<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of
The Securities Exchange Act of 1934
FOR QUARTER ENDED: COMMISSION FILE NUMBER
September 30, 1999 333-26389
------------------------------------------------
AFFINITY GROUP HOLDING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-2922099
(State of incorporation or organization) (I.R.S. Employer Identification No.)
64 Inverness Drive East (303) 792-7284
Englewood, CO 80112 (Registrant's telephone
(Address of principal executive offices) number, including area code)
-----------------------------------------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
11% Senior Notes Due 2007
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.
OUTSTANDING AS OF
CLASS NOVEMBER 8, 1999
- ----- -----------------
Common Stock, $.01 par value 100
DOCUMENTS INCORPORATED BY REFERENCE:
NONE
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I. Financial Information
ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets 1
As of September 30, 1999 and December 31, 1998
Consolidated Statements of Operations 2
For the three months ended September 30, 1999 and 1998
Consolidated Statements of Operations 3
For the nine months ended September 30, 1999 and 1998
Consolidated Statements of Cash Flows 4
For the nine months ended September 30, 1999 and 1998
Notes to Consolidated Financial Statements 5
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF 9
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. Other Information 20
SIGNATURES 21
</TABLE>
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30,1999 AND DECEMBER 31, 1998
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
9/30/99 12/31/98
--------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,161 $ 2,863
Accounts receivable, less allowance for doubtful accounts 25,400 24,248
Inventories 35,105 32,972
Prepaid expenses and other assets 14,827 8,939
--------------- ----------------
Total current assets 79,493 69,022
PROPERTY AND EQUIPMENT 72,266 69,417
NOTE FROM AFFILIATE 3,280 3,100
INVESTMENT IN AFFILIATE 18,631 -
INTANGIBLE ASSETS 190,851 196,917
DEFERRED TAX ASSET 5,208 7,842
OTHER ASSETS 4,544 3,255
NET LONG-TERM ASSETS OF DISCONTINUED OPERATIONS - 146,616
--------------- ----------------
$ 374,273 $ 496,169
--------------- ----------------
--------------- ----------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 19,276 $ 19,893
Accrued interest 8,193 4,995
Accrued taxes 3,000 332
Accrued liabilities 22,796 22,750
Deferred revenues 64,353 53,395
Deferred tax liability 1,964 1,964
Current portion of long-term debt 8,379 7,804
Net current liabilities of discontinued operations - 129,596
--------------- ----------------
Total current liabilities 127,961 240,729
DEFERRED REVENUES 33,695 35,276
LONG-TERM DEBT 286,516 297,663
OTHER LONG-TERM LIABILITIES 3,265 3,447
COMMITMENTS AND CONTINGENCIES - -
--------------- ----------------
451,437 577,115
--------------- ----------------
STOCKHOLDER'S DEFICIT:
Common stock, $.01 par value, 1,000 shares authorized,
100 shares issued and outstanding 1 1
Additional paid-in capital 12,021 12,021
Accumulated deficit (89,186) (92,968)
--------------- ----------------
Total stockholder's deficit (77,164) (80,946)
--------------- ----------------
$ 374,273 $ 496,169
--------------- ----------------
--------------- ----------------
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATMENTS OF OPERATIONS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------
9/30/99 9/30/98
-------------- --------------
<S> <C> <C>
REVENUES
Membership services $ 30,702 $ 31,294
Publications 12,083 10,090
Merchandise 57,103 53,119
-------------- --------------
99,888 94,503
COSTS APPLICABLE TO REVENUES:
Membership services 19,844 19,523
Publications 8,134 7,629
Merchandise 38,106 36,070
-------------- --------------
66,084 63,222
GROSS PROFIT 33,804 31,281
OPERATING EXPENSES:
Selling, general and administrative 20,196 18,543
Depreciation and amortization 4,014 3,697
-------------- --------------
24,210 22,240
-------------- --------------
INCOME FROM OPERATIONS 9,594 9,041
NON-OPERATING ITEMS:
Interest expense, net (7,187) (8,018)
Other non-operating items, net (387) 56
-------------- --------------
(7,574) (7,962)
-------------- --------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 2,020 1,079
INCOME TAX EXPENSE (1,314) (400)
-------------- --------------
INCOME FROM CONTINUING OPERATIONS 706 679
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations, net
of applicable income tax expense of $255 in
1999 and an income tax benefit of $205 in 1998 415 (336)
Gain on disposal, net of applicable income tax
expense of $267 436 -
-------------- --------------
NET INCOME $ 1,557 $ 343
-------------- --------------
-------------- --------------
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
9/30/99 9/30/98
-------------- --------------
<S> <C> <C>
REVENUES:
Membership services $ 89,509 $ 90,125
Publications 35,714 34,265
Merchandise 161,439 146,213
-------------- --------------
286,662 270,603
COSTS APPLICABLE TO REVENUES:
Membership services 55,317 53,739
Publications 25,299 26,689
Merchandise 106,684 98,406
-------------- --------------
187,300 178,834
GROSS PROFIT 99,362 91,769
OPERATING EXPENSES:
Selling, general and administrative 60,021 55,082
Depreciation and amortization 12,013 10,922
-------------- --------------
72,034 66,004
-------------- --------------
INCOME FROM OPERATIONS 27,328 25,765
NON-OPERATING ITEMS:
Interest expense, net (21,667) (23,935)
Other non-operating items, net (280) 290
-------------- --------------
(21,947) (23,645)
-------------- --------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 5,381 2,120
INCOME TAX EXPENSE (3,053) (797)
-------------- --------------
INCOME FROM CONTINUING OPERATIONS 2,328 1,323
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations, net
of applicable income tax expense of $624 in
1999 and an income tax benefit of $629 in
1998 1,018 (1,027)
Gain on disposal, net of applicable income tax
expense of $267 436 -
-------------- --------------
NET INCOME $ 3,782 $ 296
-------------- --------------
-------------- --------------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
9/30/99 9/30/98
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,782 $ 296
Adjustments to reconcile net income to net cash
provided by operating activities:
Discontinued operations (1,454) 466
Deferred tax provision 2,634 796
Depreciation and amortization 12,013 11,060
Provision for losses on accounts receivable 428 517
Deferred compensation 850 (325)
Gain on disposal of property and equipment (4) (6)
Changes in operating assets and liabilities (net of
purchased businesses):
Accounts receivable (1,580) 2,273
Inventories (2,133) (1,702)
Prepaids and other assets (7,177) (1,817)
Accounts payable (617) (2,355)
Accrued and other liabilities 4,723 (385)
Deferred revenues 9,377 8,884
------------ ------------
Net cash provided by operating activities 20,842 17,702
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,491) (8,477)
Proceeds from sale of property 95 45
Net changes in intangible assets (396) (49)
Net changes in loans receivable (180) -
------------ ------------
Net cash used in investing activities (8,972) (8,481)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt 58,580 37,848
Principal payments of long-term debt (69,152) (45,564)
------------ ------------
Net cash used in financing activities (10,572) (7,716)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,298 1,505
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,863 4,026
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,161 $ 5,531
------------ ------------
------------ ------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest 18,780 17,325
Income Taxes 823 5,172
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The financial statements included herein include the accounts of Affinity Group
Holding, Inc. ("AGHI"), its wholly-owned subsidiary, Affinity Group, Inc.
("AGI"), and AGI's subsidiaries (collectively the Company) without audit, in
accordance with generally accepted accounting principles, and pursuant to the
rules and regulations of the Securities and Exchange Commission. These interim
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes in the Company's 10-K report for the
year ended December 31, 1998 as filed with the Securities and Exchange
Commission. In the opinion of management of the Company, these consolidated
financial statements contain all adjustments of a normal recurring nature
necessary to present fairly the financial position, results of operations and
cash flows of the Company for the interim periods presented.
(2) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. The Company currently has no items
related SFAS 133 other than the income/loss related to the interest floor and
cap transaction agreement. This SFAS will be implemented January 1, 2001. The
adoption by the Company of SFAS 133 is not expected to have a material effect on
its results of operations or on its financial position.
(3) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
The Company's three principal lines of business are Membership Services,
Publications, and Retail. The Membership Services segment operates the Good Sam
Club, Coast to Coast Club, and Camping World's President's Club for RV owners,
campers and outdoor vacationers, and the Golf Card Club for golf enthusiasts.
5
<PAGE>
(3) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
(CONTINUED)
These membership clubs form a receptive audience to which the Company markets
its products and services. The Publications segment publishes a variety of
publications for selected markets in the recreation and leisure industry,
including general circulation periodicals, club magazines, directories and RV
industry trade magazines. The Retail segment sells specialty retail merchandise
and services for RV owners primarily through retail supercenters and mail order
catalogs. The Company evaluates performance based on profit or loss from
operations before interest, income taxes, depreciation and amortization.
The reportable segments are strategic business units that offer different
products and services. They are managed separately because each business
requires different technology, management expertise and marketing strategies.
Most of the businesses were acquired as a unit, and the management at the time
of acquisition was retained.
The Company does not allocate depreciation, amortization, interest, income taxes
or unusual items to segments. Financial information by reportable business
segment is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Membership
Services Publications Retail Consolidated
-------------------------------------------
<S> <C> <C> <C> <C>
FOR THE QUARTER ENDED:
September 30, 1999
Revenues from external customers $ 30,702 $ 12,083 $ 57,103 $ 99,888
Segment operating profit 8,643 3,405 6,349 18,397
September 30, 1998
Revenues from external customers $ 31,294 $ 10,090 $ 53,119 $ 94,503
Segment operating profit 9,643 1,880 5,665 17,188
<CAPTION>
Membership
Services Publications Retail Consolidated
-------------------------------------------
<S> <C> <C> <C> <C>
FOR THE NINE MONTHS ENDED:
September 30, 1999
Revenues from external customers $ 89,509 $ 35,714 $161,439 $286,662
Segment operating profit 28,200 8,410 16,230 52,840
September 30, 1998
Revenues from external customers $ 90,125 $ 34,265 $146,213 $270,603
Segment operating profit 30,845 5,713 13,244 49,802
</TABLE>
6
<PAGE>
(3) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
(CONTINUED)
The following is a summary of the reportable segment reconciliations to the
Company's consolidated financial statements for the three and nine months ended
September 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ------------------------
9/30/99 9/30/98 9/30/99 9/30/98
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
INCOME FROM OPERATIONS BEFORE
DEPRECIATION AND AMORTIZATION
Total profit for reportable segments $ 18,397 $ 17,188 $ 52,840 $ 49,802
Unallocated G & A expense (4,789) (4,450) (13,499) (13,115)
----------- ----------- ------------ -----------
Income from operations before
depreciation and amortization $ 13,608 $ 12,738 $ 39,341 $ 36,687
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>
(4) DISCONTINUED OPERATIONS
On December 31, 1998, the Company sold Affinity Insurance Group, Inc. ("AINS")
to a related party in exchange for a promissory note in the amount of $3.1
million. In connection with the sale, the Company recorded a loss of $87,000,
net of a related income tax benefit of $33,000.
During the fourth quarter of 1998, the Company's Board of Directors adopted a
plan to sell the stock of Affinity Bank ("AB"), subject to regulatory approval,
to Affinity Bank Holdings LLC ("ABH"), an affiliate of the Company, at its net
book value of $17,100,000, which in the opinion of management then approximated
market value. The Company received regulatory approval and subsequently closed
the transaction effective September 30, 1999. In consideration for the stock of
AB, the Company received 17,100 shares of Series A Preferred stock of the
purchaser, ABH, having a value of $17,100,000. This preferred stock bears
cumulative and compounding interest at 11% per annum and has a liquidation
preference over common holders of interests in ABH. The $1,531,000 of preferred
interest earned since the agreement date was recognized and included in the gain
on disposal. The Company recorded a gain on disposal of $436,000, net of a
related income tax benefit of $267,000 in connection with the sale.
7
<PAGE>
(4) DISCONTINUED OPERATIONS (CONTINUED)
The results of operations of AB and AINS have been classified as discontinued
operations in the accompanying financial statements. Information relating to the
operations of AB and AINS for the nine months ended September 30, 1999 and 1998
are as follows (in thousands):
<TABLE>
<CAPTION>
9/30/99 9/30/98
------------ ------------
<S> <C> <C>
Revenues $ 12,772 $ 8,114
Costs applicable to revenues 10,955 9,599
------------ ------------
Gross profit (loss) 1,817 (1,485)
Operating expenses 175 171
------------ ------------
Income (loss) from operations 1,642 (1,656)
Income tax (expense) benefit (624) 629
Gain on disposal, net of taxes 436 -
------------ ------------
Income (loss) from discontinued operations $ 1,454 $ (1,027)
------------ ------------
------------ ------------
</TABLE>
The assets and liabilities of AB are included in the accompanying consolidated
balance sheet as of December 31, 1998 as follows (in thousands):
<TABLE>
<CAPTION>
12/31/98
------------
<S> <C>
Current assets:
Cash $ 23,027
Investments 1,992
Prepaid expenses and other assets 255
------------
Total current assets 25,274
Current liabilities:
Accrued liabilities 638
Customer deposits 154,163
Accrued taxes 69
------------
Total current liabilities 154,870
------------
Net current liabilities $ (129,596)
------------
------------
Long-term assets:
Property and equipment $ 2,420
Loans receivable 143,443
Intangible and other assets 753
------------
Net long-term assets 146,616
------------
------------
</TABLE>
8
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ITEM 2:
The following table is derived from the Company's Consolidated Statements of
Operations and expresses the results from operations as a percentage of revenues
and reflects the net increase (decrease) between periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------
9/30/99 9/30/98 Inc/(Dec)
----------- ----------- -------------
<S> <C> <C> <C>
REVENUES:
Membership services 30.7% 33.1% (1.9%)
Publications 12.1% 10.7% 19.8%
Merchandise 57.2% 56.2% 7.5%
----------- ----------- -------------
100.0% 100.0% 5.7%
COSTS APPLICABLE TO REVENUES:
Membership services 19.9% 20.6% 1.6%
Publications 8.1% 8.1% 6.6%
Merchandise 38.2% 38.2% 5.6%
----------- ----------- -------------
66.2% 66.9% 4.5%
GROSS PROFIT 33.8% 33.1% 8.1%
OPERATING EXPENSES:
Selling, general and administrative 20.2% 19.6% 8.9%
Depreciation and amortization 4.0% 3.9% 8.6%
----------- ----------- -------------
24.2% 23.5% 8.9%
----------- ----------- -------------
INCOME FROM OPERATIONS 9.6% 9.6% 6.1%
NON-OPERATING ITEMS:
Interest expense, net (7.2%) (8.6%) (10.4%)
Other non-operating items, net (0.4%) 0.1% (791.1%)
----------- ----------- -------------
(7.6%) (8.5%) (4.9%)
----------- ----------- -------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 2.0% 1.1% 87.2%
INCOME TAX EXPENSE (1.3%) (0.4%) 228.5%
----------- ----------- -------------
INCOME FROM CONTINUING OPERATIONS 0.7% 0.7% 4.0%
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations, net of
applicable income tax expense (benefit) 0.4% (0.3%) 223.5%
Gain on disposal, net of applicable income tax
expense 0.5% -- --
----------- ----------- -------------
NET INCOME 1.6% 0.4% 353.9%
----------- ----------- -------------
----------- ----------- -------------
</TABLE>
9
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ITEM 2:
The following table is derived from the Company's Consolidated Statements of
Operations and expresses the results from operations as a percentage of revenues
and reflects the net increase (decrease) between periods:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------------
9/30/99 9/30/98 Inc/(Dec)
----------- ----------- -------------
<S> <C> <C> <C>
REVENUES:
Membership services 31.2% 33.3% (0.7%)
Publications 12.5% 12.7% 4.2%
Merchandise 56.3% 54.0% 10.4%
----------- ----------- -------------
100.0% 100.0% 5.9%
COSTS APPLICABLE TO REVENUES:
Membership services 19.3% 19.8% 2.9%
Publications 8.8% 9.9% (5.2%)
Merchandise 37.2% 36.4% 8.4%
----------- ----------- -------------
65.3% 66.1% 4.7%
GROSS PROFIT 34.7% 33.9% 8.3%
OPERATING EXPENSES:
Selling, general and administrative 21.0% 20.4% 9.0%
Depreciation and amortization 4.2% 4.0% 10.0%
----------- ----------- -------------
25.2% 24.4% 9.1%
----------- ----------- -------------
INCOME FROM OPERATIONS 9.5% 9.5% 6.1%
NON-OPERATING ITEMS:
Interest expense, net (7.5%) (8.8%) (9.5%)
Other non-operating items, net (0.1%) 0.1% (196.6%)
----------- ----------- -------------
(7.6%) (8.7%) (7.2%)
----------- ----------- -------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 1.9% 0.8% 153.8%
INCOME TAX EXPENSE (1.1%) (0.3%) 283.1%
----------- ----------- -------------
INCOME FROM CONTINUING OPERATIONS 0.8% 0.5% 76.0%
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations, net of
applicable income tax expense (benefit) 0.4% (0.4%) 199.1%
Gain on disposal, net of applicable income tax
expense 0.1% -- --
----------- ----------- -------------
NET INCOME 1.3% 0.1% 1177.7%
----------- ----------- -------------
----------- ----------- -------------
</TABLE>
10
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 1998
REVENUES
Revenues of $99.9 million for the third quarter of 1999 increased by
approximately $5.4 million or 5.7% from the comparable period in 1998.
Membership services revenue of $30.7 million for the third quarter of 1999
decreased by approximately $0.6 million or 1.9% from the comparable period in
1998. This revenue decrease was largely attributable to a $1.9 million reduction
in revenue from the extended vehicle warranty program. Our underwriting partner
eliminated multi-year contracts thus limiting sales to annual renewable
contracts. This decline was partially offset by revenue increases of $0.6
million in marketing fee income generated from the sales of health and life
insurance policies as a result of a renewed contract with the third party
administrator, $0.4 million from member events and $0.3 million in royalty fee
income associated with the credit card program.
Publication revenue of $12.1 million for the third quarter of 1999 increased by
$2.0 million, or 19.8%, from the comparable period in 1998. This increase was
principally due to a $0.9 million increase in revenue from the timing of issues
published by Ehlert Publishing Group, Inc. ("EPG"), a $0.6 million increase in
book sales as a result of increased promotions and a $0.5 million increase in
advertising revenue associated with the RV-related publications.
Merchandise revenue of $57.1 million increased $4.0 million or 7.5% over the
third quarter of 1998. This increase was attributable to a $2.9 million increase
in retail showroom sales, which included $0.7 million from the addition of two
new stores and $2.2 million from a 5.6% increase in same store sales over the
third quarter of 1998. In addition, mail order sales increased $0.8 million, and
installation fees and other supplies and services increased $0.3 million.
COSTS APPLICABLE TO REVENUES
Costs applicable to revenues totaled $66.1 million for the third quarter of
1999, an increase of $2.9 million or 4.5% over the comparable period in 1998.
Membership services costs and expenses increased by approximately $0.3 million
or 1.6% to $19.8 million in the third quarter of 1999 compared to $19.5 million
in 1998. This increase was due to a $0.6 million increase in marketing and club
magazine production costs primarily associated with the Good Sam
11
<PAGE>
Club and a $0.4 million increase in marketing and administration costs as a
result of the contract renewal with the health and life insurance third party
administrator, partially offset by a $0.7 million decrease in expenses
associated with the decline in extended vehicle warranty policies sold.
Publication costs and expenses of $8.1 million for the third quarter of 1999
increased approximately $0.5 million or 6.6% compared to the third quarter of
1998. This increase was primarily due to increased book promotions versus 1998
and increased costs associated with the timing of issues published by EPG,
partially offset by reduced costs associated with conversion of ROADS TO
ADVENTURE from a quarterly publication in 1998 to an annual publication in 1999.
Merchandise costs applicable to revenues of $38.1 million increased $2.0 million
from the third quarter of 1998 primarily attributable to the 7.5% increase in
merchandise sales. The gross profit margin increased by $1.9 million from 32.1%
in the third quarter of 1998 to 33.3% for the same period in 1999.
OPERATING EXPENSES
Selling, general and administrative expenses of $20.2 million for the third
quarter of 1999 were $1.7 million, or 8.9%, over the third quarter of 1998. This
increase was primarily due to a $1.3 million increase related to the addition of
two new Camping World stores in the second half of 1998 and variable labor
increases associated with increased retail sales, $0.7 million in increased
deferred executive compensation, partially offset by a $0.3 million decrease in
other expenses. Depreciation and amortization expense of $4.0 million was $0.3
million over the third quarter of 1998. This variance was principally due to the
depreciation of the assets associated with the new retail stores, merchandising
and distribution system, and the acquisition of the corporate facility in the
fourth quarter of 1998.
INCOME FROM OPERATIONS
Income from operations for the third quarter of 1999 increased by $0.6 million
or 6.1% to $9.6 million compared to $9.0 million for the third quarter of 1998.
This increase was due to a $1.9 million increase in gross profit from
merchandise segment and a $1.5 million increase in gross profit from the
publications segment, partially offset by increased operating expenses of $1.9
million and reduced gross profit from the membership services segment of $0.9
million.
NON-OPERATING EXPENSES
Non-operating expenses were $7.6 million for the third quarter of 1999, compared
to $8.0 million for the same period in 1998. This $0.4 million favorable
variance is principally due to the lower interest expense incurred as a result
of
12
<PAGE>
lower effective interest rates in 1999 as a result of the new AGI Revolving
Credit and Term Loan Facility which commenced during the fourth quarter of 1998.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
Income from continuing operations before income taxes in the third quarter of
1999 was approximately $2.0 million compared to $1.1 million for the third
quarter of 1998. This $0.9 million increase from the prior period was
principally due to the lower net non-operating expenses, principally interest
expense, and the increase in income from operations noted above.
INCOME TAX EXPENSE
In the third quarter of 1999, the Company recognized a $1.3 million tax expense
compared to $0.4 million tax expense in the third quarter of 1998.
DISCONTINUED OPERATIONS
As further described in Note 4 to the consolidated financial statements, the
Company adopted a plan to dispose of the assets of AB and sold AINS in the
fourth quarter of 1998. Income from discontinued operations was $0.4 million for
the third quarter of 1999 compared to a net loss of $0.3 million for the third
quarter of 1998. Further, the Company recorded a $0.4 million gain on the
disposal of AB in 1999.
NET INCOME
The net income in the third quarter of 1999 was $1.6 million compared to a net
income of $0.3 million for the same period in 1998.
NINE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1998
REVENUES
Revenues of $286.7 million for the first nine months of 1999 increased by
approximately $16.1 million or 5.9% from the comparable period in 1998.
Membership services revenue of $89.5 million for the first nine months of 1999
decreased by approximately $0.6 million from the comparable period in 1998. This
was largely attributable to reduced revenue of $3.7 million from the extended
vehicle warranty program, partially offset by $1.7 million in increased
marketing fee income generated from the sales of health and life insurance
policies as a result of a renewed contract with the third party administrator,
$0.7
13
<PAGE>
million in increased advertising revenue associated with the club magazines, and
a $0.7 million in additional Good Sam emergency road service revenue as a result
of increased enrollment.
Publication revenue of $35.7 million for the first nine months of 1999 increased
by $1.4 million, or 4.2%, from the comparable period in 1998. This revenue
increase was largely attributable to an increase in advertising revenue in
RV-related magazines and an increase from the timing of issues published by EPG.
Merchandise revenue of $161.4 million increased $15.2 million or 10.4% over the
first nine months of 1998. This increase was attributable to a $10.6 million
increase in retail showroom sales, which includes a $4.8 million increase
related to the addition of two new stores and a $5.8 million or 5.7% increase in
same store sales over the first nine months of 1998, a $3.4 million increase in
mail order sales, and a $1.2 million increase in installation fees and other
supplies and services.
COSTS APPLICABLE TO REVENUES
Costs applicable to revenues totaled $187.3 million for the first nine months of
1999, an increase of $8.5 million or 4.7% over the comparable period in 1998.
Membership services costs and expenses increased by approximately $1.6 million
or 2.9% to $55.3 million in the first nine months of 1999 compared to $53.7
million in 1998. This increase was due to a $1.8 million increase in membership
services costs primarily associated with increased marketing of the Good Sam
Club and increased sales of the Coast to Coast accommodation cards, as well as
$1.1 million due to increased marketing and administration costs as a result of
the contract renewal with the health and life insurance third party
administrator, partially offset by a $1.3 million expense reduction associated
with the decline in sales of extended warranty policies.
Publication costs and expenses of $25.3 million for the first nine months of
1999 decreased approximately $1.4 million or 5.2% compared to the first nine
months of 1998. This decrease was primarily due to a $0.6 million expense
reduction attributable to the conversion of ROADS TO ADVENTURE from a quarterly
publication in 1998 to an annual publication in 1999, $0.5 million expense
reduction from the annual directory publications primarily due to lower
marketing and promotion expense, and a $0.3 million decrease in paper and
promotion costs for RV-related publications.
Merchandise costs applicable to revenues of $106.7 increased $8.3 million from
the first nine months of 1998 primarily attributable to the 10.4% increase in
merchandise sales. The gross profit margin increased by $6.9 million from 32.7%
in the first nine months of 1998 to 33.9% for the same period in 1999.
14
<PAGE>
OPERATING EXPENSES
Selling, general and administrative expenses of $60.0 million for the first nine
months of 1999 were $4.9 million over the first nine months of 1998 primarily
related to the addition of two new Camping World stores and variable labor
increases associated with increased retail sales. Depreciation and amortization
expense of $12.0 million was $1.1 million over the first nine months of 1998.
This variance was principally due to the depreciation of the assets associated
with the new retail stores, the merchandising and distribution system, and the
acquisition of the corporate facility in the fourth quarter of 1998.
INCOME FROM OPERATIONS
Income from operations for the first nine months of 1999 increased by $1.6
million or 6.1% to $27.3 million compared to the comparable period in 1998. This
increase was due to increased gross profit from the merchandise segment of $6.9
million, increased gross profit from the publications segment of $2.9 million,
partially offset by increased operating expenses of $6.0 million and a $2.2
million reduction in gross profit from the membership services segment.
NON-OPERATING EXPENSES
Non-operating expenses were $21.9 million for the first nine months of 1999,
compared to $23.6 million for the same period in 1998. Lower borrowings combined
with a lower effective interest rate in 1999 from the new AGI Revolving Credit
and Term Loan Facility resulted in lower interest expense for the first nine
months of 1999 versus the same period in 1998.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
Income from continuing operations before income taxes in the first nine months
of 1999 was $5.4 million compared to $2.1 million for the first nine months of
1998. This improvement from the prior period was principally due to the increase
in income from operations noted above, combined with lower net non-operating
items, principally interest expense.
INCOME TAX EXPENSE
In the first nine months of 1999, the Company recognized a $3.1 million tax
expense compared to $0.8 million tax expense in the first nine months of 1998.
DISCONTINUED OPERATIONS
15
<PAGE>
As further described in Note 4 to the consolidated financial statements, the
Company adopted a plan to dispose of the assets of AB and sold AINS in the
fourth quarter of 1998. Income from the discontinued operations was $1.0 million
for the first nine months of 1999 compared to a net loss of $1.0 million for the
first nine months of 1998. Further, the Company recorded a $0.4 million gain on
the disposal of AB in 1999.
NET INCOME
The net income in the first nine months of 1999 was $3.8 million compared to a
net income of $0.3 million for the same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
AGHI is a holding company whose only assets are the capital stock of AGI and
Affinity Group Thrift Holding Corporation ("AGTHC"). AGI, and its subsidiaries,
provide the operating cash flow necessary to service its debt as well as that of
AGHI. The operations of AB, AGTHC's sole and wholly-owned subsidiary until
September 30, 1999 when the stock of AB was transferred to ABH, have been
classified as discontinued in the accompanying financial statements.
The Company has two primary debt obligations. On April 2, 1997, AGHI issued a
total of $130.0 million of 11.0% senior notes maturing on April 1, 2007 ("AGHI
Senior Notes"). On November 13, 1998, AGI entered into a $200.0 million
five-year revolving credit and term loan facility ("AGI Revolving Credit and
Term Loan Facility") consisting of two term loans aggregating $130.0 million
(initially reducing in quarterly principal installments of $1.65 million) and a
revolving credit facility of $70.0 million of which the outstanding balance will
be due and payable at the conclusion of the credit arrangement. The interest on
borrowings under the AGI Revolving Credit and Term Loan Facility is at variable
rates based on the ratio of total cash flow to outstanding indebtedness (as
defined). Interest rates float with prime and the London Interbank Offered Rates
("LIBOR"), plus an applicable margin ranging from 1.625% to 3.625% over the
stated rates. As of September 30, 1999, the average interest rates on the term
loans and revolving credit facility were 8.54% and 8.04%, respectively, and
permitted borrowings under the undrawn revolving line were $43.0 million. AGI
also pays a commitment fee of 0.5% per annum on the unused amount of the
revolving credit line. The AGI Revolving Credit and Term Loan Facility is
secured by virtually all the assets and a pledge of the stock of AGI.
Effective November 1, 1998, AGI entered into an interest rate floor and cap
transaction agreement ("AGI Interest Rate Collar") at no cost. The notional
amount of the AGI Interest Rate Collar is $75.0 million with a cap rate of 6.0%
and a floor rate of 5.585% over the three month LIBOR index. The floating rate
16
<PAGE>
is adjusted quarterly and was 5.3125% at September 30, 1999. This facility has a
maturity date of November 1, 2001. The AGI Interest Rate Collar protects the
Company against a rise in the base rate over 6% on $75.0 million of the floating
rate term loans noted above.
The AGI Revolving Credit and Term Loan Facility allows for, among other things,
the distribution of payments by AGI to AGHI to service the semi-annual interest
due on the AGHI Senior Notes and payment of certain other AGHI obligations. Such
distributions are subject to AGI's compliance with certain restrictive
covenants, including, but not limited to, an interest coverage ratio, fixed
charge coverage ratio, minimum operating cash flow, and limitations on capital
expenditures and total indebtedness. Further, AGI is permitted to make dividends
to AGHI subject to certain limitations and covenants as defined in the
agreement.
The AGHI indenture pursuant to which the AGHI Senior Notes were issued and the
AGI Revolving Credit and Term Loan Facility each contain certain restrictive
covenants relating to, but not limited to, mergers, changes in the nature of the
business, acquisitions, additional indebtedness, sale of assets, investments,
payment of dividends, and minimum coverage ratios pertaining to interest
expense, fixed charges, levels of consolidated cash flow and cash flow leverage
ratio. The Company was in compliance with all debt covenants at September 30,
1999.
During the first nine months of 1999, payments under the terms of several
phantom stock agreements totaled $1.7 million. Additional phantom stock payments
of $0.3 million are scheduled to be made during the remainder of 1999.
Capital expenditures for the first nine months of 1999 and 1998 totaled $8.5
million. Capital expenditures are anticipated to be approximately $10.0 million
for 1999, primarily for completion of a Camping World supercenter, and continued
enhancements to membership marketing databases, inbound and outbound
tele-communications, and computer software and hardware, some of which relate to
the Year 2000 compliance.
During the fourth quarter of 1998, the Company's Board of Directors adopted a
plan to sell the stock of AB, subject to regulatory approval, to ABH, an
affiliate of the Company, at its net book value of $17,100,000, which in the
opinion of management then approximated market value. As a result, the
operations of AB are classified as a discontinued operation in the accompanying
financial statements. The Company received regulatory approval to sell AB and
subsequently closed the transaction effective September 30, 1999. In
consideration for the stock of AB, AGTHC received 17,100 shares of Series A
Preferred stock of the purchaser, ABH, having a value of $17,100,000. This
17
<PAGE>
preferred stock bears cumulative and compounding interest at 11% per annum and
has a liquidation preference over common holders of interests in ABH. In
addition, AGTHC, although required to be consolidated with the Company, is
recognized as an "unrestricted" or non-guarantying subsidiary under the terms of
the AGHI Senior Notes.
Management believes that funds generated by operations together with available
borrowings under its revolving credit line will be sufficient to satisfy the
Company's operating cash needs, debt obligations and capital requirements of its
existing operations during the next twelve months.
YEAR 2000 DATE CONVERSION
Many of the Company's computerized systems could be affected by the Year 2000
issue, which refers to the inability of such systems to properly process dates
beyond December 31, 1999. The Company also has numerous computerized interfaces
with third parties and is possibly vulnerable to failure by such third parties
if they do not adequately address their Year 2000 issues. System failures
resulting from these issues could cause significant disruption to the Company's
operations and result in a material adverse effect on the Company's business,
results of operations, financial condition or liquidity. Management believes
that a significant portion of its "mission critical" computer systems are Year
2000 compliant and is continuing to assess the balance of its computer systems
as well as equipment and other facilities systems. Management plans to complete
its investigation, remediation and contingency planning activities for all
critical systems within the fourth quarter of 1999, although there can be no
assurance that it will be completed within this time frame. At this time,
management believes that the Company does not have any internal critical Year
2000 issues that it cannot remedy.
Management is in the process of surveying third parties with which it has a
material relationship primarily through written correspondence. Management is
depending on the response of these third parties in its assessment of Year 2000
readiness. Management cannot be certain as to the actual Year 2000 readiness of
these third parties or the impact that any non-compliance on their part may have
on the Company's business, results of operations, financial condition or
liquidity.
The Company expects to incur internal staff costs as well as consulting and
other expenses in preparing for the Year 2000. Because the Company has replaced
or updated a significant portion of its computer systems, both hardware and
software, in recent years, the cost to be incurred in addressing the Year 2000
issue are not expected to have a material impact on the Company's business,
results of operations, financial condition or liquidity. For the first nine
months of
18
<PAGE>
1999, these costs have totaled approximately $1.1 million. Expenditures on Year
2000 issues for the total year 1999 are expected to be approximately $1.7
million. This expectation assumes that the existing forecast of costs to be
incurred contemplates all significant actions required and that the Company will
not be obligated to incur significant Year 2000 related costs on behalf of our
customers, suppliers and other third parties.
19
<PAGE>
PART II: OTHER INFORMATION
Items 1-4: Not Applicable
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
Item 5: Agreement to sell the capital stock of Affinity Bank to 10.39
Affinity Bank Holdings LLC dated December 7, 1998
Member Control Agreement of Affinity Bank Holdings LLC 10.40
dated as of September 30, 1999
Closing Agreement between Affinity Group Thrift Holding 10.41
Corp. and Affinity Bank Holdings LLC dated as of Sept-
ember 30, 1999.
</TABLE>
Item 6: Not Applicable
20
<PAGE>
SIGNATURES:
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AFFINITY GROUP HOLDING, INC.
/s/ Mark J. Boggess
---------------------------
Date: November 8, 1999 Mark J. Boggess
Senior Vice President
Chief Financial Officer
21
<PAGE>
EXHIBIT 10.39
STOCK PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the 7th
day of December, 1998 between AFFINITY GROUP THRIFT HOLDING CORP., a Delaware
corporation (the "Seller") and AFFINITY BANK HOLDINGS LLC, a Minnesota limited
liability company (the "Purchaser").
WITNESSETH:
Pursuant to this Agreement, the Seller will sell and deliver to the
Purchaser, and the Purchaser will purchase and acquire from the Seller, all of
the issued and outstanding capital stock (the "Shares") of Affinity Bank, a
California corporation ("AB"). Such purchase and sale is to be subject to the
contingencies set forth in Section 2.4 hereof and is made in consideration of
and is premised upon the various representations, warranties, covenants,
agreements and undertakings of the Seller and the Purchaser contained in this
Agreement. The Shares are sometimes collectively referred to herein as the
"Securities.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement are used as defined in this
Article I or elsewhere in this Agreement
1.1 AFFILIATE. The term "Affiliate" shall mean with respect to any
entity, a person or entity directly or indirectly, controlling, controlled by
or under common control with, such entity.
1.2 DAMAGES. The term "Damages" shall mean any and all
obligations, liabilities, damages, penalties, deficiencies, losses,
investigations, proceedings, judgments, costs, and expenses (including, but
not limited to, costs and expenses incurred in connection with the performing
obligations, interest, bonding and court costs and the attorneys' fees and
disbursements) in each case, after the application of any and all amounts
covered under insurance, contracts or similar arrangements and from third
parties by the person or entity claiming indemnity hereunder and after taking
into account the contributing acts or omissions to the event giving arise to
any claim for indemnity hereunder and after taking into account the
contributing acts or omissions to the event giving arise to any claim for
indemnity hereunder directly or indirectly after the Closing of the person or
entity claiming indemnity hereunder, which acts or omissions give rise to any
liabilities by such person or entity under applicable Legal Requirements.
1
<PAGE>
1.3 LEGAL REQUIREMENTS. The term "Legal Requirements" shall mean
any and all currently applicable (i) federal, state and local laws
(statutory, judicial or otherwise), ordinances and regulations as currently
interpreted by relevant regulatory authorities, (ii) judgments, order or
decrees of any federal, state or local court, arbitrator or administrative or
governmental authority, bureau or agency, and (iii) contracts, agreements,
franchises, understandings or other arrangements with any federal, state or
local court, arbitrator or administrative or governmental authority, bureau
or agency relating to compliance with the matters described in (i) and (ii)
above. Without limiting the generality of the foregoing, the expression
"Legal Requirements" includes approval of applications filed with the Federal
Deposit Insurance Corporation and the Office of Thrift Supervision to
designate AB as a federal savings bank and to designate the Purchaser and its
parent company as savings and loan holding companies.
ARTICLE II
PURCHASE AND SALE OF THE SHARES
2.1 PURCHASE AND SALE OF SHARES. At the Closing, the Seller agrees
to sell, transfer and deliver to the Purchaser, and the Purchaser agrees to
purchase, acquire and accept from the Seller, the Securities.
2.2 CONSIDERATION. The consideration to be paid to the Seller for
the sale, transfer and delivery of the Securities shall be the issuance and
delivery by the Purchaser to the Seller of a membership interest in the
Purchaser consisting of 17,100 shares of the Series A Preferred stock of the
Purchaser (the "Preferred Stock").
2.3 THE CLOSING. The Closing of the transactions provided for in
this Agreement (the "Closing') shall occur at the offices of the Purchaser at
10:00 a.m. on the second business day after the satisfaction of the
conditions precedent set forth in Section 2.4 The Seller agrees to cooperate
with the Purchaser in having the Legal Requirements satisfied and, upon
satisfaction thereof, Purchaser shall give notice thereof to the Seller. At
the Closing, The Seller shall deliver the Shares duly endorsed for transfer
to the Purchaser. At the Closing, the Purchaser shall deliver certificates
for the Preferred Stock to the Seller. Each of the Purchaser and the Seller
agrees to execute and deliver such other and further instruments at the
Closing and thereafter as the other may reasonably request to evidence the
intent of this Agreement.
2.4 CONDITION OF THE OBLIGATIONS OF THE PARTIES HERETO. The
obligation of the Seller to convey the Securities and the obligation of the
Purchaser to purchase the Securities is conditioned upon (a) the Purchaser's
obtaining the necessary approvals to satisfy the Legal Requirements and (b)
the Seller's obtaining the requisite approval to the transactions
contemplated by this Agreement from the lenders to the parent company of the
Seller.
2
<PAGE>
ARTICLE 3
REPRESENTATION AND WARRANTIES
The following representations and warranties are made on and as of
the date hereof. The Seller hereby represents and warrants to the Purchaser
that:
3.1 TITLE TO SHARES. The Seller is the owner of the Securities,
free and clear of any liens, mortgages, charges, security interests or any
other encumbrances (including without limitation adverse claims) or other
restrictions or limitations of any kind whatsoever and all applicable
statutes and regulations. By delivery and payment for the Shares as provided
for in this Agreement, the Seller will convey good title to the Shares, free
and clear of all Liens.
3.2 NO BREACH. The execution, delivery, validity and
enforceability of this Agreement by the Seller, the consummation of the
transactions provided for hereby by the Seller, and the performance by the
Seller of its obligations contemplated hereby will not (i) violate, conflict
with or result in a breach or termination of, or otherwise give the other
person a right to terminate, or constitute a default, event of default (by
way of substitution, novation or otherwise) or an event which with notice,
lapse of time or both, would constitute a default or event of default under
the terms of any material contract or permit by which the Seller is bound
except with respect to which consent has been obtained, (ii) result in the
creation of any lien upon any of the Shares, (iii) constitute a violation by
the Seller of any Legal Requirement or (iv) give rise to any preferential
right to purchase in favor of any third party.
3.3 PURCHASE INVESTIGATION. The Seller recognizes that the
Purchaser is a recently formed entity and has no operating history. The
Seller has received and is familiar with such information with respect to the
Purchaser and its projected performance as the Seller deems necessary for the
purpose of acquiring the Preferred Stock and desires no further information
from the Purchaser.
3.4 INVESTMENT INTENT. The Seller is acquiring the Preferred Stock
for its own account for investment and with no present intention of (i)
distributing the Preferred Stock or any part thereof or (ii) exercising
direct or indirect control over AB.
The Purchaser hereby represents and warrants to the Seller that:
3.5 TITLE TO SHARES. At the Closing, the Preferred Stock will be
validity issued and outstanding in favor of the Seller and have the benefit
of the rights and preferences set forth in the Articles of Organization of
the Purchaser.
3.6 NO BREACH. The execution, delivery, validity and
enforceability of this Agreement by the Purchaser, the consummation of the
transactions provided for hereby by the Purchaser, and the performance by the
Purchaser of its obligations contemplated hereby will not (i) violate,
conflict with or result in a breach or termination of, or
3
<PAGE>
otherwise give the other person a right to terminate, or constitute a
default, event of default (by way of substitution, novation or otherwise) or
an event which with notice, lapse of time or both, would constitute a default
or event of default under the terms of any material contract or permit by
which the Purchaser is bound except with respect to which consent has been
obtained, (ii) constitute a violation by the Purchaser of any Legal
Requirement by the Purchaser.
3.7 PURCHASE INVESTIGATION. The Purchaser has received and is
familiar with such information with respect to AB and its historical and
projected performance as the Purchaser deems necessary for the purpose of
purchasing the Securities and desires no further information from the Seller.
3.8 INVESTMENT INTENT. The Purchaser is purchasing the Securities
for its own account for investment and with no present intention of
distributing the Securities or any part thereof.
ARTICLE 4
INDEMNIFICATION, LIABILITY, SURVIVAL
4.1 INDEMNIFICATION AND LIABILITY FOR BREACH OF REPRESENTATIONS.
(A) The Seller agrees to pay and to indemnify fully, hold harmless and
defend the Purchaser, its Affiliates, agents, officers, directors, shareholders,
employees, servants, consultants, representatives successors and assigns, from
and against any and all Damages arising out of or relating to any of the
following:
(i) Any misrepresentation or breach of warranty by the Seller
under this Agreement or any certificate or document requires to be
delivered in connection herewith or in connection with the consummation
of the transactions provided for hereby, or
(ii) The non-fulfillment or failure to perform any covenant or
agreement on the part of the Seller under this Agreement.
(B) The Purchaser agrees to pay and to indemnify fully, hold
harmless and defend the Seller, his Affiliates, agents, officers, directors,
shareholders, employees, servants, consultants, representatives, successors
and assigns, from and against any and all Damages arising out of or relating
to any of the following:
(i) Any misrepresentation or breach of warranty by the
Purchaser under this Agreement or any certificate or document required
to be delivered in connection herewith or in connection with the
consummation of the transactions provided for hereby, or
4
<PAGE>
(ii) The non-fulfillment or failure to perform any covenant or
agreement on the part of the Purchaser under this Agreement.
4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES: The
representations and warranties contained in this Agreement shall survive the
Closing for a period of two years.
ARTICLE 5
MISCELLANEOUS
5.1 RIGHTS AND REMEDIES, SPECIFIC PERFORMANCE. The rights and
remedies granted under this Agreement shall not be exclusive rights and
remedies, but shall be in addition to all other rights and remedies available
at law or in equity.
5.2 NOTICES. All notices under this Agreement shall be transmitted
to the respective party, shall be in writing and shall be considered to have
been duly given or served when personally delivered to any individual party,
or on the first day after the date of deposit with Federal Express for next
day delivery, postage prepaid, or on the third day after deposit in the
United States mail, certified or registered, return receipt requested,
postage prepaid, or on the date of telecopy, fax or similar telephonic
transmission during normal business hours, provided that the recipient has
specifically acknowledged by telephone receipt of such telecopy, fax or
telephonic transmission; addressed, in all cases, to the party at his address
set forth below, or to such other address as such party may hereafter
designate by written notice to the other party:
If to Seller: AFFINITY GROUP THRIFT HOLDING CORP.
64 Inverness Drive East
Englewood, CO 80112
If to Purchaser: AFFINITY BANK HOLDINGS LLC
2575 Vista Del Mar Drive
Ventura, CA 93001
or to such other address as hereafter shall be furnished as provided in this
Section 5.2 by any of the parties hereto to the other parties hereto.
5.3 ASSIGNMENT AND AMENDMENT. This Agreement shall not be
assignable by either party without the prior written consent of the other
party without the prior written consent of the other party, except it may be
amended except pursuant to a writing executed by all of the parties hereto.
5.4 ENTIRE AGREEMENT: This Agreement sets forth the entire
understanding and agreement between the parties as to the matters covered
herein and supercedes and replaces all prior understandings, agreements or
statements (written or oral) of intent.
5
<PAGE>
5.5 INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid or unenforceable, such provision shall be deemed
severed as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and the remaining provisions hereof shall remain in
full force and effect and shall not be affected by such illegal, invalid or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid, or unenforceable provision there shall be added
automatically a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and legal, valid and enforceable.
5.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single instrument.
5.7 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
5.8 GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of California.
(The remainder of this page is intentionally left blank)
6
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the date first written above.
AFFINITY GROUP THRIFT HOLDING CORP.
By /s/ Stephen Adams
---------------------------------
Stephen Adams
Its President
AFFINITY BANK HOLDINGS LLC
By /s/ Michael Mcguire
---------------------------------
Michael McGuire
Its President
7
<PAGE>
EXHIBIT 10.40
MEMBER CONTROL AGREEMENT
OF
AFFINITY BANK HOLDINGS LLC
THIS MEMBER CONTROL AGREEMENT is made as of the 30th day of September,
1999, by and among Stephen Adams ("Adams"), Michael R. McGuire ("McGuire") and
Affinity Group Thrift Holding Corp., a Delaware corporation ("Thrift Holding"):
RECITALS
WHEREAS, Adams and McGuire constitute all of the current members of the
Company (this and other capitalized terms used herein and not otherwise defined
herein are defined in Section 1.01 hereinbelow);
WHEREAS, the Company and Thrift Holding have entered into a purchase
agreement dated as of December 7, 1998 (the "Bank Agreement") by virtue of which
the Company has agreed, INTER ALIA, to issue to Thrift Holding a preferred
membership interest in the Company having the rights and preferences ascribed in
the Articles of Organization to the "Series A Preferred", such membership
interest to be issued upon consummation of the transactions contemplated by the
Bank Agreement;
WHEREAS, requisite regulatory approvals necessary for the acquisition
by the Company of the Bank have been obtained and the Company and Thrift Holding
are desirous of consummating the transactions contemplated by the Bank
Agreement;
WHEREAS, the Company has requested that Adams make a loan in the amount
of $9 million and an additional capital contribution in the amount of $1 million
and Adams is willing to do so provided that the loan is evidenced by the Senior
Note and the capital contribution has the rights and preferences ascribed to the
Class B Preferred Shares;
WHEREAS, Minnesota Statutes, Section 322B.37, the Limited Liability
Companies Act, authorizes a "member control agreement" as defined therein; and
WHEREAS, each of the undersigned desires to enter into such an
agreement in consideration of the issuance of the Class A and Class B Preferred
Membership Interest upon closing of the transactions contemplated by the Bank
Agreement;
NOW, THEREFORE, each of the undersigned agrees as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.01 DEFINITIONS. The terms defined in this Article I
(except as may be otherwise expressly provided in this Agreement or unless
the context otherwise requires) shall, for all purposes of this Agreement,
have the following meanings:
"Act" means the Limited Liability Companies Act contained in Minnesota
Statutes, Section 322B, as such Act may be amended from time to time. References
herein to sections of the Act shall include successor provisions if any such
section is amended, modified or repealed.
"Adams" is defined hereinbefore on the first page of this Agreement.
"Agreement" means this Member Control Agreement as hereafter amended
from time to time, including any schedules to the Agreement.
"Articles of Organization" means the articles of organization of the
Company dated December 4, 1998 and filed with the Secretary of State of the
State of Minnesota on December 4, 1998, as such articles may be amended or
modified from time to time.
"Asset Sale" is defined in Section 3.05.
"Bank" means Affinity Bank, the shares of which are to be contributed
to the Company by the terms of the Bank Agreement.
"Bank Agreement" is defined in the recitals of this Agreement on page
one hereof.
"Board" or "Board of Governors" means the board of governors of the
Company.
"Capital Account" means the account of a Member that is maintained in
accordance with the provisions of Section 3.09 hereof.
"Capital Contribution" means, in respect of the Common Members, the
amount set forth on Schedule A hereto (as such schedule may be amended from time
to time). The Capital Contribution of the Class A Preferred Member is the issued
and outstanding stock of Affinity Bank and is deemed to have an agreed value of
$17,100,000, which amount shall constitute the Capital Contribution of the Class
A Preferred Member. The Capital Contribution of the Class B Preferred Member in
his capacity as such is $1,000,000, which amount shall constitute the Capital
Contribution of the Class B Preferred Member.
"Capital Note" means a promissory note of the Company in the form of
Exhibit B hereto modified in such manner as may be required by applicable
regulatory authorities.
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"Chief Manager" is defined in the Organizational Documents.
"Class A Preferred Membership Interest" means the Membership
Interest of the Class A Preferred Member.
"Class A Preferred Shares" means Shares having the rights and
preferences set forth herein as applying to the Class A Preferred Membership
Interest. The Class A Preferred Shares have the rights and preferences described
in the Articles of Organization to the "Series A Preferred" and have the
additional rights and preferences, and is subject to the limitations, set forth
in this Agreement.
"Class A Preference Amount" means an amount equal to the sum of (i) the
unpaid Class A Tier One Priority Distributions and (ii) to the extent not
theretofore returned to the Class A Member, the Class A Tier Two Priority
Amount.
"Class A Tier One Priority Distributions" means cash, at the rate of
11% per annum, on the amount of the Capital Account of the Class A Preferred
Member, compounded annually from December 7, 1998.
"Class A Tier Two Priority Amount" means cash in the amount of the
Capital Contribution of the Class A Preferred Member.
"Class B Preferred Membership Interest" means the Membership Interest
of the Class B Preferred Member.
"Class B Preferred Shares" means Shares having the rights and
preferences set forth herein as applying to the Class B Preferred Membership
Interest.
"Class B Preference Amount" means an amount equal to the sum of (i) the
unpaid Class B Tier One Priority Distributions and (ii) to the extent not
theretofore returned to the Class A Member, the Class B Tier Two Priority
Amount.
"Class B Tier One Priority Distributions" means cash, at the rate of
10 3/8% per annum, on the amount of the Capital Account of the Class B Preferred
Member, compounded annually from the date of the making of the Capital
Contribution of the Class B Preferred Member.
"Class B Tier Two Priority Amount" means cash in the amount of the
Capital Contribution of the Class B Preferred Member.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor thereto. Any reference herein to specific sections of the Code shall
be deemed to include a reference to any corresponding provisions of future law.
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"Common Members" means Members in their capacity as such and not in
their capacity as Preferred Members. On the date hereof the Common Members are
Adams and McGuire.
"Common Shares" means the Shares held by the Common Members.
"Company" means Affinity Bank Holdings LLC, a Minnesota limited
liability company.
"Company Total Capital" means the sum of the Capital Accounts of all of
the Members, including the Capital Accounts of the Preferred Members.
"Distribution" means the distributions to the Members of cash or other
assets of the Company made from time to time pursuant to the provisions of this
Agreement.
"Financial Rights" means a Member's rights to share in Net Income and
Net Losses and Distributions with respect to a Membership Interest in accordance
with the terms of this Agreement.
"Governance Rights" means the total number of votes a Member controls
as a Member in the Company. Each Common Member has one vote for each Share of
such Member. The Class B Preferred Member has one vote so long as the Class B
Preferred Shares are issued and outstanding.
"Governor" means a natural person serving on the Board of Governors.
"McGuire" is defined on the first page of this Agreement.
"Manager" means a person elected, appointed, or otherwise designated as
a manager by the Board of Governors, and any other person considered elected as
a manager pursuant to the Act.
"Member" means a person reflected in the required records of the
Company as the owner of a Membership Interest of the Company.
"Membership Interest" means a Member's interest in the Company
consisting of the Member's Financial Rights and Governance Rights with respect
to the Company.
"Net Income" and "Net Losses" mean the profits and losses of the
Company, as the case may be, as determined for federal income tax purposes as of
the close of each of the fiscal years of the Company.
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"Organizational Documents" means the Articles of Organization and the
Operating Agreement of the Company, as such instruments may be amended or
modified from time to time.
"Percentage Interest" as to any Member means the Member's Capital
Account divided by the Company Total Capital.
"Permitted Tax Distributions" means distributions to the Members based
on estimates of the amount of federal and state income taxes that the Company
would be required to pay with respect to a fiscal year of the Company if, for
the applicable fiscal year, the Company were treated as a "C Corporation,"
incorporated under the laws of the State of Minnesota rather than as a limited
liability company taxable as a partnership, provided that the aggregate amount
of such distributions in respect to any period does not exceed the aggregate
amount of income taxes that would have been payable by the Company in respect of
its operations for such period if the Company were taxed as a C Corporation.
"Preferred Members" means the holder or holders of the Class A
Preferred Shares and the Class B Preferred Shares. On the date hereof, the Class
A Preferred Member is Thrift Holding and the Class B Preferred Member is Adams.
"Required Records" means the records required by Section 322B.373,
Subd. 1 of the Act.
"Senior Note" means a promissory note substantially in the form of
Exhibit C hereto.
"Shares" means the units of interest in the Company constituting the
Membership Interests and include both the Common Shares, the Class A Preferred
Shares and the Class B Preferred Shares.
"Successor" is defined in Section 6.02 hereof.
"Thrift Holding" is defined on the first page of this Agreement.
"Voting Interest" as to any Member means the Member's Governance Rights
divided by the sum of all Members' Governance Rights.
ARTICLE II
GOVERNORS
Section 2.01 FIRST GOVERNORS. The first Governors of the Company
shall be the following, who are hereby elected to hold office until their
successors are elected and qualified pursuant to the Operating Agreement of
the Company:
Michael R. McGuire
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David Frith-Smith
ARTICLE III
MEMBERSHIP INTERESTS
Section 3.01 MEMBERSHIP INTERESTS AND BOARD OF GOVERNORS AUTHORITY
AS TO ADDITIONAL MEMBERSHIP INTERESTS. The names of the Common Members and
their respective Capital Contributions and the agreed value thereof are
reflected on Schedule A attached hereto. No additional Capital Contributions
shall be accepted or Membership Interests granted by the Board of Governors
without the consent of more than 51% of the outstanding Voting Interests.
Upon such consent and the issuance of additional Membership Interests,
Schedule A shall be appropriately amended.
Section 3.02 DESIGNATION OF MEMBERSHIP INTERESTS. The Common
Shares are of one class, without series, and shall have the rights provided
by law, subject to any statement in this Agreement of the specific rights or
terms of such Membership Interests. The Class A Preferred Members shall have
the rights and preferences ascribed to the Class A Preferred Shares and the
rights of the Common Members and the Class B Preferred Member shall be
subject to the rights and preferences of the Class A Preferred Shares. The
Class B Preferred Member shall have the rights and preferences ascribed to
the Class B Preferred Shares and the rights of the Common Members and the
Class A Preferred Member shall be subject to the rights and preferences of
the Class B Preferred Shares.
Section 3.03 ALLOCATION OF NET INCOME AND NET LOSSES. Net Losses
shall be allocated annually among the Common Members based on their
respective Shares as reflected on Schedule A. Net Income shall be allocated
annually to the Preferred Members to the extent of the Tier One Priority
Distributions distributed in such year to a Preferred Member and, thereafter,
to the Common Members based on their respective Shares.
Section 3.04 OPERATING DISTRIBUTIONS. Other than Permitted Tax
Distributions, no distributions in respect of the Common Shares shall be
authorized or made until the Class A and the Class B Tier One Priority
Distributions and Class A and the Class B Tier Two Priority Amounts have been
paid in full. After payment in full of the Class A and the Class B Tier One
Priority Distributions and Class A and the Class B Tier Two Priority Amounts,
any distributions authorized by the Board (other than Liquidating
Distributions pursuant to Section 3.05) shall be distributed among the Common
Members based on their Percentage Interests provided that, if cash
distributions have not been theretofore made in an amount aggregating the
Permitted Tax Distributions, to the extent such distribution is permitted by
law and by applicable loan (or other) agreements, the Board of Governors
shall annually distribute cash to the Common Members (based on their
Percentage Interests) in an amount equal to Permitted Tax Distributions.
Section 3.05 SPECIAL DISTRIBUTIONS TO CLASS A PREFERRED MEMBERS.
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A. VOLUNTARY REDEMPTION. The Company shall have the option
of redeeming and retiring the Class A Preferred Shares by payment to the
Class A Preferred Members of an amount equal to the Class A Preference
Amount. Upon payment thereof to the Class A Preferred Member, the Class A
Preferred Member shall cease being a member.
B. MANDATORY REDEMPTION. The Company shall redeem the
Class A Preferred Shares contemporaneously with the closing of an Asset Sale.
C. ASSET SALES. In case at any time (i) the Company shall
declare any distribution in respect of its Membership Interests; (ii) there
shall be any capital reorganization or reclassification of the Common Shares
or consolidation or merger of the Company with or into another entity; (iii)
there shall occur a sale of a material amount of assets of the Company
(including shares of stock of any entity owned by the Company) to an
unaffiliated entity (other than sales of mortgage loans and similar assets of
the Bank in the ordinary course of business); (iv) if theretofore transferred
to an affiliate of the Company, there shall occur (a) a sale of such assets
by such affiliate to an unaffiliated entity, (b) a capital reorganization or
reclassification of the ownership of such affiliate, (c) the consolidation or
merger of such affiliate with or into another entity, (d) a distribution in
respect of any such assets or (e) a voluntary or involuntary dissolution or
winding up of any such assets or such affiliate; or (v) there shall be a
voluntary or involuntary dissolution or winding up of the Company (each of
the foregoing events constituting, for purposes hereof, an "Asset Sale"), the
Company shall be deemed to have been liquidated and the Class A Preferred
Member shall be paid an amount equal to the Class A Preference Amount.
D. TERMS OF REDEMPTION. The redemption price of the
Membership Interest of the Class A Preferred Member under any subsection of
this Section 3.05 shall be equal to the Class A Preference Amount and shall
be paid by the Company in cash. The Company shall give notice by mail of
redemptions to the Class A Preferred Member at least five calendar days prior
to any date of redemption. Such notice (i) shall specify the date of
redemption, and (ii) shall be addressed to the Class A Preferred Member at
such member's address as shown on the records of the Company.
If the Company deposits, on or prior to any date fixed for redemption
of the Class A Preferred Shares, with any bank or trust company having capital
and surplus of at least $50,000,000 as a trust fund, an amount equal to the
Class A Preference Amount with instructions and authority to such bank or trust
company to pay the Class A Preference Amount on or after the date fixed for
redemption or prior thereto, then, upon the surrender of any certificates (or
other evidence of the issuance of the Class A Preferred Shares), from and after
the date of such deposit, and not withstanding that the termination of the
Membership Interest shall not have been memorialized by an appropriate amendment
to the governing instruments for the Company, the Membership Interest of the
Class A Preferred Member shall no longer be deemed to be outstanding and all
rights with respect thereto shall forthwith cease and terminate, except only the
rights of the Class A Preferred Member to receive from such bank or trust
company at any time after
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the date of such deposit, the sum so deposited, without interest. Any funds
so deposited and unclaimed at the end of three years from such redemption
date shall be released or repaid to the Company, after which the Class A
Preferred Member shall be entitled to receive payment of the Class A
Preference Amount only from the Company.
E. CONVERSION. Subject to any requisite regulatory
approvals, at the option of the Company, the Class A Preferred Shares may be
converted and exchanged for the Capital Note. The Company shall give notice
by mail of any such conversion to the Class A Preferred Member at least five
calendar days prior to any date of conversion. Such notice (i) shall specify
the date of conversion and (ii) shall be addressed to the Class A Preferred
Member at such member's address as shown on the records of the Company. Upon
the date set forth in such notice as of date of the conversion, the
Membership Interest of the Class A Preferred Member shall no longer be deemed
to be outstanding and all rights with respect thereto shall forthwith cease
and terminate, except only the right of the Class A Preferred Member to
receive from the Company the Capital Note. The Capital Note shall be dated as
of the effective date of such conversion as set forth in the notice to the
Class A Preferred Member and the principal amount of the Capital Note shall
be an amount equal to the Class A Preference Amount on such date.
F. PRIORITY VIS A VIS CLASS B PREFERRED SHARES. No
redemption of, or other payment in respect of, any Class A Preferred Shares
shall be made until and unless an amount equal to the Class B Tier One
Priority Distributions shall have been paid in respect of the Class B
Preferred Shares. Redemptions of, or other payments in respect of, the Class
B Preferred Shares in excess of the amount of the Class B Tier One Priority
Distributions shall be made only after redemption in full and retirement of
the Class A Preferred Shares.
Section 3.06 SPECIAL DISTRIBUTIONS TO CLASS B PREFERRED MEMBERS.
A. VOLUNTARY REDEMPTION. The Company shall have the option
of redeeming and retiring the Class B Preferred Shares by payment to the
Class B Preferred Members of an amount equal to the Class B Preference
Amount. Upon payment thereof to the Class B Preferred Member, the Class B
Preferred Member shall cease being a member.
B. MANDATORY REDEMPTION. The Company shall redeem the
Class B Preferred Shares contemporaneously with the closing of an Asset Sale.
C. ASSET SALES. In case at any time (i) the Company shall
declare any distribution in respect of its Membership Interests; (ii) there
shall be any capital reorganization or reclassification of the Common Shares
or consolidation or merger of the Company with or into another entity; (iii)
there shall occur a sale of a material amount of assets of the Company
(including shares of stock of any entity owned by the Company) to an
unaffiliated entity (other than sales of mortgage loans and similar assets of
the Bank in the ordinary course of business); (iv) if theretofore transferred
to an affiliate of the Company, there shall occur (a) a sale of such assets
by such affiliate to an
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unaffiliated entity, (b) a capital reorganization or reclassification of the
ownership of such affiliate, (c) the consolidation or merger of such
affiliate with or into another entity, (d) a distribution in respect of any
such assets or (e) a voluntary or involuntary dissolution or winding up of
any such assets or such affiliate; or (v) there shall be a voluntary or
involuntary dissolution or winding up of the Company (each of the foregoing
events constituting, for purposes hereof, an "Asset Sale"), the Company shall
be deemed to have been liquidated and the Class B Preferred Member shall be
paid an amount equal to the Class B Preference Amount.
D. TERMS OF REDEMPTION. The redemption price of the
Membership Interest of the Class B Preferred Member under any subsection of
this Section 3.05 shall be equal to the Class B Preference Amount and shall
be paid by the Company in cash. The Company shall give notice by mail of
redemptions to the Class B Preferred Member at least five calendar days prior
to any date of redemption. Such notice (i) shall specify the date of
redemption, and (ii) shall be addressed to the Class B Preferred Member at
such member's address as shown on the records of the Company.
If the Company deposits, on or prior to any date fixed for
redemption of the Class B Preferred Shares, with any bank or trust company
having capital and surplus of at least $50,000,000 as a trust fund, an amount
equal to the Class B Preference Amount with instructions and authority to
such bank or trust company to pay the Class B Preference Amount on or after
the date fixed for redemption or prior thereto, then, upon the surrender of
any certificates (or other evidence of the issuance of the Class B Preferred
Shares), from and after the date of such deposit, and not withstanding that
the termination of the Membership Interest shall not have been memorialized
by an appropriate amendment to the governing instruments for the Company, the
Membership Interest of the Class B Preferred Member shall no longer be deemed
to be outstanding and all rights with respect thereto shall forthwith cease
and terminate, except only the rights of the Class B Preferred Member to
receive from such bank or trust company at any time after the date of such
deposit, the sum so deposited, without interest. Any funds so deposited and
unclaimed at the end of three years from such redemption date shall be
released or repaid to the Company, after which the Class B Preferred Member
shall be entitled to receive payment of the Class B Preference Amount only
from the Company.
Section 3.07 LIQUIDATING DISTRIBUTIONS. If the Company is
dissolved and (i) dissolution is not avoided under Section 5.01 and (ii) its
business is being liquidated in accordance with Minnesota Statutes, Section
322B.873, Subd. 1, the Company shall cease to carry on its business, except
to the extent necessary for the winding up of the business of the Company.
The Company shall thereafter be wound up and terminated as provided by the
Act. All tangible or intangible property of the Company, including money,
remaining after the discharge of the debts, obligations, and liabilities of
the Company shall be distributed to the Members as follows:
(a) unless theretofore distributed to the Class B Preferred
Member pursuant to Section 3.06 above, to the Class B Preferred Member an amount
equal to the Class B Preference Amount;
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(b) unless theretofore distributed to the Class A Preferred
Member pursuant to Section 3.05 above, to the Class A Preferred Member an amount
equal to the Class A Preference Amount;
(c) to the Members in proportion to, and to the extent of,
the positive balances in their Capital Accounts; and
(d) to the Common Members in accordance with their Percentage
Interests.
Section 3.08 VOTING. Until the payment to the Class A Preferred
Member of the Class A Preference Amount, the Class A Preferred Member shall
be entitled to veto any action of the Members or the Board of Governors of
the Company affecting the rights and preferences applicable of the Class A
Preferred Shares. Until the payment to the Class B Preferred Member of the
Class B Preference Amount, the Class B Preferred Member shall be entitled to
veto any action of the Members or the Board of Governors of the Company
affecting the rights and preferences applicable of the Class B Preferred
Shares. Except as hereinbefore provided in this Section 3.08, the Class A
Preferred Member shall have no voting rights and the Common Members and the
Class B Preferred Member shall be entitled to vote on matters that are
subject to Member vote based on their Voting Interests.
Section 3.09 CAPITAL ACCOUNTS. A Capital Account shall be
established for each Member and shall be maintained in accordance with
Treasury Regulation Section 1.704-1(b). Any Member who shall receive any
Membership Interest in the Company or whose Membership Interest shall be
increased by means of the transfer to such Member of any financial interest
in the Company from another Member shall have a Capital Account that has been
appropriately adjusted to reflect such transfer. No interest shall be paid by
the Company on Capital Contributions or on balances in Members' Capital
Accounts.
Section 3.10 ADDITIONAL CAPITAL CONTRIBUTIONS. No Member shall
have any obligation to make additional capital contributions to the Company
or to fund, advance or loan monies that may be necessary to pay deficits, if
any, incurred by the Company during the term hereof. Members may make loans
to the Company from time to time, as authorized by the Board of Governors.
Any payment or transfer accepted by the Company from a Member which is not a
capital contribution complying with Section 3.01, including without
limitation, the loan evidenced by the Note, shall be deemed a loan and
neither shall be treated as a contribution to the capital of the Company for
any purpose hereunder, nor shall entitle such Member (as such) to any
increase in such Member's Percentage Interest. Any such loan shall be repaid
at such times and with such interest (at rates not to exceed the maximum
permitted by law) as the Board of Governors and the lending Member shall
reasonably agree.
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ARTICLE IV
TAX MATTERS
Section 4.01 TAX CHARACTERIZATION AND RETURNS. The Members
acknowledge that the Company will be treated as a "partnership" for tax
purposes. Within 90 days after the end of each fiscal year, the Chief Manager
will cause to be delivered to each person who was a Member at any time during
such fiscal year a Form K-1 and such other information, if any, with respect
to the Company as may be necessary for the preparation of such Member's
federal or state income tax (or information) returns, including a statement
showing each Member's share of income, gain, or loss and credits for such
fiscal year for federal or state income tax purposes.
Section 4.02 ACCOUNTING DECISIONS. All decisions as to accounting
matters shall be made by a majority of the Board of Governors in its sole
discretion. A majority of the Board of Governors may make or revoke such
elections as may be allowed pursuant to the Code, including the election
referred to in Section 754 of the Code to adjust the basis of Company
property.
Section 4.03 TAX MATTERS PARTNER. The Board of Governors shall
designate a Member to act on behalf of the Company as the "tax matters
partner" within the meaning of Section 6231(a)(7) of the Code.
ARTICLE V
AGREEMENT TO AVOID DISSOLUTION
Section 5.01 DISSOLUTION AVOIDANCE CONSENT. Each Member agrees
that at the request of the Company and no later than 90 days after occurrence
of an event that terminates the continued membership of another Member in the
Company (including the events enumerated in Section 322B.80, Subd. 1, clause
(5) of the Act), each remaining Member shall consent to the continuation of
the Company as a legal entity without dissolution and to the continuation of
its business. The Members hereby consent to the continuation of the Company
as a legal entity without dissolution and to the continuation of its business
upon termination of the Membership Interest of the Preferred Members after
payment to the Preferred Member of their respective Preference Amounts.
Section 5.02 STATUS OF TERMINATED MEMBER IF DISSOLUTION IS
AVOIDED. If dissolution is avoided under 5.01, then the Member whose interest
has terminated loses all Governance Rights and will be considered merely an
assignee of the Financial Rights owned before the termination of Membership.
Section 5.03 NO OBLIGATION TO PURCHASE MEMBERSHIP INTEREST OF
TERMINATED MEMBERS. If dissolution is avoided under 5.01, neither the Company
nor the remaining Members shall be obligated to purchase the interest of the
Member whose interest was terminated.
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ARTICLE VI
BUSINESS CONTINUATION AGREEMENT
Section 6.01 AGREEMENT TO CONTINUE BUSINESS. If one or more
Members fails to give the consent specified in Article V and the Company
dissolves as a result, each Member agrees that the Company and the Members
shall have the right to transfer the Company's assets and business to a
successor limited liability company and to continue its business in such
successor as provided in Section 6.02.
Section 6.02 PROCEDURES TO TRANSFER AND CONTINUE BUSINESS.
Following dissolution in the circumstances described in Section 6.01, the
Board shall organize a new limited liability company (the "Successor") under
the Act and shall prepare a plan of merger pursuant to which the Company
would be merged into the Successor, which would be the surviving company, and
the Membership interests of the Members in the Company would be converted
into membership interests in the Successor having substantially identical
terms. If approved by the Members of the Company (including Members voting
pursuant to Section 322B.306, Subd. 3, clause (2) of the Act), such merger
shall be promptly effected in accordance with law. Each Member agrees to
waive dissenters' rights with respect to such Merger. If, notwithstanding the
agreement in the previous sentence, a Member asserts dissenters' rights with
respect to the merger, such rights are subject to the limitations and offsets
provided by Section 322B.873, Subd. 3, of the Act.
ARTICLE VII
TRANSFERS OF INTERESTS
Section 7.01 TRANSFERS. A Member may assign the Member's full
Membership Interest only by assigning all of the Member's Governance Rights
coupled with a simultaneous assignment to the same assignee of all of the
Member's Financial Rights. A Member's Governance Rights may be assigned,
without the consent of any other Member, in whole or in part, to another
person already a Member at the time of the assignment. Any other assignment
of any Governance Rights is effective only if (i) all the Members, other than
the Member seeking to make the assignment, approve the assignment by
unanimous written consent, which consent may be given or withheld,
conditioned or delayed as the remaining Members may determine in their sole
discretion, and (ii) if the assignee executes this Agreement as amended to
reflect such assignee's interest in the Company and any other instrument or
instruments that the Board may deem necessary or desirable to effect such
assignment. Subject to the terms of any option, call or similar agreement
made between Members or with the Company, a Member's Financial Rights may be
transferred, in whole or in part, without the consent of the Board of
Governors.
ARTICLE VIII
AMENDMENTS
Section 8.01 AMENDMENT OF AGREEMENT. No change, modification or
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amendment of this Agreement shall be valid or binding unless such change,
modification or amendment shall be in writing signed by 66% of the Voting
Interests, provided that in no event may this Agreement be amended to provide
for less than unanimous consent to avoid dissolution under Section 5.01.
Section 8.02 PREFERRED INTERESTS. So long as the Class A Preference
Amount has not been paid in full to the Class A Preferred Member, no change,
modification, or amendment of this Agreement which affects the rights or
preferences of the Class A Preferred Shares or any other term hereof
applicable to the Class A Preferred Member shall be valid unless such change,
modification or amendment shall be in writing signed by the Class A Preferred
Member. So long as the Class B Preference Amount has not been paid in full to
the Class B Preferred Member, no change, modification, or amendment of this
Agreement which affects the rights or preferences of the Class B Preferred
Shares or any other term hereof applicable to the Class B Preferred Member
shall be valid unless such change, modification or amendment shall be in
writing signed by the Class B Preferred Member.
ARTICLE IX
MISCELLANEOUS
Section 9.01 GOVERNING LAW. This Agreement and the rights of the
parties hereunder will be governed by, interpreted and enforced in accordance
with the laws of the State of Minnesota.
Section 9.02 BINDING EFFECT. This Agreement will be binding upon and
inure to the benefit of the Members, and their respective distributees,
successors and assigns.
Section 9.03 SEVERABILITY. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under the present or future laws
effective during the term of this Agreement, such provision will be fully
severable. This Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance form this Agreement. Furthermore,
in lieu of such illegal, invalid or unenforceable provision, there will be
added automatically as a part of this Agreement a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid and enforceable.
Section 9.04 MULTIPLE COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which will be deemed an original but all of
which will constitute one and the same instrument. However, in making proof
hereof it will be necessary to produce only one copy hereof signed by the
party to be charged.
Section 9.05 ADDITIONAL DOCUMENTS AND ACTS. Each Member agrees to
execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry
out and perform all of the
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terms, provisions and conditions of this Agreement and the transactions
contemplated hereby.
Section 9.06 NO THIRD PARTY BENEFICIARY. This Agreement is made solely
and specifically among and for the benefit of the parties hereto, and their
respective heirs, administrators, successors and assigns, and no other person
will have any rights, interests or claims hereunder or be entitled to any
benefits under or on account of this Agreement as a third party beneficiary
or otherwise.
Section 9.07 NOTICES. Any notice to be given or to be served upon the
Company or any party hereto in connection with this Agreement must be in
writing and will be deemed to have been given and received when delivered to
the address specified by the party to receive the notice. Such notices will
be given to a Member at the address specified in the Company's Required
Records. Any Member or the Company may, at any time by giving five days'
prior written notice to the other Members and the Company, designate any
other address in substitution of the foregoing address to which such notice
will be given.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
/s/ Michael McGuire
------------------------------------
Michael R. McGuire
/s/ Stephen Adams
------------------------------------
Stephen Adams
Affinity Group Thrift Holding Corp.
By: /s/ Stephen Adams
--------------------------------
Stephen Adams, President
14
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Agreed Value
of Percentage
Name of Member Contribution Contribution Shares Interest Voting Interest
- ------------------------------ ----------------- ------------------- ---------- --------------- --------------------
<S> <C> <C> <C> <C> <C>
Stephen Adams $951 $951 951 95.1% 95.1%
Michael R. McGuire $ 49 $ 49 49 4.9% 4.9%
</TABLE>
1
<PAGE>
EXHIBIT B
CAPITAL NOTE
AFFINITY BANK HOLDINGS LLC
Dated: _________ $17,100,000.00
AFFINITY BANK HOLDINGS LLC (the "Company") promises to pay to
_______________________, or assigns (the "Payee") the principal sum of Seventeen
Million One Hundred Thousand and 00/100 Dollars ($17,100,000).
1. INTEREST. The Payee shall be entitled to receive interest from the
date hereof at the rate of eleven percent (11%) per annum on the principal
amount of this Note outstanding from time to time. Interest shall be paid at
such times as declared by the board of directors of the Company. Interest not
paid shall accumulate and shall be compounded annually until paid. All interest
accumulated under this section shall be paid in full before any distribution is
paid or declared to any member of the Company. If not earlier paid, all accrued
and theretofore unpaid interest shall be paid on the Maturity Date. The Company
shall pay interest on overdue principal and on overdue interest (to the full
extent permitted by law) at a rate equal to fifteen percent (15%) per annum.
2. PRINCIPAL. The Payee shall be entitled to receive the principal
amount of this Note on the Maturity Date.
3. LIQUIDATION PREFERENCE. In the event of any voluntary dissolution,
liquidation, partial liquidation or winding up of the Company, after due payment
or provision for payment of the other debts and other liabilities of the
Company, the Payee shall be entitled to receive from the net assets an amount
(the "Liquidation Payment") equal to interest accumulated and unpaid pursuant to
Section 1 above plus the principal amount hereof, before any distribution shall
be made to any member of the Company.
4. PRE-PAYMENT.
A. VOLUNTARY PRE-PAYMENT. The Company shall have the option of
prepaying this Note in whole or in part at any time and from time to time
without penalty or premium. All payments shall be applied first to accrued
interest and then to principal balances.
B. MANDATORY PRE-PAYMENT. The Company shall prepay the entire
principal balance of this Note and all interest accrued thereon (or, in the case
of a distribution pursuant to clause (v) of the definition of Asset Sale, the
amount of such distribution) contemporaneously with the closing of an Asset
Sale.
5. DEFAULTS AND REMEDIES. An "Event of Default" occurs if:
(a) the Company defaults in the payment of any principal,
interest or premium, if any, on the Note when the same becomes due and payable,
or otherwise fails to comply with any other provision of this Note and such
default is not cured within five business days after the occurrence thereof.
1
<PAGE>
(b) the Company, pursuant to Title 11 of the U.S. Code or any
similar federal or state law for the relief of debtors as the same may be
amended from time to time, (i) commences a voluntary case or proceeding, (ii)
consents to the entry of an order for relief against it in an involuntary case
or proceeding, (iii) consents to the appointment of a receiver, trustee,
assignee, liquidator, sequestrator or similar official charged with maintaining
possession or control over property for one or more creditors, (iv) makes a
general assignment for the benefit of its creditors, or (v) generally does not
pay its debts when such debts become due or admits in writing its inability to
pay its debts generally.
If an Event of Default specified in subparagraph (a) above
occurs and is continuing, then the Payee may declare the principal of and
interest on the Note to be due and payable immediately. If an Event of Default
specified in subparagraph (b) above occurs and is continuing, the principal of,
and premium, if any, and interest on the Note shall IPSO FACTO become and be
immediately due and payable without any declaration or other act on the part of
the Payee. No course of dealing on the part of the Payee nor any delay or
failure on the part of the Payee to exercise any right shall operate as a waiver
of such right or otherwise prejudice the Payee's rights, powers and remedies. If
an Event of Default occurs, the Company will pay to the Payee all costs and
expenses, including but not limited to reasonable attorneys' fees, incurred by
the Payee in collecting any sums due on this Note or in otherwise enforcing any
of the Payee's rights, powers and remedies.
6. REGULATORY COMPLIANCE. Anything herein to the contrary
notwithstanding, the obligation of the Company to make payments of interest
shall be subject to the limitation that payments of interest shall not be
required to be made hereunder to the extent that payment thereof would
negatively impact the ability of Affinity Bank, a subsidiary of the Company, to
satisfy all regulatory capital requirements.
7. SENIORITY. The indebtedness evidenced by this Note, including all
principal, interest, premium, fees, costs and expenses payable by the Company
hereunder, shall be expressly junior and subordinate in right of payment to any
indebtedness of the Company for borrowed money which is designated as senior
indebtedness, whether secured or unsecured (the "Senior Debt"). No payment of
principal of or interest on this Note shall be made if the Company is in
default, or such payment would result in a default, with respect to the Senior
Debt. Upon any distribution of assets of the Company, upon dissolution,
winding-up, liquidation or reorganization of the Company, whether in bankruptcy,
insolvency or receivership proceedings, or upon an assignment for the benefit of
creditors, or any other marshalling of the assets and liabilities of the
Company, or otherwise, Senior Debt shall first be paid in full, or provision
made for such payment, in cash, before any payment is made on account of the
principal of and interest on this Note.
8. MISCELLANEOUS.
As used herein, the following terms shall have the meanings given to
them hereinbelow:
"Maturity Date" means the fifteenth anniversary of the date thereof or
such earlier date on which the principal balance of this Note shall become due
and payable by the terms hereof, by acceleration or otherwise.
"Asset Sale" means: (i) a voluntary or involuntary dissolution or
winding up of the Company; (ii) any capital reorganization or reclassification
of the membership interests of the
2
<PAGE>
Company or consolidation or merger of the Company with or into another
entity; (iii) a sale of a material amount of assets of the Company (including
shares of stock of any entity owned by the Company) to an unaffiliated entity
(other than sales of mortgage loans and similar assets of the Company in the
ordinary course of business); (iv) if theretofore transferred to an
affiliate, (a) a sale of such assets by such affiliate to an unaffiliated
entity, (b) a capital reorganization or reclassification of the ownership of
such affiliate, (c) the consolidation or merger of such affiliate with or
into another entity, (d) a distribution in respect of any such assets or (e)
a voluntary or involuntary dissolution or winding up of any such assets or
such affiliate; or (v) the declaration by the Company of any distribution in
respect of its membership interests.
This Note is a contract made under the laws of the state of California
and the rights and obligations of the Company and the Payee shall be construed,
interpreted and enforced under the laws of such state.
This Note has not been registered under the Securities Act of 1933, as
amended, or the securities laws of the State of California, or any other state.
This note may not be sold, transferred or otherwise disposed of except pursuant
to an effective registration statement or appropriate exemption from
registration under the foregoing laws. Accordingly, this Note may not be sold,
transferred or otherwise disposed of without (i) the opinion of counsel
satisfactory to the Company that such transfer may lawfully be made without
registration under the Federal Securities Act of 1933 and the securities laws of
the State of California or any other applicable state securities laws; or (ii)
such registration. This legend represents a restriction on transferability of
this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the date first written above.
AFFINITY BANK HOLDINGS LLC
By:______________________________
Name:
Title:
3
<PAGE>
EXHIBIT C
SENIOR NOTE
AFFINITY BANK HOLDINGS LLC
Dated: ____________, 1999
$9,000,000.00
AFFINITY BANK HOLDINGS LLC (the "Company") promises to pay to the
Stephen Adams Living Trust u/t/a dated September 15,1997 or assigns (the
"Payee") the principal sum of Nine Million and 00/100 Dollars ($9,000,000).
1. INTEREST. The Payee shall be entitled to receive interest at the
rate of ten and three-eighths percent (10 3/8%) per annum on the principal
amount of this Note outstanding from time to time. Interest shall be paid
quarterly in arrears on the last day of April, July, October and January.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months. If not earlier paid, all accrued and theretofore unpaid interest shall
be paid on the Maturity Date. The Company shall pay interest on overdue
principal and on overdue interest (to the full extent permitted by law) at a
rate equal to fourteen and three-eighths percent (14 3/8%) per annum.
2. PRINCIPAL. The Payee shall be entitled to receive the principal
amount of this Note on the Maturity Date.
3. PRE-PAYMENT.
A. VOLUNTARY PRE-PAYMENT. The Company shall have the option of
prepaying this Note in whole or in part at any time and from time to time
without penalty or premium. All payments shall be applied first to accrued
interest and then to principal balances.
B. MANDATORY PRE-PAYMENT. The Company shall prepay the entire
principal balance of this Note and all interest accrued thereon (or, in the case
of a distribution pursuant to clause (v) of the definition of Asset Sale, the
amount of such distribution) contemporaneously with the closing of an Asset
Sale.
4. DEFAULTS AND REMEDIES. An "Event of Default" occurs if:
(a) the Company defaults in the payment of any principal,
interest or premium, if any, on the Note when the same becomes due and
payable, or otherwise fails to comply with any other provision of this Note
and such default is not cured within five business days after the occurrence
thereof.
(b) the Company, pursuant to Title 11 of the U.S. Code or any
similar federal or state law for the relief of debtors as the same may be
amended from time to time, (i) commences a voluntary case or proceeding, (ii)
consents to the entry of an order for relief against it in an involuntary case
or proceeding, (iii) consents to the appointment of a receiver, trustee,
assignee, liquidator, sequestrator or similar official charged with maintaining
possession or
1
<PAGE>
control over property for one or more creditors, (iv) makes a general
assignment for the benefit of its creditors, or (v) generally does not pay
its debts when such debts become due or admits in writing its inability to
pay its debts generally.
If an Event of Default specified in subparagraph (a) above
occurs and is continuing, then the Payee may declare the principal of and
interest on the Note to be due and payable immediately. If an Event of Default
specified in subparagraph (b) above occurs and is continuing, the principal of,
and premium, if any, and interest on the Note shall IPSO FACTO become and be
immediately due and payable without any declaration or other act on the part of
the Payee. No course of dealing on the part of the Payee nor any delay or
failure on the part of the Payee to exercise any right shall operate as a waiver
of such right or otherwise prejudice the Payee's rights, powers and remedies. If
an Event of Default occurs, the Company will pay to the Payee all costs and
expenses, including but not limited to reasonable attorneys' fees, incurred by
the Payee in collecting any sums due on this Note or in otherwise enforcing any
of the Payee's rights, powers and remedies.
5. REGULATORY COMPLIANCE. Anything herein to the contrary
notwithstanding, the obligation of the Company to make payments of interest
shall be subject to the limitation that payments of interest shall not be
required to be made hereunder to the extent that payment thereof would
negatively impact the ability of Affinity Bank, a subsidiary of the Company, to
satisfy all regulatory capital requirements.
6. SENIORITY. The indebtedness evidenced by this Note, including all
principal, interest, premium, fees, costs and expenses payable by the Company
hereunder, shall be expressly senior and prior in right of payment to all other
indebtedness of the Company for borrowed money. The Company agrees not to incur
any indebtedness for borrowed money unless the Company and such lender have
entered into a subordination agreement in form and substance acceptable to the
Payee.
7. MISCELLANEOUS.
As used herein, the following terms shall have the meanings given to
them herein below:
"Maturity Date" means April 2, 2007 or such earlier date on which the
principal balance of this Note shall become due and payable by the terms hereof,
by acceleration or otherwise.
"Asset Sale" means (i) a voluntary or involuntary dissolution or
winding up of the Company; (ii) any capital reorganization or reclassification
of the membership interests of the Company or consolidation or merger of the
Company with or into another entity; (iii) a sale of a material amount of assets
of the Company (including shares of stock of any entity owned by the Company) to
an unaffiliated entity (other than sales of mortgage loans and similar assets of
the Company in the ordinary course of business); (iv) if theretofore transferred
to an affiliate, (a) a sale of such assets by such affiliate to an unaffiliated
entity, (b) a capital reorganization or reclassification of the ownership of
such affiliate, (c) the consolidation or merger of such affiliate with or into
another entity, (d) a distribution in respect of any such assets or (e) a
voluntary or involuntary dissolution or winding up of any such assets or such
affiliate; or (v) the declaration by the Company of any distribution in respect
of its membership interests.
This Note is a contract made under the laws of the state of California
and the rights and obligations of the Company and the Payee shall be construed,
interpreted and enforced under the laws of such state.
2
<PAGE>
This Note has not been registered under the Securities Act of 1933, as
amended, or the securities laws of the State of California, or any other state.
This note may not be sold, transferred or otherwise disposed of except pursuant
to an effective registration statement or appropriate exemption from
registration under the foregoing laws. Accordingly, this Note may not be sold,
transferred or otherwise disposed of without (i) the opinion of counsel
satisfactory to the Company that such transfer may lawfully be made without
registration under the Federal Securities Act of 1933 and the securities laws of
the State of California or any other applicable state securities laws; or (ii)
such registration. This legend represents a restriction on transferability of
this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the date first written above.
AFFINITY BANK HOLDINGS LLC
By:______________________________
Name: Michael McGuire
Title: President
3
<PAGE>
EXHIBIT 10.41
CLOSING AGREEMENT
THIS CLOSING AGREEMENT (the "Agreement") is made and entered into as of
the 30th day of September, 1999 between AFFINITY GROUP THRIFT HOLDING CORP., a
Delaware corporation (the "Seller") and AFFINITY BANK HOLDINGS LLC, a Minnesota
limited liability company (the "Purchaser").
WITNESSETH:
The Seller entered into a Stock Purchase Agreement dated as of December
7, 1998 (the "Purchase Agreement") pursuant to which the Purchaser agreed to
purchase and acquire from the Seller all of the issued and outstanding stock of
Affinity Bank, a California corporation ("AB"). Capitalized terms used herein
and not otherwise defined herein shall have the meanings given to them in the
Purchase Agreement.
The obligations of the Seller and the Purchaser under the Purchase
Agreement are subject to contingencies including, INTER ALIA, approval of the
transactions contemplated thereby by appropriate regulatory authorities. By
action dated September 24, 1999, the Department of Financial Institutions of the
State of California consented to the acquisition of AB by the Purchaser.
Accordingly, the Seller and the Purchaser now wish to consummate the
transactions contemplated by the Purchase Agreement and to make certain
amendments to the Purchase Agreement as a condition thereof.
NOW, THEREFORE, the parties agree as follows:
1. The date of the Closing is hereby fixed by mutual agreement to be
September 30, 1999. Conditions set forth in the Purchase Agreement pertaining to
the giving of notice or otherwise are waived.
2. The Seller hereby reaffirms the representations and warranties set
forth in Sections 3.1 through 3.4 inclusive of the Purchase Agreement and the
Purchaser reaffirms the representations and warranties set forth in Sections 3.5
through 3.8, inclusive, of the Purchase Agreement.
3. The Purchaser has, contemporaneously herewith, issued to the Seller
a preferred membership interest in the Purchaser constituting the consideration
contemplated by Section 2.2 of the Purchase Agreement. The issuance of such
membership interest shall be deemed to have satisfied the requirements of
Section 2.2 of the Purchase Agreement. The Purchaser acknowledges receipt of
certificates for the shares of stock of AB duly endorsed for transfer.
<PAGE>
4. This Agreement shall be subject to the general terms of the Purchase
Agreement, including, specifically, the provisions of Article 5 thereof, which
Article is incorporated herein by this reference thereto.
This document may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which when taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the date first written above.
AFFINITY GROUP THRIFT HOLDING CORP.
By /s/ Stephen Adams
-------------------------------
Stephen Adams
Its President
AFFINITY BANK HOLDINGS LLC
By /s/ Michael McGuire
-------------------------------
Michael McGuire
Its President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,161
<SECURITIES> 0
<RECEIVABLES> 26,816
<ALLOWANCES> (1,416)
<INVENTORY> 35,105
<CURRENT-ASSETS> 79,493
<PP&E> 91,973
<DEPRECIATION> (19,707)
<TOTAL-ASSETS> 374,273
<CURRENT-LIABILITIES> 127,961
<BONDS> 130,000
0
0
<COMMON> 1
<OTHER-SE> (77,165)
<TOTAL-LIABILITY-AND-EQUITY> 374,273
<SALES> 161,439
<TOTAL-REVENUES> 286,662
<CGS> 106,684
<TOTAL-COSTS> 187,300
<OTHER-EXPENSES> 72,314
<LOSS-PROVISION> 428
<INTEREST-EXPENSE> (21,667)
<INCOME-PRETAX> 5,381
<INCOME-TAX> (3,053)
<INCOME-CONTINUING> 2,328
<DISCONTINUED> 1,018
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,782
<EPS-BASIC> 37.820
<EPS-DILUTED> 37.820
</TABLE>
