    /s/ Alberto Zonca
                                     -------------------------------
                                      Name:  Alberto Zonca
                                      Title: Vice President




                                       6
<PAGE>


         SERVICER:                HOMEPRIDE FINANCE CORP., AS SERVICER


                                  By:    /s/ Anthoney S. Cleberg
                                     -------------------------------
                                      Name:  Anthoney S. Cleberg
                                      Title: Vice President



         SUB-SERVICER:            THE CIT GROUP/SALES FINANCING, INC.


                                  By:    /s/ Ron G. Arrington
                                     -------------------------------
                                      Name:  Ron G. Arrington
                                      Title: Executive Vice President






                                       7

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>7
<FILENAME>k71231exv11.txt
<DESCRIPTION>STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TEXT>
<PAGE>
                                                                      EXHIBIT 11


Statement Regarding Computation of Earnings (Loss) Per Share

(in 000's, except per share amounts)

<TABLE>
<CAPTION>

                                                            Unaudited                Unaudited
                                                        Three Months Ended        Six Months Ended
                                                      ---------    ---------   ---------    ---------
                                                      June 29,     June 30,    June 29,     June 30,
                                                        2002         2001        2002         2001
                                                      ---------    ---------   ---------    ---------
<S>                                                  <C>          <C>          <C>         <C>
Weighted average shares outstanding                      48,729       47,847      48,617       47,672
Effect of dilutive securities - options                       -        1,661           -            -
Shares for diluted EPS                                   48,729       49,508      48,617       47,672

Net income (loss)                                     $(199,291)   $     490   $(211,137)   $ (25,593)
Less: Dividend on preferred stock                           563            -         813            -
Income (loss) available to common shareholders        $(199,854)   $     490   $(211,950)   $ (25,593)


Per share amounts:
Basic earnings (loss) per share                       $   (4.10)   $    0.01   $   (4.36)   $   (0.54)
Diluted earnings (loss) per share                     $   (4.10)   $    0.01   $   (4.36)   $   (0.54)
</TABLE>





</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
