<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 1, 1999.
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
RV CENTERS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5500 76-0577509
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
</TABLE>
---------------------
600 TRAVIS, SUITE 2100
HOUSTON, TEXAS 77002
(713) 238-6780
(Address, including zip code and telephone number,
including area code, of registrant's principal executive offices)
---------------------
CLAYTON K. TRIER
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
600 TRAVIS, SUITE 2100
HOUSTON, TEXAS 77002
(713) 238-6780
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
---------------------
copy to:
<TABLE>
<S> <C>
CHRISTOPHER S. COLLINS T. MARK KELLY
MICHAEL C. BLANEY VINSON & ELKINS L.L.P.
ANDREWS & KURTH L.L.P. 2300 FIRST CITY TOWER
600 TRAVIS, SUITE 4200 1001 FANNIN
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
(713) 220-4200 (713) 758-2222
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
---------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value...... (1) (1) $56,250,000 $15,638
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</TABLE>
(1) In accordance with Rule 457(o) under the Securities Act, the number of
shares being registered and the proposed maximum offering price per share
are not included in this table.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1999
PROSPECTUS
SHARES
RV CENTERS, INC.
[RV CENTERS, INC. LOGO]
COMMON STOCK
----------------------
This is RV Centers, Inc.'s initial public offering of common stock. RV
Centers, Inc. was founded in 1998 to acquire 14 companies engaged in the sale
and servicing of new and used recreation vehicles and to become the leading
recreation vehicle dealer in the United States. RV Centers, Inc. has not
conducted any operations to date except in connection with this offering and the
acquisitions. The underwriters will offer shares in the United
States.
We expect the public offering price to be between $ and $ per
share. Currently, no public market exists for the shares. After pricing of the
offering, we expect that the common stock will trade on The New York Stock
Exchange under the symbol "RVC."
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN "RISK
FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS.
----------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price......................................
Underwriting Discount......................................
Proceeds, before expenses, to RV Centers, Inc. ............
</TABLE>
The underwriters may also purchase up to an additional shares at
the public offering price, less the underwriting discount, within 30 days from
the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares of common stock will be ready for delivery in New York, New York
on or about , 1999.
----------------------
MERRILL LYNCH & CO.
J.C. BRADFORD & CO.
SANDERS MORRIS MUNDY
----------------------
THE DATE OF THIS PROSPECTUS IS , 1999.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 3
Map of the United States indicating the location of
RV Centers' facilities with photographs of recreation vehicles on dealer lots.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 9
The Company................................................. 15
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Capitalization.............................................. 18
Dilution.................................................... 19
Selected Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Business.................................................... 44
Management.................................................. 57
Certain Transactions........................................ 62
Principal Stockholders...................................... 65
Description of Capital Stock................................ 66
Shares Eligible for Future Sale............................. 70
Underwriting................................................ 72
Legal Matters............................................... 74
Experts..................................................... 74
Where You Can Find More Information......................... 75
Index to Consolidated Financial Statements.................. F-1
</TABLE>
----------------------
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about RV Centers, including, among other things:
- The successful implementation of our anticipated internal and external
growth strategies;
- Our ability to integrate our founding companies and future acquisitions;
- Anticipated economic and demographic trends affecting our business;
- Our expectation that current suppliers will continue to supply recreation
vehicles to us; and
- Future expenditures for capital projects.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
----------------------
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
----------------------
i
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus and may
not contain all the information that may be important to you. You should read
the entire prospectus, including the financial data and related notes, before
making an investment decision. At the same time as the closing of this offering,
RV Centers, Inc. will acquire 14 recreation vehicle dealers for consideration
including cash and shares of its common stock. The 14 companies acquired are
referred to as the "founding companies."
Unless otherwise indicated, the information, share and per share data in
this prospectus assumes that (a) RV Centers acquires all of the founding
companies; (b) the underwriters' over-allotment option is not exercised; and (c)
RV Centers has completed a 1,339.157-for-one stock split of the common stock.
THE COMPANY
RV Centers was founded to become the leading retailer of recreation
vehicles in the United States. We operate 25 dealership facilities in 13 states
and sell over 100 different models of RVs which are built by over 40 different
manufacturers. We sell new and used RVs and provide complementary products and
services, including sales of parts and accessories, maintenance and repair
services, body shop services, vehicle rentals, and contracts through which our
customers can obtain financing, insurance and extended warranties. The RVs that
we sell range from "pop-up" camping trailers with a sales price of approximately
$5,000 to luxury motor homes with a sales price in excess of $500,000. Our
dealerships have been in business an average of 20 years.
Our dealerships have grown significantly in the past two years. Combined
pro forma revenues increased from $219.9 million in 1996 to $252.2 million in
1997, and from $201.5 million for the nine months ended September 30, 1997 to
$231.8 million for the nine months ended September 30, 1998, representing annual
growth rates of approximately 15% during each of these periods. The RV industry
as a whole also achieved significant growth during this time period, as these
vehicles and the lifestyles they afford have become increasingly popular with
consumers. Industry studies are predicting continued strong industry growth over
the next 10 years.
We believe that, as the operator of the largest nationwide network of RV
dealerships, we will bring about significant and beneficial changes in our
industry. In order to be able to serve consumers in all major markets within the
United States and Canada, we intend to continue to expand our dealer network,
primarily through acquisitions of complementary dealerships.
THE INDUSTRY
The recreation vehicle retailing industry is a large, highly-fragmented
industry composed almost exclusively of small, privately-owned companies, most
of which operate from a single location. Based on data from an industry study,
we estimate that retail and private sales of new and used RVs in the U.S. were
approximately $20 billion in 1997. Of such amount, $9.7 billion represented
retail sales by the approximately 3,000 RV dealerships in the U.S. We believe
that the four largest RV dealerships generated less than 5% of total industry
revenue in 1997.
There are currently nine million RVs in use, and one in ten households in
the U.S. currently owns an RV. Within households headed by persons aged 45 to
64, the figure increases to one in seven currently owning an RV. Consumers are
increasingly demanding a broader selection of product models, the most
competitive prices and nationwide access to reliable and prompt repair and
maintenance services. Based on their years of experience in the RV retailing
industry, our management believes that consolidation in this industry is
inevitable and necessary to meet these consumer demands.
INDUSTRY GROWTH FACTORS
The RV industry has experienced steady growth in recent years and
anticipates significant growth over the next ten years. Factors stimulating
industry growth include:
- favorable demographic trends -- which indicate that, as baby boomers age,
the number of people in the industry's primary customer age group will
increase significantly over the next 10 years;
1
<PAGE> 6
- growing popularity of the RV lifestyle -- which promotes independence in
leisure travel, frequent outings to relax with family and friends, and
increased mobility for retirees;
- expanding RV uses -- beyond camping and travel to include special events
where it has become popular to congregate in RVs, such as automobile
races, club rallies, aircraft shows and sporting events;
- marketing efforts of RV industry associations -- such as the nationwide
"Go RVing" advertising campaign directed at baby boomers;
- increasing need to replace the large stock of aging RVs -- because
approximately 40% of all RVs currently in use are over 15 years old and
are reaching the end of their useful lives; and
- increasing number of sport utility vehicles, vans and pickup
trucks -- which are capable of towing RVs.
COMPANY STRENGTHS
With 25 locations in 13 states, we believe we are the largest RV retailer
in the United States in terms of geographic coverage, number of product lines
represented and number of vehicles sold. We have a number of strengths that will
support our ability to expand our business through internal growth and
acquisitions. These strengths, which collectively provide us with a competitive
advantage, include:
- national presence and geographic diversity -- which allow us to provide a
wide selection of products and nationwide repair and maintenance
services, two of the primary factors driving customers in their search
for dealer relationships;
- size and critical mass -- which allow us to establish a lower operating,
marketing, purchasing and financing cost structure;
- decentralized operations -- which provide focused, market-specific
management of sales, service and inventory, because our local managers
are experienced in their markets and possess in-depth knowledge of local
customers' needs and preferences;
- experienced management team -- which, after the offering, will hold
approximately 41% of our outstanding common stock and includes recognized
leaders in the RV retailing industry and persons experienced in
successfully consolidating and operating in highly-fragmented industries
and public markets; and
- ability, as a large, publicly-traded company, to attract and retain
quality employees -- which will enhance the buying and servicing
experiences for our customers.
COMPANY GOAL AND OPERATING STRATEGY
Our goal is to become the leading recreation vehicle retailer in the United
States with the capability of serving customers through a nationwide network of
dealerships. Our strategies to increase revenue, reduce costs and achieve our
goal include:
Increase Internal Growth. We intend to increase our revenue and our share
of the RV retailing market by pursuing various opportunities available to us as
a national organization that are not generally available to individual dealers,
including the ability to:
- provide customers with access to timely, reliable repair and maintenance
services on a nationwide basis through our dealer network;
- offer customers access to a broader inventory selection of used vehicles
and, to the extent permitted by manufacturers' agreements, new vehicles,
by linking all of our dealerships' inventory databases;
2
<PAGE> 7
- establish inventory management practices that will reduce costs and
increase sales, such as shifting inventory to locations in regions of the
country experiencing their peak selling seasons from those experiencing
off-season reductions in sales;
- create name recognition for "RV Centers" using national and regional
marketing campaigns including focused media and print advertising,
prominent displays at trade shows, telemarketing programs, newsletters
and an Internet web site;
- develop customer loyalty through supporting local, regional and national
camping events and clubs and establishing our own national club and
newsletter, with incentives for members; and
- adopt innovative sales and customer service training procedures and
programs, designed to increase customer satisfaction and result in a
higher closure percentage of sales opportunities.
Reduce Costs Through Operating Efficiencies. Through our nationwide network
of dealers, we will have the ability to achieve certain economies of scale,
increase our operating efficiencies, lower our costs and increase our overall
productivity by:
- using our increased purchasing power to reduce financing and insurance
costs and to strengthen our relationships with RV manufacturers;
- centralizing certain administrative functions (such as purchasing,
accounting, financing, insurance, employee benefits and legal support)
which will provide local management with more time to focus on sales and
operations;
- sharing and applying "best practices" from successful dealers which can
allow us to achieve higher operating margins; and
- standardizing our computer and information systems which will improve
inventory management, purchasing and financial reporting and provide
customer tracking and real-time sales information.
Expand Our Network of Dealers Through Acquisitions. The highly fragmented
nature of the RV industry provides us with significant opportunities to expand
our dealer network. We believe that owners of RV dealerships will seek to
affiliate with us due to the competitive advantages associated with our business
strategy and the opportunity to have a continuing role in local dealership
management. We intend to acquire dealerships which will allow us to:
- enter into new geographical markets;
- increase our presence in geographic markets we currently serve;
- increase our access to popular, high-quality product lines and models;
and
- expand our repair and maintenance services capacity.
Further Develop Complementary Revenue Sources. We believe that we will be
able to increase our revenue and strengthen our operations through developing
areas of business which generally have not been fully exploited by individual RV
dealers, including:
- consolidating our relationships with financing institutions and insurers
in order to provide our customers with favorable loan terms, insurance
rates and extended warranty coverages and to expand our related fee
income;
- offering programs designed to capture revenue associated with sales of
used RVs between private individuals, such as pre-sale servicing and
sales of extended warranties;
- expanding floorspace dedicated to parts and accessories, which have
higher margins than vehicle sales; and
3
<PAGE> 8
- working with the largest RV insurance providers to become certified as
designated service centers for collision repair and body shop services.
THE OFFERING
Common Stock offered by RV
Centers.................. shares
Common Stock to be
outstanding after the
offering(1).............. shares
Use of proceeds............ We expect that the net proceeds from this offering
(after all costs and underwriting discounts and
commissions, but without exercise of the
over-allotment option) will be approximately $46.3
million. We intend to use these proceeds to:
- pay the cash portion of the consideration for the
founding companies; and
- repay certain indebtedness of the founding
companies.
Risk Factors............... See "Risk Factors" for a discussion of factors you
should carefully consider before deciding to invest
in shares of the common stock.
Proposed NYSE trading
symbol..................... "RVC"
- ---------------
(1) Consists of: (a) 1,968,561 shares issued to Baker Kreft Funding I, L.L.C.,
the management of RV Centers and other investors, (b) 3,780,100 shares to be
issued to the owners of the founding companies, and (c) shares
to be sold in the offering. Excludes: (a) options to purchase approximately
695,139 shares at the initial public offering price, which have been or are
expected to be granted to RV Centers' management and employees of the
founding companies upon consummation of the offering, (b) options to
purchase 45,000 shares at the initial public offering price, which are
expected to be granted to three non-employee directors, and (c) 41,000
shares that may be paid to the stockholder of a founding company if that
company achieves a certain pretax income level after the acquisition.
4
<PAGE> 9
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
RV Centers will acquire the founding companies simultaneously with and as a
condition to the closing of the offering. For financial statement presentation
purposes, RV Centers has been identified as the "accounting acquiror." The
following table presents summary pro forma combined financial data for RV
Centers, as adjusted for (a) the effects of the acquisitions of the founding
companies, (b) the effects of certain pro forma adjustments to the historical
financial statements described below and (c) the consummation of the offering.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
--------------------- ---------------------
<S> <C> <C>
INCOME STATEMENT DATA(1):
Revenues.......................................... $252,208 $231,824
Cost of sales..................................... 207,738 191,155
-------- --------
Gross profit...................................... 44,470 40,669
Selling, general and administrative expenses(2)... 32,551 26,741
Goodwill amortization(3).......................... 988 741
-------- --------
Operating income............................... 10,931 13,187
Interest and other income (expense), net(4)....... (1,566) (1,416)
-------- --------
Income before taxes............................ 9,365 11,771
Income tax expense................................ 4,141 5,005
-------- --------
Net income..................................... $ 5,224 $ 6,766
======== ========
Net income per share.............................. $ $
Shares used in computing pro forma net income per
share(5).......................................
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------
<S> <C>
BALANCE SHEET DATA(6):
Cash...................................................... $ 6,910
Working capital........................................... 40,046
Total assets.............................................. 118,483
Total floor plan financing................................ 24,499
Other debt................................................ 1,161
Shareholders' equity...................................... 85,124
</TABLE>
- ---------------
(1) The pro forma combined income statement data assumes that the acquisitions
of the founding companies and the offering were closed at the beginning of
each period presented. During these periods, the founding companies were not
under common control or management; therefore, the data presented may not be
comparable to or indicative of results after the offering. In addition, the
pro forma combined financial information does not include (a) any cost
savings expected to be achieved by economies of scale and consolidating
certain operational and administrative functions or (b) the costs of
corporate overhead, other than salaries of executive officers.
(2) The pro forma combined income statement data for the year ended December 31,
1997 and the nine months ended September 30, 1998 reflect an aggregate of
$2.8 million and $2.3 million, respectively, in pro forma reductions in
salary and benefits of the owners of the founding companies to which they
have agreed prospectively, $793,000 and $595,000, respectively, in pro forma
salary and benefits to corporate management and $15,000 and $11,000,
respectively, of expense reductions for the effect of revisions of certain
lease agreements between certain stockholders of the founding companies and
those founding companies.
5
<PAGE> 10
(3) Reflects amortization of the goodwill to be recorded as a result of the
acquisitions of the founding companies over a 40-year period and computed on
the basis described in the Notes to the Unaudited Pro Forma Combined
Financial Statements.
(4) Pro forma interest expense reflects a reduction in interest for the year
ended December 31, 1997 and the nine months ended September 30, 1998 of $2.7
million and $2.0 million, respectively, related to repayment of certain
indebtedness with the proceeds from the offering. See "Use of Proceeds."
(5) Consists of: (a) 1,339,157 shares issued to Baker Kreft Funding I, L.L.C.,
(b) 595,926 shares issued to the management of RV Centers, (c) 33,478 shares
issued to other investors, (d) 3,780,100 shares to be issued to the owners
of the founding companies, and (e) shares to be sold in the
offering. Excludes: 41,000 shares that may be issued to the stockholder of a
founding company if that company achieves a certain pretax income level
after the acquisition. Subsequent to September 30, 1998, (a) options to
purchase 415,139 shares at the initial public offering price were issued to
management and are currently outstanding, (b) options to purchase
approximately 280,000 shares at the initial public offering price are
expected to be granted to the founding companies' employees upon
consummation of the offering, and (c) options to purchase 45,000 shares at
the initial public offering price are expected to be granted to three
non-employee directors upon the consummation of the offering.
(6) The pro forma combined balance sheet data is based upon preliminary
estimates and assumes that the acquisitions of the founding companies were
closed on September 30, 1998.
6
<PAGE> 11
SUMMARY INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA
The following table presents certain summary historical financial data for
each of the founding companies. The historical income statement data below have
not been adjusted for the pro forma adjustments related to contractually-agreed
reductions in salaries and benefits, or any other pro forma adjustments,
reflected in the Unaudited Pro Forma Combined Financial Statements, included
elsewhere in this prospectus. The income statement data presented below have
been audited for the periods as reflected in the historical financial statements
of such founding companies, included elsewhere in this prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
---------------------------- SEPTEMBER 30,
1995 1996 1997 1998
------- ------- -------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
County Line:
Revenue..................................... $35,444 $32,355 $ 41,384 $ 43,111
Gross profit................................ 4,179 4,711 6,250 6,254
Operating income............................ 565 1,045 1,756 2,015
Saddleback:
Revenue..................................... $16,003 $16,583 $ 25,384 $ 26,857
Gross profit................................ 2,581 2,993 3,964 4,403
Operating income............................ 350 362 307 1,126
Emerald Coast:
Revenue..................................... $20,598 $26,349 $ 28,781 $ 26,249
Gross profit................................ 4,572 5,218 5,711 5,011
Operating income............................ 1,249 1,567 1,599 1,971
Casey's:
Revenue..................................... $17,027 $18,741 $ 21,092 $ 19,355
Gross profit................................ 1,888 2,498 2,990 2,804
Operating income............................ 812 1,009 1,202 1,150
Stoltzfus(1):
Revenue..................................... $12,940 $15,930 $ 15,721 $ 18,615
Gross profit................................ 2,428 2,758 2,675 3,503
Operating income............................ (174) 94 430 431
Dusty's Camper World:
Revenue..................................... $19,620 $21,409 $ 20,753 $ 18,032
Gross profit................................ 2,720 3,086 3,508 2,644
Operating income............................ 312 328 664 698
Hall Enterprises:
Revenue..................................... $14,617 $14,036 $ 16,682 $ 11,943
Gross profit................................ 2,600 2,439 3,097 2,273
Operating income............................ 340 262 457 880
Scott Motor Coach:
Revenue..................................... $12,294 $12,141 $ 13,986 $ 11,748
Gross profit................................ 2,071 2,441 2,793 2,424
Operating income............................ 292 357 413 586
American RV:
Revenue..................................... $11,113 $14,752 $ 15,085 $ 11,195
Gross profit................................ 2,043 2,852 2,959 2,384
Operating income............................ 11 241 489 230
</TABLE>
7
<PAGE> 12
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
---------------------------- SEPTEMBER 30,
1995 1996 1997 1998
------- ------- -------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Young's:
Revenue..................................... $13,405 $12,977 $ 14,280 $ 10,981
Gross profit................................ 2,848 2,985 3,037 2,413
Operating income............................ 958 956 793 766
RV's Northwest:
Revenue..................................... $ 8,111 $ 8,599 $ 10,719 $ 10,180
Gross profit................................ 1,138 1,441 1,802 1,794
Operating income............................ (97) 90 244 507
Little Valley:
Revenue..................................... $ 8,593 $11,163 $ 11,785 $ 8,953
Gross profit................................ 1,508 1,700 2,273 1,591
Operating income............................ 398 594 978 785
Marshall's:
Revenue..................................... $ 9,056 $ 9,045 $ 10,004 $ 7,868
Gross profit................................ 975 1,452 1,633 1,394
Operating income............................ 266 299 127 273
Ace Fogdall:
Revenue..................................... $ 4,935 $ 5,893 $ 6,554 $ 6,738
Gross profit................................ 1,218 1,393 1,778 1,777
Operating income............................ 326 342 445 813
</TABLE>
- ---------------
(1) The financial data presented for Stoltzfus is based on the fiscal years
ended October 31, 1995, 1996, 1997 and 1998.
8
<PAGE> 13
RISK FACTORS
You should carefully consider the following factors as well as the other
information contained in this prospectus. This prospectus contains certain
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including the risk factors set forth below and elsewhere in this prospectus.
WE DO NOT HAVE ANY COMBINED OPERATING HISTORY AND OUR STRATEGIES ARE UNPROVEN IN
THE RV RETAILING INDUSTRY
We are a newly-formed company operating in an industry that has experienced
no meaningful consolidation to date. We will acquire the founding companies
simultaneously with the closing of the offering. The pro forma combined
financial results presented in this prospectus are not necessarily indicative of
actual results which might have occurred if our operations and management teams
had been combined during the periods presented, nor are they representative of
future results that will be reported on a consolidated basis. While we believe
there are significant benefits to be derived from creating a nationwide network
of RV dealerships operating under common control, our business strategy has
never been tested within this industry. We therefore cannot guarantee that our
strategy will produce the operating synergies and lower cost structure that we
are seeking.
WE MAY FAIL TO INTEGRATE OUR LOCAL OPERATIONS INTO A NATIONAL NETWORK WHICH
WOULD REDUCE THE BENEFITS ASSOCIATED WITH FORMING A NATIONAL NETWORK
Prior to the offering, each of the founding companies operated
independently, with their own internal controls and management systems. We
intend to maintain a decentralized approach to dealership operations, whereby
local management retains responsibility for day-to-day operations, profitability
and the growth of the business. At the same time, our success will depend in
large part on our ability to integrate the operations and management of the
founding companies and future acquisitions into a national organization. If we
do not successfully convert the founding companies and future acquisitions to
common information systems and implement consistent overall business, accounting
and reporting controls, inconsistent operating and financial practices could
result among local operations. Such inconsistencies could negate the benefits to
be derived from a nationwide dealership network. Further, if management of the
founding companies and businesses to be acquired in the future cannot work
cohesively together or with our corporate management or readily adapt to this
type of operating structure, inefficiencies and a deterioration in the morale
and profitability of local dealerships could result. See "Business -- Company
Goal and Operating Strategy."
THERE ARE RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY
We plan to expand our dealership network primarily through acquisitions.
Implementing an acquisition strategy involves several risks, including the
following:
- diversion of corporate management's attention from operating matters to
acquisitions;
- reallocation of significant amounts of capital from operating
initiatives, such as capital improvements and expansions, to
acquisitions;
- adverse impact on overall profitability if acquired companies do not
achieve the financial results projected in our valuation models;
- assumption of unanticipated operating problems or legal liabilities; and
- difficulty of assimilating the acquired operations, including
implementing common information systems and standardizing certain
operating and financial reporting procedures.
We may not be successful in overcoming these risks or other problems
encountered in connection with future acquisitions. In addition, we cannot
guarantee that companies consolidating related industries
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<PAGE> 14
or yet-to-be formed companies will not also compete with us for acquisition
candidates at some future date. Future competitors may have greater financial
resources than us to finance acquisition opportunities and might be willing to
pay higher prices for the same acquisition opportunities. Such competition could
have the effect of increasing the price for acquisitions or reducing the number
of suitable acquisition candidates. See "Business -- Company Goal and Operating
Strategy."
WE WILL REQUIRE SIGNIFICANT ADDITIONAL CAPITAL FOR FUTURE ACQUISITIONS
Our expansion through acquisitions will require significant capital. We
cannot predict with certainty what our capital needs will be to finance our
acquisition program. We currently intend to use our common stock to fund a
portion of the purchase price of future acquisitions. If our common stock does
not maintain an acceptable price in the public markets or if potential
acquisition candidates are unwilling to accept our common stock as part of the
consideration for the sale of their businesses, we may have to use more cash to
finance our acquisition program. If we do not have enough cash resources, our
ability to make acquisitions could be limited unless we are able to obtain
additional cash through future debt or equity financings. Incurring debt would
increase our leverage and make us more vulnerable to economic downturns and
limit our ability to compete.
We are negotiating with a group of commercial banks to provide us with a
credit facility to be used for acquisitions, working capital, capital
expenditures and other general corporate purposes. Any such credit facility or
other debt financing will require that we make certain financial covenants which
could limit our operational and financial flexibility. We cannot guarantee that
we will be able to obtain financing for our acquisition program or, if
available, that it will be available on terms we deem acceptable. As a result,
we might be unable to successfully pursue our acquisition strategy. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Combined Liquidity and Capital Resources" and "Business -- Company
Goal and Operating Strategy."
WE DO NOT HAVE LONG-TERM SUPPLY CONTRACTS WITH RV MANUFACTURERS
We do not have long-term franchise agreements or supply contracts with
manufacturers from whom we purchase our inventory of new RVs. To the extent we
have supply agreements with any of the manufacturers, the agreements generally
permit termination at will by either party on short notice. Because of the
short-term nature of these contracts, we cannot be certain of a continued supply
of new vehicles to sell in the future. In addition, if one or more of our
significant suppliers refuse to sell to us for any reason, we may not be able to
obtain an alternate supply of comparable RVs. Such a loss of supply could
adversely affect our business.
We also sell a significant number of used RVs. We do not have any contracts
ensuring a supply of used vehicles. We obtain these used vehicles primarily
through trade-ins in connection with a customer's purchase of a new vehicle.
Quality used RVs can sometimes be purchased from other dealers and wholesalers.
If for any reason we are not able to obtain an adequate supply of used vehicles,
our business could be adversely affected. See "Business -- Industry Overview"
and "Business -- Manufacturers Supplying RV Centers".
OUR GROWTH STRATEGY MAY BE RESTRICTED BY TERRITORIAL RESTRAINTS IMPOSED BY
MANUFACTURERS
Our growth strategy from time to time may involve expanding or changing
product lines carried by local dealerships. Such activities could be constrained
or restricted due to territorial restraints imposed by manufacturers. While we
believe we will be successful in maintaining a supply of high-quality product
lines at our local dealerships and expanding our distribution rights over time,
there can be no assurance that manufacturers will be cooperative. If we are
unable to offer a broad mix of high-quality products across our dealership
network, our results of operations could be adversely affected.
THE RV INDUSTRY IS A CYCLICAL INDUSTRY
The RV industry is susceptible to cycles of growth and contraction as a
result of prevailing economic conditions. In an economic downturn, consumers
generally spend less on leisure goods. Because an RV can
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<PAGE> 15
be a major expenditure, even a small decline in discretionary spending could
adversely affect our business. Other factors which may affect the RV industry
and dealer revenue include prevailing fuel prices, fuel availability, interest
rates, consumer spending patterns and the availability of consumer credit.
Rising fuel prices or interest rates or decreasing consumer spending or
availability of fuel or consumer credit will generally result in decreased sales
of RVs.
QUARTERLY OPERATING RESULTS WILL FLUCTUATE DUE TO SEASONALITY AND THE TIMING OF
ACQUISITIONS
The retail RV industry is influenced by seasonality and demand changes. In
the northern United States, sales of RVs are typically at their highest in the
second and third quarters and then decrease significantly during the first and
fourth quarters. In the southern United States, the seasonal differences are not
nearly as dramatic, but the first and second quarters tend to have the highest
sales and the fourth quarter tends to be the lowest. We cannot guarantee that
our geographic diversity will be sufficient to overcome such seasonal patterns.
In addition, our quarterly results may be affected by the timing of
acquisitions, the timing and magnitude of costs relating to the assimilation of
acquired companies and regional economic conditions. Accordingly, our financial
performance in any particular quarter may not be indicative of the results which
can be expected for any other quarter or for the entire year. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."
GOVERNMENT REGULATIONS MAY IMPOSE ADDITIONAL COSTS ON US OR RESTRICT OUR
ACTIVITIES
Our operations are subject to a number of federal, state and local
regulations relating to the protection of the environment and to workplace
health and safety. We may wish to expand the types of services provided to our
customers to include more automotive type service such as oil changes, certain
chassis-related services and collision repairs. Such services may involve
handling used motor oil or other substances subject to various regulations.
Compliance with current and future regulations may be expensive or make it
difficult for us to provide certain products or services.
OUR OPERATIONS HAVE PRODUCT AND SERVICE LIABILITY RISKS
RVs sold or serviced by us may subject us to potential claims for personal
injury or property damage resulting from a customer's use of such vehicles.
Generally, product liability claims for new units are the responsibility of the
manufacturers. However, if we fail to properly repair a vehicle and such failure
results in injury or damage, we may be liable for such injury or damage. We
expect to maintain third-party insurance for product and service liability
claims. Although none of the founding companies has experienced a significant
loss in this regard, there can be no assurances that we will not experience
future claims in excess of available insurance coverage.
WE DEPEND ON OUR KEY PERSONNEL
Our operations are dependent on the continued efforts of our executive
officers and the senior management of the founding companies. We will also
depend on the senior management of companies that may be acquired in the future.
The executive officers of RV Centers are experienced in industry-specific
consolidations as well as the RV industry. The senior management of the founding
companies have extensive experience in the RV industry, have established
reputations and long-term customer relationships, and possess an in-depth
knowledge of their local market. Although we will execute an employment
agreement with each of our executive officers, we cannot guarantee that any
individual will continue in such capacity for any particular term. The loss of
our executive officers and the senior management of the founding companies could
have a material adverse effect on us. See "Management."
MANAGEMENT AND CERTAIN STOCKHOLDERS WILL CONTROL A MAJORITY OF OUR STOCK
Following the offering, our executive officers, directors and former
stockholders of the founding companies, a total of 28 people, will beneficially
own in the aggregate 5,748,661 shares of common stock which represent % of
the total outstanding shares of common stock ( % if the underwriters' over-
allotment option is exercised in full). These persons, if acting in concert,
will be able to significantly
11
<PAGE> 16
influence our affairs, including the election of our board of directors and the
disposition of any matter submitted to a vote of stockholders. See "Principal
Stockholders."
THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK AND THE MARKET PRICE
OF OUR COMMON STOCK MAY BE VOLATILE
Prior to this offering, no public market for our common stock has existed.
We intend to apply to have our common stock listed on the New York Stock
Exchange, but we cannot guarantee that an active trading market for our common
stock will develop or, if developed, continue after the offering. The initial
public offering price will be determined by our negotiations with
representatives of the underwriters. The price that is agreed upon may not be
equal to the price at which the common stock will trade after the offering. See
"Underwriting" for the factors to be considered in determining the initial
public offering price. The market price of our common stock after the offering
may fluctuate significantly from time to time in response to numerous factors,
including variations in our reported financial results and changing conditions
in the economy in general or in the RV retailing industry in particular. In
addition, the stock markets experience significant price and volume volatility
from time to time, which may affect the market price of our common stock for
reasons unrelated to our performance.
THERE ARE A NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE WHICH MAY AFFECT THE
MARKET PRICE OF OUR
COMMON STOCK
Upon completion of the Acquisitions and the offering, there will be
approximately 5,808,661 shares of unregistered common stock outstanding that was
not sold in connection with this offering. If a substantial amount of these
shares are sold on the open market, the price of our common stock could be
adversely affected. Currently, these shares of common stock may not be sold
except in transactions registered under the Securities Act or pursuant to a
transactional exemption from registration, including the exemptions contained in
Rules 144 and 701. In addition, certain of our directors, executive officers and
senior management and the owners of the founding companies have agreed, subject
to specific exceptions, to not sell or otherwise dispose of approximately 80% of
their common stock for two years and approximately 20% of their common stock for
one year. However, when these shares are no longer subject to legal or
contractual restrictions, persons holding such common stock will be able to
freely sell or otherwise dispose of their shares.
The transfer restrictions are also subject to the rights of such holders to
sell shares of common stock in connection with the exercise of registration
rights described below. The stockholders of the founding companies have certain
piggyback registration rights with respect to their shares of common stock,
which are exercisable only during periods when the shares of such stockholders
are subject to resale restrictions under Rule 144. These piggyback registration
rights generally allow the stockholders to sell unregistered shares in
conjunction with a future offering of common stock by our company, subject to
certain conditions and potential limitations. See "Shares Eligible for Future
Sale."
Upon the closing of the offering, we will also have outstanding options to
purchase up to a total of approximately 752,790 shares of common stock,
including options to purchase approximately 325,000 shares issued under our 1999
Stock Option Plan. Our 1999 Stock Option Plan provides for the issuance of
options to purchase the greater of (a) 1,500,000 or (b) 15% of the total
outstanding shares of common stock. Following the offering, we intend to file a
registration statement under the Securities Act to register the resale of the
shares subject to this plan. See "Management."
We also intend to register within 90 days of the offering an additional
3,000,000 shares of common stock under the Securities Act for use in connection
with future acquisitions. These shares may be freely tradeable after their
issuance by persons not affiliated with our company unless we contractually
restrict their resale.
There can be no assurance that the resale or the availability for sale of
the shares of common stock eligible for future sale will not have an adverse
effect on the prevailing market price of our common stock.
12
<PAGE> 17
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION
If you purchase shares of our common stock in this offering, you will
experience immediate dilution in the net tangible book value of your shares of
$ per share (assuming an initial public offering price of $ per share).
See "Dilution." In the event that we issue additional shares of common stock in
the future, including shares that may be issued in connection with acquisitions
or other public or private financings, you may experience further dilution in
the net tangible book value per share of your common stock.
A TAKE-OVER OF RV CENTERS WOULD BE DIFFICULT
Our charter, bylaws, employment agreements and employee benefit plans
contain provisions which may have the effect of delaying, deferring or
precluding a change in control of our company. For example, our charter and
bylaws provide for, among other things, the prohibition of stockholder action by
written consent. In addition, our board of directors has the authority to issue
shares of preferred stock in one or more series and to fix the rights and
preferences of the shares of any such series without stockholder approval. Any
series of preferred stock is likely to be senior to the common stock with
respect to dividends, liquidation rights and, possibly, voting. Our ability to
issue preferred stock without stockholder approval could have the effect of
discouraging unsolicited acquisition proposals. Our 1999 Stock Option Plan will
contain provisions that allow for the acceleration of vesting or payment of
awards granted under such plans in the event of a "change of control," as
defined in such plan. In addition, we have entered into employment agreements
with certain executive officers and key employees allowing for cash payments
under certain circumstances following a change in control.
WE WILL HAVE A SIGNIFICANT AMOUNT OF GOODWILL ON OUR BALANCE SHEET AND ANY
CHANGE IN HOW IT IS AMORTIZED MAY HAVE A SIGNIFICANT EFFECT ON FUTURE EARNINGS
Immediately after the consummation of the offering, our balance sheet will
include an amount designated as "goodwill" that represents 33.5% of total assets
and 46.6% of stockholders' equity. Goodwill arises when an acquiror pays more
for a business than the fair value of the tangible and separately measurable
intangible net assets of that business. Generally accepted accounting principles
require that this "goodwill" and all other intangible assets be amortized over
the period benefitted. Our management has determined that the period benefitted
by the goodwill will be no less than 40 years. If we were not to separately
recognize a material intangible asset having a benefit period less than 40
years, or were not to give effect to shorter benefit periods of factors giving
rise to a material portion of the goodwill, our earnings reported in periods
immediately following the acquisition of the founding companies would be
overstated. In later years we would be burdened by a continuing charge against
earnings without the associated benefit to income valued by our management in
arriving at the consideration paid for the businesses. Earnings in later years
also could be significantly affected if our management determined then that the
remaining balance of goodwill was impaired. We have reviewed with our
independent accountants all of the factors and related future cash flows which
were considered in arriving at the amount incurred to acquire each of the
founding companies. We have concluded that the anticipated future cash flows
associated with intangible assets recognized in the acquisition of the founding
companies will continue indefinitely, and there is no persuasive evidence that
any material portion will dissipate over a period shorter than 40 years.
WE MAY BE ADVERSELY AFFECTED BY THE YEAR 2000 COMPUTER PROBLEM
Many existing computer programs were designed and developed without
considering the upcoming change in the century, which would lead to the failure
of such computer applications or create erroneous results by or at the year
2000. We are in the process of identifying and evaluating potential issues for
our internal information technology and our third-party relationships associated
with the date change in the year 2000. We have not yet fully assessed any year
2000 remedial costs, but are in the process of developing solutions to the year
2000 issues. Although we are not currently able to quantify the cost of
corrective actions, we do not expect that these actions will materially exceed
the cost of normal software
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<PAGE> 18
upgrades and replacements expected to occur through the year 2000. We believe
that all necessary work will be completed in a timely fashion, but we cannot
guarantee that the systems of other companies on which we rely will be converted
within the same time frame. We are attempting to obtain assurances from vendors,
business partners and others with which we conduct business that their systems
will be year 2000 compliant. If, as a result of foregoing process, we determine
that a material business interruption may occur due to the year 2000 issue, we
will attempt to implement an appropriate contingency plan. Any material failure
of our Company or others to bring the computer systems on which we rely into
compliance with year 2000 requirements could result in additional costs of
corrective actions and delays in integrating the information and financial
reporting systems of the founding companies and implementing our business
strategies. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000 Issue."
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<PAGE> 19
THE COMPANY
Our executive offices are located at 600 Travis, Suite 2100, Houston, Texas
77002, and our telephone number is 713-238-6780. We have entered into agreements
to acquire the founding companies (the "Acquisitions") simultaneously with the
consummation of the offering. The following is a description of the founding
companies:
COUNTY LINE SELECT CARS, INC. County Line Select Cars, Inc. ("County Line")
was founded in 1979 and operates four RV dealerships located in central Florida
in the cities of Clermont, Inverness, and Ocala (two locations), Florida. County
Line operates an additional seasonal dealership facility in Bushnell, Florida
during approximately five months of its peak season each year. County Line had
revenues of $41.4 million in 1997, revenues of $43.1 million for the nine months
ended September 30, 1998, and employed 135 people as of September 30, 1998. The
principal officers of County Line are Armando Alonso, the President of County
Line, and Francisco Alonso, Jr., the Vice President of County Line. Each of
these individuals will sign a three-year employment agreement with County Line
and will continue to serve in their current positions following the consummation
of the offering. Mr. Armando Alonso will become a director following the
consummation of the offering.
SADDLEBACK RVS, INC. Saddleback RVs, Inc. ("Saddleback") was founded in
1991 and operates three RV dealerships located in Carson, California, Irvine,
California and La Mirada, California. Saddleback had revenues of $25.4 million
in 1997, revenues of $26.9 million for the nine months ended September 30, 1998,
and employed 59 people as of September 30, 1998. Michael Sebastian, the
President of Saddleback, will sign a three-year employment agreement with
Saddleback and will continue to serve as President of Saddleback following the
consummation of the offering.
EMERALD COAST RV CENTER, INC. Emerald Coast RV Center, Inc. ("Emerald
Coast") was founded in 1990 and operates three RV dealerships located in Gulf
Breeze (Pensacola), Florida, Panama City, Florida and Dothan, Alabama. Emerald
Coast had revenues of $28.8 million in 1997, revenues of $26.2 million for the
nine months ended September 30, 1998, and employed 76 people as of September 30,
1998. Allen M. Binford, the President of Emerald Coast, will sign a three-year
employment agreement with Emerald Coast and will continue to serve as President
of Emerald Coast following consummation of the offering. Mr. Binford will become
a director of RV Centers following the consummation of the offering.
CASEY'S MOTORS, INC. D/B/A CASEY'S RECREATIONAL SALES. Casey's Motors, Inc.
d/b/a Casey's Recreational Sales ("Casey's") was founded in 1988 and operates an
RV dealership in the Denver, Colorado area. Casey's had revenues of $21.1
million in 1997, revenues of $19.4 million for the nine months ended September
30, 1998, and employed 17 people as of September 30, 1998. Steve J. Casement,
the President of Casey's, will sign a three-year employment agreement with
Casey's and will continue to serve as President of Casey's following the
consummation of the offering.
STOLTZFUS TRAILER SALES, INC. Stoltzfus Trailer Sales, Inc. ("Stoltzfus")
was founded in 1969 and operates an RV dealership in West Chester, Pennsylvania.
Stoltzfus had revenues of $15.7 million in 1997, revenues of $18.6 million for
the twelve months ended October 31, 1998 and employed 54 people as of September
30, 1998. Earl Stoltzfus, the President of Stoltzfus, will sign a three-year
employment agreement with Stoltzfus and will continue to serve as President of
Stoltzfus following the consummation of the offering. Mr. Stoltzfus will become
a director of RV Centers following the consummation of the offering.
DUSTY'S CAMPER WORLD OF BARTOW, INC. Dusty's Camper World of Bartow, Inc.
("Dusty's Camper World") was founded in 1985 and operates an RV dealership in
Bartow, Florida. Dusty's Camper World had revenues of $20.8 million in 1997,
revenues of $18.0 million for the nine months ended September 30, 1998, and
employed 48 people as of September 30, 1998. The principal officers of Dusty's
Camper World are Karcie E. Crum, the President and General Manager of Dusty's
Camper World, and Terrence W. Crum, the Vice President of Sales and Marketing of
Dusty's Camper World. Each of these individuals will sign a three-year
employment agreement with Dusty's Camper World and will continue to serve in
their current positions following the consummation of the offering.
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<PAGE> 20
HALL ENTERPRISES, INC. Hall Enterprises, Inc. ("Hall Enterprises") was
founded in 1965 and operates two RV dealerships in the Lexington, Kentucky area.
Hall Enterprises had revenues of $16.7 million in 1997, revenues of $11.9
million for the nine months ended September 30, 1998 and employed 37 people as
of September 30, 1998. Tommy R. Hall, the President of Hall Enterprises will
sign a three-year employment agreement with Hall Enterprises and will continue
to serve as President of Hall Enterprises following the consummation of the
offering.
SCOTT MOTOR COACH SALES, INC. Scott Motor Coach Sales, Inc. ("Scott Motor
Coach") was founded in 1985 and operates an RV dealership in Lakewood, New
Jersey. Scott Motor Coach had revenues of $14.0 million in 1997, revenues of
$11.7 million for the nine months ended September 30, 1998 and employed 30
people as of September 30, 1998. Brad J. Scott, the President of Scott Motor
Coach, will sign a three-year employment agreement with Scott Motor Coach and
will continue to serve as President of Scott Motor Coach following the
consummation of the offering.
AMERICAN RV CENTERS, INC. American RV Centers, Inc. ("American RV") was
founded in 1990 and operates two recreational dealerships located in Olive
Branch, Mississippi and Memphis, Tennessee. American RV had revenues of $15.1
million in 1997, revenues of $11.2 million for the nine months ended September
30, 1998, and employed 32 people as of September 30, 1998. Peter A. Albano, the
President of American RV will sign an eighteen-month consulting agreement with
American RV under which he will serve in an advisory capacity following the
consummation of the offering. Mr. Albano will become a director of RV Centers
following the consummation of the offering.
YOUNG'S RV CENTER. Young's RV Center ("Young's") was founded in 1963 and
operates an RV dealership in Lancaster, California (Los Angeles County). Young's
had revenues of $14.3 million in 1997, revenues of $11.0 million for the nine
months ended September 30, 1998, and employed 47 people as of September 30,
1998. Roy B. Padgett, the owner of Young's, will sign a one-year consulting
agreement with Young's under which he will serve in an advisory capacity
following the consummation of the offering.
RV'S NORTHWEST, INC. RV's Northwest, Inc. ("RV's Northwest") was founded in
1985 and operates two RV dealerships in the Spokane, Washington area. RV's
Northwest had revenues of $10.7 million in 1997, revenues of $10.2 million for
the nine months ended September 30, 1998, and employed 31 people as of September
30, 1998. William H. Fishfader, the President of RV's Northwest, will sign a
one-year consulting agreement with RV's Northwest under which he will serve in
an advisory capacity following the consummation of the offering.
LITTLE VALLEY AUTO & RV SALES, INC. Little Valley Auto & RV Sales, Inc.
("Little Valley") was founded in 1984 and operates an RV dealership in the
Charleston, West Virginia area. Little Valley had revenues of $11.8 million in
1997, revenues of $9.0 million for the nine months ended September 30, 1998 and
employed 26 people as of September 30, 1998. Ernest B. Davis, Jr., the President
and Treasurer of Little Valley, will sign a three-year employment agreement with
Little Valley and will continue to serve as President of Little Valley following
the consummation of the offering.
GROWTH VENTURES, INC. D/B/A MARSHALL'S TRAVELAND. Growth Ventures, Inc.
d/b/a Marshall's Traveland ("Marshall's") was founded in 1975 and operates an RV
dealership in Austin, Texas. Marshall's had revenues of $10.0 million in 1997,
revenues of $7.9 million for the nine months ended September 1998, and employed
18 people as of September 30, 1998. Jerry D. Keesee, the President of Marshall's
will sign an eighteen-month consulting agreement with Marshall's under which he
will serve in an advisory capacity following the consummation of the offering.
ACE FOGDALL, INC. Ace Fogdall, Inc. ("Ace Fogdall") was founded in 1959 and
operates an RV dealership in Cedar Falls, Iowa. Ace Fogdall had revenues of $6.6
million in 1997, revenues of $6.7 million for the nine months ended September
30, 1998, and employed 18 people as of September 30, 1998. James S. Fogdall, the
President of Ace Fogdall, will sign a three-year employment agreement with Ace
Fogdall and will continue to serve as President of Ace Fogdall following
consummation of the offering. Mr. Fogdall will become a director of RV Centers
following the consummation of the offering.
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<PAGE> 21
USE OF PROCEEDS
The net proceeds we will receive from the offering, after deducting
estimated underwriting discounts and commissions and estimated offering
expenses, are estimated to be approximately $46.3 million (approximately $54.2
million if the Underwriters exercise their over-allotment option in full).
Of the net proceeds, approximately $17.7 million will be used to pay the
cash portion of the purchase price for the founding companies, all of which will
be paid to the stockholders of the founding companies. The remainder of the
purchase price for the founding companies will be paid by the issuance of
3,780,100 shares of common stock to their stockholders. The total value of the
cash and stock paid for the founding companies will equal $ million (based
on an estimated fair value per share equal to the assumed initial public
offering price less a marketability discount of 20%).
In addition, approximately $28.7 million of the net proceeds will be used
to repay outstanding indebtedness of the founding companies at the closing of
the offering. Of such amount, approximately $3.3 million is owed by various
founding companies to their stockholders and carries a weighted average interest
rate of 9.1% per annum. The remaining $25.4 million of the $28.7 million is owed
by various founding companies to financial institutions. Such debt carries a
weighted average interest rate of 9.5% per annum.
We have entered into negotiations with potential lenders to obtain a credit
facility of up to $150 million. If we obtain such a facility, we intend to use
it to repay the remaining indebtedness, to fund future acquisitions and
anticipated capital expenditures and for increased working capital needs.
DIVIDEND POLICY
We currently intend to retain all our earnings to finance the growth,
development and expansion of our business, and do not anticipate paying any cash
dividends on our common stock in the foreseeable future. Any future dividends
will be at the discretion of our board of directors after taking into account
various factors, including, among others, our financial condition, results of
operations, cash flows from operations, current and anticipated capital
requirements and expansion plans, the income tax laws then in effect and the
requirements of Delaware law. In addition, the terms of our proposed credit
facility may restrict or prohibit the payment of dividends. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Combined Liquidity and Capital
Resources."
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<PAGE> 22
CAPITALIZATION
The following table sets forth the capitalization of RV Centers at
September 30, 1998 (a) on a pro forma combined basis to give effect to the
Acquisitions and (b) as adjusted, to give effect to both the Acquisitions and
the offering and the application of the estimated net proceeds therefrom. See
"Use of Proceeds." This table should be read in conjunction with the Unaudited
Pro Forma Combined Financial Statements of RV Centers and the notes thereto and
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------------
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Floor plan notes payable.................................... $ 49,907 $ 24,499
Due to shareholders/affiliates -- current portion........... 21,236(1) --
Current maturities of long-term notes payable............... 421 421
Due to shareholders/affiliates -- long-term portion......... 995 --
Long-term obligations, less current maturities.............. 740 740
-------- --------
Total indebtedness................................ 73,299 25,660
Shareholders' equity:
Preferred Stock: $0.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding........... -- --
Common Stock: $0.01 par value, 30,000,000 shares
authorized; 5,748,661 shares issued and outstanding,
pro forma; and shares issued and
outstanding, as adjusted(2)............................ 57
Restricted Common Stock: $0.01 par value, 1,000,000 shares
authorized; shares issued and outstanding pro forma and
as adjusted............................................
Additional paid-in capital................................ 38,755
Retained earnings......................................... -- --
-------- --------
Total shareholders' equity........................ 38,812 85,124
-------- --------
Total capitalization.............................. $112,111 $110,784
======== ========
</TABLE>
- ---------------
(1) Includes approximately $17.7 million payable to owners of the founding
companies, representing the cash to be paid to them for the Acquisitions.
(2) Consists of: (a) 1,339,157 shares issued to Baker Kreft Funding I, L.L.C.
("BKF"), (b) 595,926 shares issued to the management of RV Centers, (c)
33,478 shares issued to other investors, (d) 3,780,100 shares to be issued
to the owners of the founding companies and (e) shares to be sold
in the offering. Excludes: (a) outstanding options to purchase 415,139
shares at an exercise price equal to the initial public offering price
issued to the management of RV Centers, (b) options to purchase
approximately 280,000 shares at the initial public offering price which are
expected to be granted to employees of the founding companies upon
consummation of the offering, (c) options to purchase 45,000 shares at the
initial public offering price which are expected to be granted to three
non-employee directors, and (d) 41,000 shares that may be issued to a
stockholder of a founding company if that company achieves a certain pretax
income level after the Acquisitions. See "Management," "Certain
Transactions," and "Description of Capital Stock -- Common Stock and
Restricted Common Stock."
18
<PAGE> 23
DILUTION
The deficit in pro forma net tangible book value of RV Centers at December
31, 1998 was approximately $ million or $ per share after giving effect
to the Acquisitions but before the offering. Pro forma net tangible book value
per share is the adjusted tangible net worth (total tangible assets less total
liabilities) of RV Centers divided by the number of shares of common stock
outstanding after giving effect to the Acquisitions. Net tangible book value
dilution per share represents the difference between the amount per share paid
by purchasers of shares of common stock in the offering and the pro forma net
tangible book value per share after the offering. After giving effect to the
sale of the shares of common stock offered hereby (assuming an initial price of
$ per share and after deducting underwriting discounts and commissions and
estimated offering expenses), the pro forma net tangible book value of RV
Centers at December 31, 1998 would have been $ million or $ per share,
representing an immediate increase in net tangible book value of $ per share
to existing stockholders and an immediate dilution of $ per share to the
investors purchasing the shares in the offering (the "New Investors"). The
following table illustrates this dilution to New Investors:
<TABLE>
<S> <C>
Assumed initial public offering price per share............. $
--------
Pro forma deficit in net tangible book value per share at
December 31, 1998...................................... $
--------
Increase in net tangible book value per share attributable
to New Investors.......................................
--------
Pro forma net tangible book value per share after the
Offering..................................................
--------
Dilution per share to New Investors......................... $
========
</TABLE>
The following table sets forth as of the date of this prospectus the number
of shares of common stock purchased from RV Centers, the total consideration to
RV Centers and the average price per share paid by existing stockholders (after
giving effect to the Acquisitions) and by the New Investors:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION(A) AVERAGE
----------------- ------------------ PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders
(including owners of founding companies).....
New Investors..................................
Total................................
======= ===== ======== ===== ======
</TABLE>
- ---------------
(a) Total consideration paid by existing stockholders represents the combined
stockholders' equity of the founding companies and RV Centers before the
offering of approximately $ million, adjusted to reflect the payment of
approximately $ million in cash to the stockholders of the founding
companies as part of the consideration for the Acquisitions. See "Certain
Transactions."
19
<PAGE> 24
SELECTED FINANCIAL DATA
RV Centers will acquire the founding companies simultaneously with and as a
condition to the consummation of the offering. For financial statement
presentation purposes, RV Centers has been identified as the "accounting
acquiror." The following selected historical financial data for RV Centers as of
September 30, 1998 and for the period from inception to September 30, 1998 has
been derived from the unaudited financial statements of RV Centers. The selected
unaudited pro forma combined Statement of Operations Data present data for RV
Centers and the founding companies, adjusted for (a) the effects of the
Acquisitions, (b) the effects of certain pro forma adjustments to the historical
financial statements described below and (c) the consummation of the offering
and the application of the net proceeds therefrom. The Pro Forma Combined
Balance Sheet Data gives effect to the Acquisitions and the application of the
net proceeds of the offering. The pro forma combined financial data is not
necessarily indicative of the results RV Centers would have achieved had these
events occurred and the management and operations been combined during the
period presented, nor is it indicative of our future results. See the Unaudited
Pro Forma Combined Financial Statements and the notes thereto and the historical
financial statements of RV Centers and the founding companies and the notes
thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(MAY 8, 1998
THROUGH
SEPTEMBER 30, 1998)
----------------------
(IN THOUSANDS)
<S> <C>
STATEMENT OF OPERATIONS DATA:
RV Centers:
Revenue................................................ $ --
Selling, general and administrative expenses........... (1,339)
Loss before income taxes............................... (1,339)
Net loss............................................... (1,339)
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS EXCEPT
PER SHARE INFORMATION)
<S> <C>
Pro Forma Combined:
Revenue................................................ $231,824
Gross profit........................................... 40,669
Selling, general and administrative expenses........... 26,741
Goodwill amortization.................................. 741
Operating income....................................... 13,187
Interest and other expense, net........................ (1,416)
Income before taxes.................................... 11,771
Net income............................................. 6,766
Net income per share...................................
Shares used in computing pro forma net income per
share.................................................
</TABLE>
<TABLE>
<CAPTION>
RV CENTERS COMBINED COMPANY
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................ $(1,326) $ 40,046
Total assets............................................. 1,487 118,483
Total floor plan and other debt.......................... 1,431 25,660
Shareholders' equity..................................... 11 85,124
</TABLE>
20
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion presents the results of RV Centers on a pro forma
combined basis and each of the founding companies on an individual basis. This
discussion should be read in conjunction with the Unaudited Pro Forma Combined
Financial Statements and the founding companies' Financial Statements and
related notes thereto and "Selected Financial Data" appearing elsewhere in this
prospectus.
OVERVIEW
Revenue. Our revenue is derived from the sale of new and used RVs and, to a
much lesser extent, sales of parts and accessories, repair and maintenance
services and fees from the sale of finance, insurance and warranty contracts
incidental to the sale of a vehicle. Revenue is recognized when vehicles are
delivered to customers, services are performed and parts are sold. Finance,
insurance and warranty fees are recognized at the time contracts are sold. For
many of the founding companies, revenue increased from 1996 to 1997 and again
from 1997 to 1998, as RVs have become increasingly popular and consumer demand
for these products has steadily increased during these periods.
Cost of Sales and Gross Profit Margins. Cost of sales consists of the cost
of products sold and service work provided. Gross profit margins vary among the
founding companies, primarily because of the differences in local market demand
and competition as well as differences in the mix of revenue. For example,
certain dealers may sell more entry-level products, which tend to generate
higher percentage margins (although fewer total profit dollars) than upscale
products. In addition, used vehicle sales tend to generate higher percentage
margins than sales of new vehicles (although on fewer total sales dollars),
although the founding companies have historically been limited in the number of
good-quality used vehicles they have been able to obtain for resale. Towable
products typically generate higher gross profit margins than motorized products,
but they are priced lower than motorized products and therefore generate fewer
dollars of revenue per unit sold. See "Business -- Industry
Overview -- Products" for a description of these products and a discussion of
their typical selling price.
The founding companies' gross profit margins on parts and service range
from about 25% to in excess of 50%. However, parts and service revenue
represented only 6.6% and 6.8% of total revenue for the year ended December 31,
1997 and the nine months ended September 30, 1998, respectively. Several of the
founding companies that achieve high margins on parts and service also provide
collision repair and body shop services at attractive margins. Fees from the
sale of contracts for consumer financing, insurance and extended warranties
represent the highest margin portion of our business, but they are currently
less than 3% of total revenue.
An integral part of our strategy, as discussed in "Business -- Company Goal
and Operating Strategy," is to expand our complementary revenue sources which
include: achieving higher commission percentages and increased penetration of
the market for RV consumer financing, insurance and warranty policies; offering
pre-sale servicing and extended warranties to individuals who are selling their
used vehicles themselves; expanding our sales of parts and accessories, which
generally have higher profit margins than vehicles sales; and working with large
insurance companies to have our facilities approved and recommended for
collision repair services.
Selling, General and Administrative ("SG&A") Expenses. The most significant
component of SG&A expenses is compensation and related benefits, including
compensation that the owner(s) elected to take from the business, which varies
greatly among the founding companies. In connection with the Acquisitions,
certain owners of the founding companies have agreed to reductions in their
compensation and related benefits totaling $2.8 million and $2.3 million on a
pro forma basis for the twelve months ended December 31, 1997 and the nine
months ended September 30, 1998, respectively. Such reductions in salaries,
bonuses and benefits are in accordance with the terms of employment or
consulting agreements to be effective upon consummation of the offering.
However, these reductions have not been reflected in the historical financial
data accompanying this discussion of each founding company's operations.
21
<PAGE> 26
A substantial portion of the compensation of managers and sales and service
personnel is a variable expense, because it is based on performance, typically
gross profit dollars achieved on sales or service. For example, it is not
unusual for sales representatives to receive no salary or only a modest salary,
with the vast majority of their total compensation tied to a commission based on
the gross profit of each sale generated. Finance managers typically receive
their compensation based upon the fees received and penetration rates achieved
in selling financing, insurance and warranty contracts to customers in
connection with their purchase of an RV. Other SG&A expenses include
advertising, facility rent and utilities, insurance, communications and
professional fees.
Interest and Other. Most of the founding companies finance a significant
portion of vehicle inventory through floor plan borrowings available from a
variety of financial institutions. Interest rates vary by product line and
product age, and for the year ended December 31, 1997, the average rates on
floor plan financing for the founding companies ranged from 7.3% to 10.2% with a
weighted average interest rate of 8.8%. Total floor plan debt outstanding at
September 30, 1998 was $49.9 million. We believe that we can save a significant
amount of interest expense by consolidating these lines and financing our
working capital needs through a revolving credit facility with a major
commercial lending institution.
Goodwill. As a result of the Acquisitions, the excess of the consideration
paid over the fair value of the net assets to be acquired will be recorded as
goodwill on our balance sheet. Goodwill will be amortized as a non-cash charge
against earnings over a 40-year period. The pro forma impact of this
amortization expense, the majority of which is non-deductible for tax purposes,
is approximately $1.0 million per year.
RESULTS OF OPERATIONS -- COMBINED
The following unaudited combined financial information does not purport to
present the combined historical results of operations of the founding companies
in accordance with generally accepted accounting principles, but represents
merely a summation of the revenues, cost of sales and gross profit of the
individual founding companies. The historical pro forma combined results as
shown below will not be comparable to, and are not necessarily indicative of,
anticipated post-combination results for a number of reasons, including:
- the founding companies were not under common control or management during
the periods presented;
- the majority of the founding companies used a different tax structure (S
corporation or sole proprietorship) and each of these private companies
operated in a manner to minimize federal and state income taxes;
- RV Centers, using the purchase method of accounting, will revalue the
assets received and liabilities assumed in the Acquisitions at their fair
market value and record goodwill to be amortized in future periods; and
- we will incur incremental costs for corporate management and the costs
associated with being a publicly-traded company, which we expect to be
substantially offset by increased revenue and cost savings that will be
enjoyed once we begin operating as a combined entity.
At December 31, 1998, we operated 25 dealerships located in 13 states. The
following table sets forth certain historic pro forma combined data and such
data as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- --------------------------------
1996 1997 1997 1998
-------------- -------------- -------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue.................. $219.9 100.0% $252.2 100.0% $201.5 100.0% $231.8 100.0%
Cost of sales............ 182.0 82.7 207.7 82.4 164.9 81.8 191.1 82.5
------ ----- ------ ----- ------ ----- ------ -----
Gross profit........... $ 37.9 17.3% $ 44.5 17.6% $ 36.6 18.2% $ 40.7 17.5%
====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
22
<PAGE> 27
Combined Nine Months ended September 30, 1998 Compared to Nine Months
Ended September 30, 1997
Revenue. Combined revenue increased $30.3 million, or 15.0% from $201.5
million for the nine months ended September 30, 1997 to $231.8 million for the
nine months ended September 30, 1998. During 1998, we continued to experience
strong demand for our products at most locations, particularly in Florida and
southern California, as RVs have become increasingly popular with consumers.
Vehicle sales, which accounted for 90.7% and 90.4% of total revenue during the
nine months ended September 30, 1997 and 1998, respectively, increased $26.6
million, or 14.6% for the first nine months of 1998. The opening of a new store
during 1998 in Clermont, Florida (west of Orlando) contributed $8.4 million of
the increase in vehicle sales, which was partially offset by $1.9 million in
reduced revenue from the closure of a small store in Lexington, Kentucky. Other
markets where we achieved considerable internal growth in vehicle sales during
1998 included southern California (up $6.1 million or 22%, with $2.4 million of
the increase attributable to the La Miranda store, which opened during 1997),
Philadelphia (up $2.8 million or 21%) and Iowa (up $1.4 million or 30%).
Parts and service revenue, which accounted for 6.6% and 6.8% of total
revenue during the nine months ended September 30, 1997 and 1998, respectively,
increased $2.6 million, or 20.0%, for the first nine months of 1998, primarily
at the central Florida, southern California and New Jersey stores. Fees for
providing customers with financing, insurance and warranty contracts accounted
for 2.7% and 2.8% of total revenue during the nine months ended September 30,
1997 and 1998, respectively, and were up $1.1 million, or 19.5%, for the nine
months ended September 30, 1998, with gains occurring at virtually all of our
stores.
Cost of Sales and Gross Profit. Cost of sales increased $26.2 million, or
15.9%, from $164.9 million for the nine months ended September 30, 1997 to
$191.1 million for the nine months ended September 30, 1998. As a percentage of
revenue, cost of sales increased to 82.5% of revenue for the nine months ended
September 30, 1998, compared to 81.8% for the nine months ended September 30,
1997. Gross profit margins on vehicle sales dropped to 12.7% of revenue for the
first nine months of 1998, compared to 13.6% of revenue in the corresponding
period of 1997, largely attributable to shifts in the mix of products sold and,
to a lesser extent, competitive pressures in several large markets. These were
offset slightly by strong increases in gross profit margins on vehicles sold at
our Philadelphia store, due to upgraded product lines and better sales training
and sales follow-up. Gross profit margins on parts and service increased
slightly to 48.0% for the first nine months of 1998, compared to 47.4% for the
corresponding period of 1997.
Combined Year Ended 1997 Compared to Year Ended 1996
Revenue. Combined revenue increased $32.3 million, or 14.7% from $219.9
million in 1996 to $252.2 million in 1997. Virtually all of our stores
experienced revenue growth in 1997 as consumer demand for RVs increased
nationwide. Vehicle sales, which accounted for 90.9% and 90.7% of total revenue
in 1996 and 1997, respectively, were up $28.8 million, or 14.4%, in 1997. The
strongest growth in vehicle sales occurred in (a) the southern California market
(up 32% from $26.3 million in 1996 to $34.7 million in 1997), due to increasing
demand for higher-priced diesel and luxury motorhomes and $4.4 million in
vehicle sales from the La Mirada store, which opened during 1997, and (b) the
Ocala, Florida and nearby stores (up 28% from $29.8 million in 1996 to $38.1
million in 1997), where significant increases in marketing and advertising in
1997 established a broader presence for these operations throughout Florida.
Parts and service revenue, which accounted for 6.6% of total revenue in
both periods, increased $2.1 million, or 14.6%, in 1997. Approximately $0.8
million of the increase was attributable to a new service center opened in
Irvine, California during 1997. Our Florida stores had increased parts and
service revenue totaling $0.8 million, representing 16% revenue growth in this
area. Fees for providing customers with financing, insurance and warranty
contracts accounted for 2.5% and 2.7% of total revenue in 1996 and 1997,
respectively, and were up $1.3 million, or 24.7%, in 1997, with the strongest
gains coming in the southern California and Memphis markets.
23
<PAGE> 28
Cost of Sales and Gross Profit. Cost of sales increased $25.7 million, or
14.1%, from $182.0 million in 1996 to $207.7 million in 1997. As a percentage of
revenue, cost of sales decreased slightly to 82.4% of revenue in 1997, compared
to 82.7% in 1996. Gross profit margins on vehicle sales remained constant
between the years at 13.0% of revenue, as reduced margins on higher-priced new
vehicles sold in southern California were offset by significantly improved
margins on vehicles sold in central Florida and West Virginia. Gross profit
margins on parts and service increased to 47.7% in 1997, compared to 45.0% in
1996, because margins on parts and service improved significantly at the
Kentucky and West Virginia stores to 37% in 1997, compared to abnormally low
margins in 1996 (16%) due to overstaffing and certain non-recurring parts
inventory write-offs in 1996.
COMBINED LIQUIDITY AND CAPITAL RESOURCES
Liquidity. On a pro forma combined basis, as adjusted for the estimated net
proceeds of the offering and anticipated uses thereof to pay $17.7 million to
the founding company stockholders and $28.7 million to retire indebtedness, we
had working capital of $40.2 million as of September 30, 1998. This includes
inventory, consisting primarily of new and used vehicles, of $62.6 million and
related floor plan borrowings of $24.5 million. Our business has relatively low
amounts of receivables (generally amounts due from manufacturers for warranty
work) and payables and accrued liabilities. Pro forma combined long-term debt
was $0.7 million at September 30, 1998. After completion of the offering, we
anticipate that cash flow from operations, which was $8.2 million during the
nine months ended September 30, 1998, will be sufficient to enable us to meet
our working capital needs and fund planned capital expenditures in 1999, as
described below.
We are currently negotiating with selected banks to obtain a credit
facility to be available upon the consummation of the offering. Our ability to
obtain the credit facility is subject to negotiations with potential lenders as
well as the satisfaction of certain conditions, including final loan
documentation. We intend to use the credit facility to replace the existing
floor plan debt and for future acquisitions, including consolidation of any
floor plan borrowings of acquired companies.
Acquisitions. We intend to aggressively pursue acquisition opportunities
and believe, for reasons cited elsewhere in this prospectus, that we will be
considered an attractive acquiror to owners of RV dealerships. However, the
timing, size or ultimate success of our acquisition program and the associated
capital requirements cannot be predicted with certainty. We expect to fund
future acquisitions with surplus cash flow from operations and, to a larger
degree, with issuances of common stock and borrowings of cash, including any
unborrowed portion of the proposed credit facility and, in certain
circumstances, with seller-financed debt.
Capital Expenditures. Capital expenditures for us and for the RV industry
as a whole are typically not significant. We lease all our facilities and the
majority of our fixed asset additions over the past two years have related to
leasehold improvements. Total capital expenditures were approximately $2.0
million in 1997 and approximately $0.8 million for the nine months ended
September 30, 1998. We anticipate that total capital expenditures in 1999
applicable to the founding companies' operations will be less than $2.0 million.
The only significant corporate-wide capital expenditure in 1999 will be the
purchase of computer systems, software, hardware and support services to put our
dealerships onto a common information systems platform. We have held preliminary
discussions with certain vendors having experience providing these products to
multi-location automobile and marine dealerships, and we intend to solicit
proposals, including cost commitments, and select a vendor during the second
quarter of 1999. Preliminary estimates are that these expenditures, to be made
over the second half of 1999 and during 2000, could be as much as $1.5 million.
During 2000, we expect to embark on a company-wide project to expand and
upgrade our parts and service capabilities as part of our overall strategy to
increase revenue from parts and accessories sales and maintenance, repair and
body shop activities. At that time, we will explore, on a facility-by-facility
basis, whether it is preferable to expand existing facilities or enter into
build-to-suit lease agreements for newly-
24
<PAGE> 29
constructed, state-of-the-art service centers, similar to its current plans for
the Denver market as discussed under "Results of Operations -- Casey's" below.
RESULTS OF OPERATIONS -- COUNTY LINE
County Line, headquartered in Ocala, Florida, operates five dealerships in
Central Florida (Ocala North, Ocala South, Inverness, Clermont, and Bushnell;
Bushnell is only open five months out of the 12 month period). County Line sold
the Clermont store in 1995 and repurchased it in the first quarter of 1998. The
following table sets forth certain historic data and such data as a percentage
of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------- ---------------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................ $35.4 100.0% $32.4 100.0% $41.4 100.0% $30.4 100.0% $43.1 100.0%
Cost of sales.......... 31.2 88.2 27.7 85.4 35.1 84.9 25.9 85.2 36.9 85.5
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit......... 4.2 11.8 4.7 14.6 6.3 15.1 4.5 14.8 6.2 14.5
SG&A expenses.......... 3.6 10.2 3.6 11.3 4.5 10.9 3.2 10.5 4.2 9.8
Interest and other..... 0.6 1.6 0.5 1.5 0.6 1.4 0.5 1.5 0.6 1.3
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income before
taxes............. $ 0.0 0.0% $ 0.6 1.8% $ 1.2 2.8% $ 0.8 2.8% $ 1.4 3.4%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
County Line Nine Months Ended September 30, 1998 Compared to Nine Months
Ended September 30, 1997
Revenue. Revenue increased $12.7 million, or 41.8%, from $30.4 million for
the nine months ended September 30, 1997 to $43.1 million for the nine months
ended September 30, 1998. This increase was primarily due to the opening of the
Clermont store, which began operations during the first quarter of 1998 and
produced revenue of $9.7 million during the nine months ended September 30,
1998.
Cost of Sales and Gross Profit. As a percentage of revenue, cost of sales
increased slightly to 85.5% in the nine months ended September 30, 1998,
compared to 85.2% in the nine months ended September 30, 1997. Contributions
from high-margin parts and service and finance, insurance and warranty fees
increased substantially during 1998, but were offset by a decrease in gross
profit margins on vehicle sales from 11.3% to 10.0% as a result of lower margins
on used vehicle sales.
Selling, General and Administrative Expenses. SG&A expenses increased $1.0
million, or 31.2%, from $3.2 million during the nine months ended September 30,
1997 to $4.2 million for the nine months ended September 30, 1998. This increase
was attributable to greater payroll and commission expenses and the opening of
the Clermont store during the first quarter of 1998. As a percentage of revenue,
SG&A expenses decreased from 10.5% for the nine months ended September 30, 1997
to 9.8% for the nine months ended September 30, 1998. The reduction in SG&A
expenses as a percentage of revenue is a result of increased revenues
attributable to the Clermont store, which required a proportionately smaller
increase in SG&A.
Interest and Other. Interest and other expenses increased $0.1 million
during the first nine months of 1998 compared to the corresponding period in
1997 as a result of the increased level of business and correspondingly higher
inventory and debt levels.
County Line Year Ended 1997 Compared to Year Ended 1996
Revenue. Revenue increased $9.0 million, or 27.9% from $32.4 million in
1996 to $41.4 million in 1997. A significant portion of this increase was
attributable to the Ocala North location establishing a broader market presence
in the state of Florida which increased new and used vehicle sales by $8.3
million. County Line's parts and service revenue increased by $0.7 million
during 1997.
25
<PAGE> 30
Cost of Sales. Cost of sales increased $7.4 million, or 26.7%, from $27.7
million in 1996 to $35.1 million in 1997. As a percentage of revenue, cost of
sales decreased from 85.4% in 1996 to 84.9% in 1997. The improved gross profit
margins were due to better margins from vehicle sales (10.6% in 1996 to 11.2% in
1997) and from parts and service (44.9% in 1996 to 48.7% in 1997).
Selling, General and Administrative Expenses. SG&A expenses increased $0.9
million, or 24.3%, from $3.6 million in 1996 to $4.5 million in 1997. As a
percentage of revenue, SG&A expenses decreased from 11.3% in 1996 to 10.9% in
1997. The majority of the additional expense was a result of commissions related
to high sales and the hiring of two general sales managers.
Interest and Other. Interest and other expenses increased $0.1 million in
1997 compared to 1996 as higher interest expense as a result of higher borrowing
levels to finance the growth in revenue more than offset a slight decline in
interest rates.
County Line Liquidity and Capital Resources
At September 30, 1998, County Line had working capital of $1.6 million
compared to working capital of $1.3 million at December 31, 1997. Total debt,
consisting primarily of floor plan borrowings and advances from County Line's
stockholders, was $9.1 million at September 30, 1998, compared to total debt of
$9.0 million at December 31, 1997. County Line's principal capital requirements
have been to fund inventory. Historically, this requirement has been met by cash
flows from operating activities, borrowings from finance companies under floor
plan notes secured by vehicle inventory and borrowings from the stockholders.
County Line had capital expenditures of $0.2 million during 1996, $0.2 million
during 1997 and $0.1 million during the first nine months of 1998. County Line
intends to spend approximately $0.9 million in the aggregate during the final
quarter of 1998 and during 1999, primarily to complete development of a
campground adjacent to the Ocala North store, expansion of the offices and
improvements to the sales lot at the Ocala North store and expansion of the
offices and showroom at the Clermont store.
RESULTS OF OPERATIONS -- SADDLEBACK
Saddleback operated a single dealership in Irvine, California until 1997,
when a second dealership was opened in La Mirada, California. During 1997,
Saddleback also established a parts and service center at its Irvine facility.
In the fourth quarter of 1998, Saddleback opened a third dealership in Carson,
California. The following table sets forth certain historic data and such data
as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------- ---------------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................ $16.0 100.0% $16.6 100.0% $25.4 100.0% $19.6 100.0% $26.9 100.0%
Cost of sales.......... 13.4 83.9 13.6 82.0 21.4 84.4 16.4 83.7 22.5 83.6
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit......... 2.6 16.1 3.0 18.0 4.0 15.6 3.2 16.3 4.4 16.4
SG&A expenses.......... 2.2 13.9 2.6 15.9 3.7 14.4 2.7 13.8 3.3 12.2
Interest and other..... 0.3 1.8 0.4 2.1 0.5 2.2 0.4 1.8 0.4 1.7
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income before
taxes........... $ 0.1 0.4% $ 0.0 0.0% $(0.2) (1.0)% $ 0.1 0.7% $ 0.7 2.5%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Saddleback Nine Months Ended September 30, 1998 Compared to Nine Months
Ended September 30, 1997
Revenue. Revenue increased $7.3 million, or 37.9%, from $19.6 million for
the nine months ended September 30, 1997 to $26.9 million for the nine months
ended September 30, 1998. This increase was attributable to better management
supervision of sales personnel and increased revenue of $2.4 million from the
new La Mirada location.
26
<PAGE> 31
Cost of Sales and Gross Profit. As a percentage of revenues, cost of sales
decreased slightly from 83.7% in the nine months ended September 30, 1997 to
83.6% in the nine months ended September 30, 1998. Gross profit margin on
vehicles was down slightly in 1998 due to a $0.2 million provision for the
effect of a change in LIFO calculation, which was offset by improved margins on
parts and service from the new service facility.
Selling, General and Administrative Expenses. SG&A expenses increased $0.6
million, or 22.2%, from $2.7 million for the nine months ended September 30,
1997, to $3.3 million for the nine months ended September 30, 1998. As a
percentage of revenue, SG&A expenses decreased from 13.8% for the nine months
ended September 30, 1997 to 12.2% for the nine months ended September 30, 1998.
This percentage decrease was a result of better management of costs and
increasing staffing in 1997 in anticipation of the significant growth to be
achieved in 1998.
Interest and Other. Interest and other expenses increased $0.1 million for
the nine months ended September 30, 1998 compared to the nine months ended
September 30, 1997 due to higher interest expense as a result of higher levels
of floor plan borrowings necessary to finance growth.
Saddleback Year Ended 1997 Compared to Year Ended 1996
Revenue. Revenue increased $8.8 million, or 44.9%, from $16.6 million in
1996 to $25.4 million in 1997. This increase was attributable to increased sales
of luxury diesel motorhomes, $4.4 million in sales made at the new La Mirada
store and $0.8 million in revenue from the new service facility.
Cost of Sales and Gross Profit. Cost of sales increased $7.8 million, or
57.3%, from $13.6 million in 1996 to $21.4 million in 1997. As a percentage of
revenue, cost of sales increased from 82.0% in 1996 to 84.4% in 1997. The
decline in gross profit margins was primarily due to discounting slower moving
inventory, which resulted in lower gross profit margins and discounting units at
the new La Mirada store to stimulate sales.
Selling, General and Administrative Expenses. SG&A expenses increased $1.1
million, or 39.0%, from $2.6 million in 1996 to $3.7 million in 1997. As a
percentage of revenue, SG&A expenses decreased from 15.9% in 1996 to 14.4% in
1997. The increased costs were due to start-up expenses associated with the La
Mirada store and the new service facility.
Interest and Other. Interest and other expenses increased $0.1 million in
1997, compared to 1996 due to higher interest expense as a result of higher
levels of floor plan borrowings necessary to finance growth.
Saddleback Liquidity and Capital Resources
At September 30, 1998, Saddleback had working capital of $0.2 million,
compared to working capital deficit of $0.7 million at December 31, 1997.
Saddleback had total debt of $7.3 million at September 30, 1998, compared to
total debt of $6.7 million at December 31, 1997. Saddleback's principal capital
requirement has been to fund inventory and the startup of the La Mirada store.
Historically, this requirement has been met by cash flows from operating
activities and borrowings from finance companies under floor plan notes secured
by inventory. Saddleback had capital expenditures of $0.9 million in 1996, $0.5
million in 1997 and an insignificant amount during the nine months ended
September 30, 1998, primarily for the new facilities and additional units for
Saddleback's rental fleet. During the fourth quarter of 1998, Saddleback made a
modest amount of capital expenditures associated with opening a new store in
Carson, California. Saddleback currently has no significant future capital
expenditure requirements.
27
<PAGE> 32
RESULTS OF OPERATIONS -- EMERALD COAST
Emerald Coast operates two dealerships in Gulf Breeze and Panama City,
Florida and one in Dothan, Alabama. The following table sets forth certain
historic data and such data as a percentage of revenue for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------- ---------------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................ $20.6 100.0% $26.3 100.0% $28.8 100.0% $22.9 100.0% $26.2 100.0%
Cost of sales.......... 16.0 77.8 21.1 80.2 23.1 80.2 18.1 79.1 21.2 80.9
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit......... 4.6 22.2 5.2 19.8 5.7 19.8 4.8 20.9 5.0 19.1
SG&A expenses.......... 3.3 16.1 3.6 13.9 4.1 14.3 3.1 13.4 3.0 11.6
Interest and other..... 0.4 1.8 0.4 1.5 0.5 1.7 0.3 1.6 0.4 1.5
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income before
taxes............. $ 0.9 4.3% $ 1.2 4.4% $ 1.1 3.8% $ 1.4 5.9% $ 1.6 6.0%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Emerald Coast Nine Months Ended September 30, 1998 Compared to Nine Months
Ended September 30, 1997
Revenue. Revenue increased $3.3 million, or 14.4% from $22.9 million for
the nine months ended September 30, 1997 to $26.2 million for the nine months
ended September 30, 1998. Emerald Coast achieved revenue growth at all three
stores in both new and used vehicles, which was attributable primarily to
increased sales of motorized vehicles.
Cost of Sales and Gross Profit. As a percentage of revenue, cost of sales
increased to 80.9% for the nine months ended September 30, 1998 compared to
79.1% for the nine months ended September 30, 1997. Gross profit margins were
lower for the nine months ended September 30, 1998 on both new and used
vehicles, which was partially offset by a $0.2 million increase in fees from
higher-margin finance, insurance and warranty contracts.
Selling, General and Administrative Expenses. SG&A expenses decreased $0.1
million, or 3.2%, from $3.1 million for the nine months ended September 30, 1997
to $3.0 million for the nine months ended September 30, 1998. As a percentage of
revenue, SG&A expenses decreased from 13.4% for the nine months ended September
30, 1997 to 11.6% for the nine months ended September 30, 1998. This percentage
decrease was a result of better management of labor costs.
Interest and Other. Interest and other expenses were slightly higher during
the first nine months of 1998 compared to the same period in 1997, due to higher
interest expense on floor plan borrowings.
Emerald Coast Year Ended 1997 Compared to Year Ended 1996
Revenue. Revenue increased $2.5 million, or 9.5%, from $26.3 million in
1996 to $28.8 million in 1997. Emerald Coast achieved revenue growth in 1997 at
all three stores. This increase was primarily attributable to a $1.5 million, or
22%, increase in sales of used vehicles.
Cost of Sales and Gross Profit. Cost of sales increased $2.0 million, or
9.5%, from $21.1 million in 1996 to $23.1 million in 1997. As a percentage of
revenue, cost of sales remained constant at 80.2% in 1996 and 80.2% in 1997. A
slight decline in gross profit margins on vehicles was offset by increased
higher-margin fees on finance, insurance and warranty contracts.
Selling, General and Administrative Expenses. SG&A expenses increased $0.5
million, or 13.9%, from $3.6 million in 1996 to $4.1 million in 1997. As a
percentage of revenue, SG&A expenses increased from 13.9% in 1996 to 14.3% in
1997. The majority of categories of SG&A showed increases in 1997, commensurate
with the additional revenue growth. Depreciation expense was higher in 1997 as a
result of significant expansion of buildings and property undertaken in 1996.
28
<PAGE> 33
Interest and Other. Interest and other expenses increased by $0.1 million
in 1997 as Emerald Coast had higher levels of floor plan borrowings during 1997
at slightly higher average interest rates.
Emerald Coast Liquidity and Capital Resources
At September 30, 1998, Emerald Coast had working capital of $1.8 million,
compared to working capital of $0.9 million at December 31, 1997. Emerald Coast
had total debt of $7.5 million at September 30, 1998, compared to total debt of
$7.7 million at December 31, 1997. Emerald Coast's principal capital requirement
has been to fund inventory. Historically, this requirement has been met by cash
flows from operating activities and borrowings from finance companies under
floor plan notes secured by vehicle inventory. Emerald Coast had capital
expenditures of $0.5 million during 1996 and $0.3 million during 1997, primarily
for expansion of buildings at the Pensacola and Panama City stores. Capital
expenditures were minor during the first nine months of 1998, and Emerald Coast
currently has no significant future capital expenditure requirements, except for
some miscellaneous improvements to the Alabama store which will cost less than
$0.2 million in the aggregate.
RESULTS OF OPERATIONS -- CASEY'S
Casey's operates a dealership located in Wheat Ridge, Colorado. The
following table sets forth certain historic data and such data as a percentage
of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------- ---------------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $17.0 100.0% $18.7 100.0% $21.1 100.0% $18.3 100.0% $19.4 100.0%
Cost of sales........... 15.1 88.9 16.2 86.7 18.1 85.8 15.8 86.1 16.6 85.5
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit.......... 1.9 11.1 2.5 13.3 3.0 14.2 2.5 13.9 2.8 14.5
SG&A expenses........... 1.1 6.3 1.5 7.9 1.8 8.5 1.4 7.8 1.7 8.5
Interest and other...... 0.3 1.9 0.3 1.6 0.3 1.5 0.2 1.3 0.2 1.2
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income before taxes... $ 0.5 2.9% $ 0.7 3.8% $ 0.9 4.2% $ 0.9 4.8% $ 0.9 4.8%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Casey's Nine Months Ended September 30, 1998 Compared to Nine Months Ended
September 30, 1997
Revenue. Revenue increased $1.1 million, or 6.0%, from $18.3 million for
the nine months ended September 30, 1997 to $19.4 million for the nine months
ended September 30, 1998. This increase was attributable to an increase in the
sales force and the addition of a popular new product line.
Cost of Sales and Gross Profit. As a percentage of revenue, cost of sales
decreased slightly to 85.5% for the nine months ended September 30, 1998,
compared to 86.1% for the nine months ended September 30, 1997.
Selling, General and Administrative Expenses. SG&A expenses increased $0.3
million, or 21.4%, from $1.4 million for the nine months ended September 30,
1997 to $1.7 million for the nine months ended September 30, 1998. As a
percentage of revenue, SG&A expenses increased from 7.8% for the nine months
ended September 30, 1997 to 8.5% for the nine months ended September 30, 1998.
This percentage increase was a result of an increase in the number of employees,
particularly sales staff, to meet customers' demand, and an increase in
advertising expenditures.
Interest and Other. Interest and other expenses decreased slightly during
the first nine months of 1998 compared with the corresponding period in the
prior year as a result of lower levels of inventories and floor plan interest
expense.
29
<PAGE> 34
Casey's Year Ended 1997 Compared to Year Ended 1996
Revenue. Revenue increased $2.4 million, or 12.8%, from $18.7 million in
1996 to $21.1 million in 1997. This increase was attributable to an expansion of
the sales lot and doubling of the size of the facility during 1996, thereby
allowing Casey's to expand product lines and carry more inventory.
Cost of Sales and Gross Profit. Cost of sales increased $1.9 million, or
11.7%, from $16.2 million in 1996 to $18.1 million in 1997. As a percentage of
revenues, cost of sales decreased from 86.7% in 1996 to 85.8% in 1997. The
increase in gross profit margins was achieved through changes in product line
mix.
Selling, General and Administrative Expenses. SG&A expenses increased $0.3
million, or 20.0%, from $1.5 million in 1996 to $1.8 million in 1997. As a
percentage of revenue, SG&A expenses increased from 7.9% in 1996 to 8.5% in
1997. This increase was due to an increase in the number of employees to service
an increased revenue volume.
Interest and Other. Interest and other expenses were approximately the same
between periods.
Casey's Liquidity and Capital Resources
At September 30, 1998, Casey's had working capital of $1.2 million,
compared to working capital of $0.9 million at December 31, 1997. Total debt,
consisting entirely of floor plan borrowings, was $3.5 million at September 30,
1998, compared to total debt of $3.8 million at December 31, 1997. Casey's
principal capital requirement has been to fund inventory. Historically, this
requirement has been met by cash flows from operating activities and borrowings
from finance companies under floor plan notes secured by vehicle inventory.
Casey's had minor capital expenditures during 1997 and the first nine months of
1998, and currently has no significant future capital expenditure requirements.
However, Casey's does not currently provide repairs and service for its
customers. After the offering, Casey's intends to enter into a build-to-suit
construction and long-term lease arrangement for a service center.
RESULTS OF OPERATIONS -- STOLTZFUS
Stoltzfus operates a dealership located in West Chester, Pennsylvania. The
following table sets forth certain historic data and such data as a percentage
of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------
1996 1997 1998
------------- ------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenue........................................ $15.9 100.0% $15.7 100.0% $18.6 100.0%
Cost of sales.................................. 13.2 82.7 13.0 83.0 15.1 81.2
----- ----- ----- ----- ----- -----
Gross profit................................. 2.7 17.3 2.7 17.0 3.5 18.8
SG&A expenses.................................. 2.7 16.7 2.3 14.3 3.1 16.5
Interest and other............................. 0.2 1.6 0.3 1.8 0.3 1.6
----- ----- ----- ----- ----- -----
Income before taxes.......................... $(0.2) (1.0)% $ 0.1 0.9% $ 0.1 0.7%
===== ===== ===== ===== ===== =====
</TABLE>
Stoltzfus Year Ended October 31, 1998 Compared to Year Ended October 31, 1997
Revenue. Revenue increased $2.9 million, or 18.5%, from $15.7 million for
the year ended October 31, 1997 to $18.6 million for the year ended October 31,
1998. This increase was attributable to upgraded product lines and better sales
training and sales follow-up systems implemented in 1998. In addition, Stoltzfus
lost a significant number of sales opportunities due to a dispute over a
township zoning ordinance that disrupted operations during most of the second
quarter of 1997, until it was finally resolved.
Cost of Sales and Gross Profit. Cost of sales increased $2.1 million, or
16.2%, from $13.0 million in 1997 to $15.1 million in 1998. As a percentage of
revenue, cost of sales decreased to 81.2% in 1998 compared to 83.0% in 1997.
Stoltzfus refined and upgraded its in-house sales system during 1998 and had
better penetration and more fees from finance, insurance and warranty contracts.
30
<PAGE> 35
Selling, General and Administrative Expenses. SG&A expenses increased $0.8
million, or 36.4%, from $2.3 million in 1997 to $3.1 million in 1998. As a
percentage of revenue, SG&A expenses increased from 14.3% in 1997 to 16.5% in
1998. This increase was due to an increase of $0.6 million in owner's
compensation, which was partially offset by a revised sales commission plan that
better focused sales personnel and reduced overall commission costs.
Interest and Other. Interest and other expenses remained relatively
constant during the periods.
Stoltzfus Year Ended October 31, 1997 Compared to Year Ended October 31, 1996
Revenue. Revenue decreased $0.2 million, or 1.3%, from $15.9 million in
1996 to $15.7 million in 1997. This decrease was attributable to a management
decision in 1997 to drop certain product lines that were not selling well and a
business interruption in 1997 caused by a dispute over a township zoning
ordinance that was not resolved until mid-year.
Cost of Sales and Gross Profit. Cost of sales decreased $0.2 million, or
1.5%, from $13.2 million in 1996 to $13.0 million in 1997. As a percentage of
revenue, cost of sales increased slightly from 82.7% in 1996 to 83.0% in 1997.
The decrease in gross profit was primarily due to decreased margins to clear out
certain discontinued product lines during 1997 and $0.1 million in lower gross
profit from parts and service.
Selling, General and Administrative Expenses. SG&A expenses decreased $0.4
million, or 18.5%, from $2.7 million in 1996 to $2.3 million in 1997. As a
percentage of revenue, SG&A expenses decreased from 16.7% in 1996 to 14.3% in
1997. Because of lower revenue levels, cost cuts were put in place during 1997
including a reduction in owner's compensation.
Interest and Other. Interest and other expenses increased slightly in 1997
compared to 1996, due to higher interest expense incurred on higher levels of
borrowings under floor plan notes.
Stoltzfus Liquidity and Capital Resources
At October 31, 1998, Stoltzfus had working capital of $0.3 million,
compared to working capital of $0.2 million at October 31, 1997. Total debt was
$3.7 million at October 31, 1998, compared to $3.8 million at October 31, 1997.
Stoltzfus' principal capital requirement has been to fund inventory.
Historically, this requirement has been met by cash flows from operating
activities and borrowings from finance companies under floor plan notes secured
by vehicle inventory. Capital expenditures were $0.2 million in each of the
years ended October 31, 1996, 1997 and 1998, primarily for additional units for
the rental fleet. Stoltzfus currently anticipates spending similar amounts in
future periods to replace older units and expand the rental fleet and
approximately $0.5 million for expansion of the service facility and additional
paving.
RESULTS OF OPERATIONS -- DUSTY'S CAMPER WORLD
Dusty's Camper World operates a dealership located in Bartow, Florida. The
following table sets forth certain historic data and such data as a percentage
of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------- ---------------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................ $19.6 100.0% $21.4 100.0% $20.8 100.0% $15.6 100.0% $18.0 100.0%
Cost of sales.......... 16.9 86.1 18.3 85.6 17.3 83.1 12.6 81.1 15.4 85.3
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit......... 2.7 13.9 3.1 14.4 3.5 16.9 3.0 18.9 2.6 14.7
SG&A expenses.......... 2.4 12.3 2.8 12.9 2.9 13.7 2.1 13.2 1.9 10.8
Interest and other..... 0.2 1.1 0.2 1.0 0.2 1.2 0.2 1.3 0.2 0.9
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income before
taxes............. $ 0.1 0.5% $ 0.1 0.5% $ 0.4 2.0% $ 0.7 4.4% $ 0.5 3.0%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
31
<PAGE> 36
Dusty's Camper World Nine Months Ended September 30, 1998 Compared to Nine
Months
Ended September 30, 1997
Revenue. Revenue increased $2.4 million, or 15.4%, from $15.6 million for
the nine months ended September 30, 1997 to $18.0 million for the nine months
ended September 30, 1998. This increase was attributable to improved market
shares in new towables and motorhomes, and the addition of two new product
lines: van campers and pop-up camper trailers.
Cost of Sales and Gross Profit. As a percentage of revenue, cost of sales
increased to 85.3% in the nine months ended September 30, 1998, compared to
81.1% for the nine months ended September 30, 1997. This decrease in gross
profit margins was attributable to increases in new towables and motorhomes
sales, which carry lower profit margins than used vehicles, and the cost of
adding two new product lines.
Selling, General and Administrative Expenses. SG&A expenses decreased $0.2
million, or 9.5%, from $2.1 million to $1.9 million. As a percentage of revenue,
SG&A expenses decreased from 13.2% in the nine months ended September 30, 1997
to 10.8% in the nine months ended September 30, 1998. This percentage decrease
was a result of reduced advertising and insurance expenses as a percentage of
revenues.
Interest and Other. Interest and other expenses decreased during 1998 as a
result of the consolidation of floor plan lines on improved terms.
Dusty's Camper World Year Ended 1997 Compared to Year Ended 1996
Revenue. Revenue decreased $0.6 million, or 2.8%, from $21.4 million in
1996 to $20.8 million in 1997. The majority of this decrease was attributable to
reduced revenue from sales of Class A motorhomes due to increased competition.
Cost of Sales and Gross Profit. Cost of sales decreased $1.0 million, or
5.5%, from $18.3 million in 1996 to $17.3 million in 1997. As a percentage of
revenues, cost of sales decreased from 85.6% in 1996 to 83.1% in 1997. The
increase in gross profit margins was primarily due to reduction of Class A
motorhome sales, which have a lower gross margin than other products sold by
Dusty's.
Selling, General and Administrative Expenses. SG&A expenses increased $0.1
million, or 3.8%, from $2.8 million in 1996 to $2.9 million in 1997. As a
percentage of revenues, SG&A expenses increased from 12.9% in 1996 to 13.7% in
1997. This was attributable to hiring additional service technicians and
increases in insurance and employee benefits.
Interest and Other. Interest and other expenses increased slightly during
1997 as higher levels of floor plan debt more than offset a slight reduction in
average interest rates during 1997.
Dusty's Camper World Year Ended 1996 Compared to Year Ended 1995
Revenue. Revenue increased $1.8 million, or 9.1%, from $19.6 million in
1995 to $21.4 million in 1996. Approximately $1.5 million of this increase was
attributable to new Class A motorhome sales and increased overall used vehicle
sales.
Cost of Sales and Gross Profit. Cost of sales increased $1.4 million, or
8.3%, from $16.9 million in 1995 to $18.3 million in 1996. As a percentage of
revenues, cost of sales decreased from 86.1% in 1995 to 85.6% in 1996. The
increase in gross profit margins was primarily due to improved inventory turns
due to improved market share and increased sales of used vehicles.
Selling, General and Administrative Expenses. SG&A expenses increased $0.4
million, or 14.6%, from $2.4 million in 1995 to $2.8 million in 1996. As a
percentage of revenues, SG&A expenses increased from 12.3% in 1995 to 12.9% in
1996. This increase was attributable to additional personnel hired to handle the
increase in business.
Interest and Other. Interest and other expenses decreased slightly during
1996 due to a slight reduction in average interest rates during the periods.
32
<PAGE> 37
Dusty's Camper World Liquidity and Capital Resources
At September 30, 1998, Dusty's Camper World had working capital of $0.9
million, compared to working capital of $0.6 million at December 31, 1997. Total
debt was $3.5 million at September 30, 1998, compared to total debt of $3.4
million at December 31, 1997. Dusty's Camper World's principal capital
requirement has been to fund inventory. Historically, this requirement has been
met by cash flows from operating activities and borrowings from finance
companies under floor plan notes secured by vehicle inventory. Dusty's Camper
World had capital expenditures of $0.1 million during 1997, primarily for the
addition of two new service bays, two new sales offices and a conference room.
Dusty's Camper World had only minor capital expenditures during the first nine
months of 1998, and currently has no significant future capital expenditure
requirements.
RESULTS OF OPERATIONS -- HALL ENTERPRISES
Hall Enterprises operated three dealerships in the Lexington, Kentucky area
until the fourth quarter of 1997 when the operations were consolidated into two
locations. The following table sets forth certain historic data and such data as
a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------- ---------------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................ $14.6 100.0% $14.0 100.0% $16.7 100.0% $12.5 100.0% $11.9 100.0%
Cost of sales.......... 12.0 82.2 11.6 82.6 13.6 81.4 10.0 79.8 9.6 81.0
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit......... 2.6 17.8 2.4 17.4 3.1 18.6 2.5 20.2 2.3 19.0
SG&A expenses.......... 2.3 15.5 2.2 15.5 2.6 15.8 2.1 16.8 1.4 11.7
Interest and other..... 0.3 2.3 0.3 2.6 0.5 2.8 0.3 2.5 0.4 3.0
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income before
taxes............. $ 0.0 0.0% $(0.1) (0.7)% $ 0.0 0.0% $ 0.1 0.9% $ 0.5 4.3%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Hall Enterprises Nine Months Ended September 30, 1998 Compared to Nine Months
Ended September 30, 1997
Revenue. Revenue decreased $0.6 million, or 4.8%, from $12.5 million for
the nine months ended September 30, 1997 to $11.9 million for the nine months
ended September 30, 1998. This decrease was attributable to closing a small
store at the end of 1997, which was largely offset by growth in the other two
stores.
Cost of Sales and Gross Profit. As a percentage of revenue, cost of sales
increased to 81.0% for the nine months ended September 30, 1998, compared to
79.8% for the nine months ended September 30, 1997. The decline in gross profit
margins was due to discounting certain models to move older inventory during the
first half of 1998.
Selling, General and Administrative Expenses. SG&A expenses decreased $0.7
million, or 33.3% from $2.1 million to $1.4 million. As a percentage of revenue,
SG&A expenses decreased from 16.8% for the nine months ended September 30, 1997
to 11.7% for the nine months ended September 30, 1998. This decrease was a
result of significant headcount reductions and other cost savings achieved by
consolidating operations from three locations to two, a reduction of $0.1
million in advertising expense and a reduced level of owners' compensation
during the first nine months of 1998.
Interest and Other. Interest and other expenses increased by $0.1 million
for the first nine months of 1998, compared to the corresponding period in 1997
as a result of higher interest expense due to borrowings to finance a purchase
of land during 1997.
33
<PAGE> 38
Hall Enterprises Year Ended 1997 Compared to Year Ended 1996
Revenue. Revenue increased $2.7 million, or 18.6%, from $14.0 million in
1996 to $16.7 million in 1997. This increase was attributable to higher demand
in the local market and increasing popularity of higher-priced diesel motorhomes
carried by Hall Enterprises.
Cost of Sales and Gross Profit. Cost of sales increased $2.0 million, or
17.2%, from $11.6 million in 1996 to $13.6 million in 1997. As a percentage of
revenue, cost of sales decreased from 82.6% in 1996 to 81.4% in 1997. The
improvement in gross profit margins was primarily due to better sales management
and improved margins on parts and service.
Selling, General and Administrative Expenses. SG&A expenses increased $0.4
million, or 18.2%, from $2.2 million in 1996 to $2.6 million in 1997, primarily
as a result of higher sales. As a percentage of revenue, SG&A expenses increased
slightly from 15.5% in 1996 to 15.8% in 1997.
Interest and Other. Interest and other expenses increased by $0.2 million
in 1997 as a result of higher levels of floor plan borrowings at slightly higher
rates to finance increases in inventories associated with Hall Enterprises'
growth.
Hall Enterprises Liquidity and Capital Resources
At September 30, 1998, Hall Enterprises had negative working capital of
$0.5 million, compared to negative working capital of $1.0 million at December
31, 1997. Total debt was $3.6 million at September 30, 1998, compared to total
debt of $5.2 million at December 31, 1997. Hall Enterprises' principal capital
requirement has been to fund inventory. Historically, this requirement has been
met by cash flows from operating activities and borrowings from finance
companies under floor plan notes secured by vehicle inventory. Hall Enterprises
had capital expenditures of $1.0 million during 1997, consisting primarily of
$0.7 million for the purchase of a tract of undeveloped land and $0.2 million in
additional units purchased for the rental fleet. Capital expenditures were minor
during the first nine months of 1998, and Hall Enterprises currently has no
significant future capital expenditure requirements. Upon closing of the
offering, the owner of Hall Enterprises will purchase the land at its book value
by assuming the mortgage debt ($0.5 million at September 30, 1998) and paying
cash for the remainder.
RESULTS OF OPERATIONS -- SCOTT MOTOR COACH
Scott Motor Coach operates a dealership located in Lakewood, New Jersey.
The following table sets forth certain historic data and such data as a
percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------ ----------------------------------
1996 1997 1997 1998
------------- ------------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue.......................... $12.1 100.0% $14.0 100.0% $11.1 100.0% $11.7 100.0%
Cost of sales.................... 9.7 79.9 11.2 80.0 8.8 79.1 9.3 79.4
----- ----- ----- ----- ----- ----- ----- -----
Gross profit................... 2.4 20.1 2.8 20.0 2.3 20.9 2.4 20.6
SG&A expenses.................... 2.1 17.2 2.4 17.0 1.7 15.2 1.8 15.6
Interest and other............... 0.2 2.1 0.4 2.8 0.3 3.2 0.2 1.7
----- ----- ----- ----- ----- ----- ----- -----
Income before taxes............ $ 0.1 0.8% $ 0.0 0.2% $ 0.3 2.5% $ 0.4 3.3%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Scott Motor Coach Nine Months Ended September 30, 1998 Compared to Nine Months
Ended September 30, 1997
Revenue. Revenue increased $0.6 million, or 5.4%, from $11.1 million for
the nine months ended September 30, 1997 to $11.7 million for the nine months
ended September 30, 1998. Of the increase, $0.4 million was attributable to
increased vehicle sales and $0.2 million was attributable to revenue from parts
and service.
34
<PAGE> 39
Cost of Sales and Gross Profit. As a percentage of revenue, cost of sales
increased slightly to 79.4% for the nine months ended September 30, 1998
compared to 79.1% for the nine months ended September 30, 1997.
Selling, General and Administrative Expenses. SG&A expenses increased $0.1
million, or 5.9%, from $1.7 million for the nine months ended September 30, 1997
to $1.8 million for the nine months ended September 30, 1998. As a percentage of
revenue, SG&A expenses increased slightly from 15.2% for the nine months ended
September 30, 1997 to 15.6% for the nine months ended September 30, 1998. The
increase was due to increased facility rent associated with adding additional
acreage to the sales lot and increased training costs attributable to service
technicians and conversion of Scott Motor Coach's computer system in 1998.
Interest and Other. Interest and other expenses decreased by $0.2 million
for the nine months ended September 30, 1998, compared to the corresponding
period in 1997. Interest on floor plan notes was approximately the same during
the periods, but the 1997 period included $0.2 million related to legal fees and
settlement costs of a lawsuit against Scott Motor Coach.
Scott Motor Coach Year Ended 1997 Compared to Year Ended 1996
Revenue. Revenue increased $1.9 million, or 15.7%, from $12.1 million in
1996 to $14.0 million in 1997. This increase was attributable to increased sales
of higher priced motor coaches.
Cost of Sales and Gross Profit. Cost of sales increased $1.5 million, or
15.5%, from $9.7 million in 1996 to $11.2 million in 1997. As a percentage of
revenue, cost of sales remained relatively constant at 79.9% in 1996 and 80.0%
in 1997.
Selling, General and Administrative Expenses. SG&A expenses increased $0.3
million, or 14.3%, from $2.1 million in 1996 to $2.4 million in 1997, primarily
as a result of higher sales. As a percentage of revenue, SG&A expenses decreased
slightly from 17.2% in 1996 to 17.0% in 1997.
Interest and Other. Interest and other costs increased by $0.2 million in
1997 compared to 1996 as a result of legal fees and settlement costs of $0.2
million incurred in a lawsuit against Scott Motor Coach.
Scott Motor Coach Liquidity and Capital Resources
At September 30, 1998, Scott Motor Coach had working capital of $1.0
million, compared to working capital of $0.9 million at December 31, 1997. Total
debt was $3.6 million at September 30, 1998, compared to total debt of $3.4
million at December 31, 1997. Scott Motor Coach's principal capital requirement
has been to fund inventory. Historically, this requirement has been met by cash
flows from operating activities and borrowings from finance companies under
floor plan notes secured by inventory. Capital expenditures were $0.2 million
for 1997 and less than $0.1 million for the first nine months of 1998, which
expenditures were primarily attributable to leasehold improvements and computer
systems and equipment. Scott Motor Coach currently has no significant future
capital expenditure requirements.
35
<PAGE> 40
RESULTS OF OPERATIONS -- AMERICAN RV
American RV operates dealerships located in Memphis, Tennessee and Olive
Branch, Mississippi. The following table sets forth certain historic data and
such data as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------ ----------------------------------
1996 1997 1997 1998
------------- ------------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue.......................... $14.8 100.0% $15.1 100.0% $12.7 100.0% $11.2 100.0%
Cost of sales.................... 12.0 80.7 12.1 80.4 10.3 80.9 8.8 78.7
----- ----- ----- ----- ----- ----- ----- -----
Gross profit................... 2.8 19.3 3.0 19.6 2.4 19.1 2.4 21.3
SG&A expenses.................... 2.6 17.7 2.5 16.4 1.9 14.9 2.2 19.2
Interest and other............... 0.3 2.2 0.3 1.8 0.2 1.9 0.2 1.8
----- ----- ----- ----- ----- ----- ----- -----
Income before taxes............ $(0.1) (0.6)% $ 0.2 1.4% $ 0.3 2.3% $ 0.0 0.3%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
American RV Nine Months Ended September 30, 1998 Compared to Nine Months
Ended September 30, 1997
Revenue. Revenue decreased $1.5 million, or 11.8%, from $12.7 million for
the nine months ended September 30, 1997 to $11.2 million for the nine months
ended September 30, 1998. Revenue at the Memphis store was approximately the
same during these periods, while revenue at the Mississippi store decreased by
$1.5 million. American RV experienced significant competition during 1998,
particularly at the Mississippi store, and management made the decision to lose
sales rather than match competitors' low prices.
Cost of Sales and Gross Profit. As a percentage of revenue, cost of sales
decreased to 78.7% for the nine months ended September 30, 1998, compared to
80.9% for the nine months ended September 30, 1997. The increase in gross profit
margins was attributable to a change in the mix of vehicles sold and an increase
of $0.1 million in high-margin finance, insurance and warranty fees.
Selling, General and Administrative Expenses. SG&A expenses increased $0.3
million, or 15.8%, from $1.9 million to $2.2 million. As a percentage of
revenue, SG&A expenses increased from 14.9% for the nine months ended September
30, 1997 to 19.2% for the nine months ended September 30, 1998. This percentage
increase was a result of the overall decrease in sales volume in 1998 without
corresponding reductions in personnel cost until November 1998 when personnel
reductions were implemented, coupled with increases in advertising expenditures
and owner's compensation.
Interest and Other. Interest and other expenses decreased slightly during
the first nine months of 1998 compared with the corresponding period in 1997 as
a result of decreasing inventories and floor plan interest expense at the
Mississippi dealership.
American RV Year Ended 1997 Compared to Year Ended 1996
Revenue. Revenue increased $0.3 million, or 2.0%, from $14.8 million in
1996 to $15.1 million in 1997. Vehicle sales remained constant during the
periods at $13.4 million while parts and service revenue increased $0.1 million
and finance, insurance and warranty fees increased $0.2 million.
Cost of Sales and Gross Profit. Cost of sales increased $0.1 million, or
0.8%, from $12.0 million in 1996 to $12.1 million in 1997. As a percentage of
revenue, cost of sales decreased from 80.7% in 1996 to 80.4% in 1997. The
increase in gross profit margins was primarily due to the increase in
high-margin finance, insurance and warranty fees offset by slightly lower
margins on vehicle sales.
Selling, General and Administrative Expenses. SG&A expenses decreased $0.1
million, or 3.8%, from $2.6 million in 1996 to $2.5 million in 1997. As a
percentage of revenue, SG&A expenses decreased from
36
<PAGE> 41
17.7% in 1996 to 16.4% in 1997. Approximately $0.2 million of this decrease was
due to a reduction in owner's compensation in 1997.
Interest and Other. Interest and other expenses decreased slightly in 1997
due to lower levels of debt and a reduction in floor plan interest rates.
American RV Liquidity and Capital Resources
At September 30, 1998, American RV had working capital of $0.5 million,
compared to working capital of $0.5 million at December 31, 1997. Total debt was
$3.0 million at September 30, 1998, compared to total debt of $3.5 million at
December 31, 1997. American RV's principal capital requirement has been to fund
inventory. Historically, this requirement has been met by cash flows from
operating activities and borrowings from finance companies under floor plan
notes secured by vehicle inventory. American RV had minor capital expenditures
during 1997 and the first nine months of 1998, and currently has no significant
future capital expenditure requirements.
RESULTS OF OPERATIONS -- YOUNG'S
Young's operates a dealership located in Lancaster, California (Los Angeles
County). The following table sets forth certain historic data and such data as a
percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED SEPTEMBER 30,
DECEMBER 31, ----------------------------------
1997 1997 1998
------------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenue......................................... $14.3 100.0% $11.2 100.0% $11.0 100.0%
Cost of sales................................... 11.3 78.8 8.8 78.6 8.6 78.0
----- ----- ----- ----- ----- -----
Gross profit.................................. 3.0 21.2 2.4 21.4 2.4 22.0
SG&A expenses................................... 2.2 15.7 1.7 15.4 1.6 15.0
Interest and other.............................. 0.2 1.4 0.2 1.3 0.2 1.5
----- ----- ----- ----- ----- -----
Income before taxes........................... $ 0.6 4.1% $ 0.5 4.7% $ 0.6 5.5%
===== ===== ===== ===== ===== =====
</TABLE>
Young's Nine Months Ended September 30, 1998 Compared to Nine Months Ended
September 30, 1997
Revenue. Revenue decreased $0.2 million, or 1.8%, from $11.2 million for
the nine months ended September 30, 1997 to $11.0 million for the nine months
ended September 30, 1998. This decrease was attributable to slow vehicle sales
volume in the first quarter of 1998, offset somewhat by increased parts and
service revenue during the first nine months of 1998.
Cost of Sales and Gross Profit. As a percentage of revenues, cost of sales
decreased to 78.0% for the nine months ended September 30, 1998, compared to
78.6% for the nine months ended September 30, 1997.
Selling, General and Administrative Expenses. SG&A expenses decreased by
$0.1 million, or 5.9%, from $1.7 million in 1997 to $1.6 million in 1998. As a
percentage of revenue, SG&A expenses decreased from 15.4% for the nine months
ended September 30, 1997 to 15.0% for the nine months ended September 30, 1998.
This decrease was a result of improved management of these costs.
Interest and Other. Interest and other expenses remained relatively
constant during the periods.
Young's Liquidity and Capital Resources
At September 30, 1998, Young's had working capital of $1.5 million,
compared to working capital of $1.1 million at December 31, 1997. Total debt was
$2.3 million at September 30, 1998, compared to total debt of $3.0 million at
December 31, 1997. Young's principal capital requirement has been to fund
inventory. Historically, this requirement has been met by cash flows from
operating activities and borrowings from finance companies under floor plan
notes secured by vehicle inventory. Young's had
37
<PAGE> 42
capital expenditures of $0.1 million in each of 1996 and 1997 and for the nine
months ended September 30, 1998. Young's currently has no significant future
capital expenditure requirements.
RESULTS OF OPERATIONS -- RV'S NORTHWEST
RV's Northwest operated one dealership located in the Spokane, Washington
area until July 1998, when it purchased the assets and assumed the debt of
another dealership in the same area. The following table sets forth certain
historic data and such data as a percentage of revenue for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED SEPTEMBER 30,
DECEMBER 31, ----------------------------------
1997 1997 1998
------------- -------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenue.................................... $10.7 100.0% $9.0 100.0% $10.2 100.0%
Cost of sales.............................. 8.9 83.2 7.4 81.9 8.4 82.4
----- ----- ---- ----- ----- -----
Gross profit............................. 1.8 16.8 1.6 18.1 1.8 17.6
SG&A expenses.............................. 1.6 14.5 1.3 13.9 1.3 12.6
Interest and other......................... 0.1 1.7 0.1 1.5 0.2 1.9
----- ----- ---- ----- ----- -----
Income before taxes...................... $ 0.1 0.6% $0.2 2.7% $ 0.3 3.1%
===== ===== ==== ===== ===== =====
</TABLE>
RV's Northwest Nine Months Ended September 30, 1998 Compared to Nine Months
Ended September 30, 1997
Revenue. Revenue increased $1.2 million, or 13.3%, from $9.0 million for
the nine months ended September 30, 1997 to $10.2 million for the nine months
ended September 30, 1998. This increase was attributable to a new location added
in July 1998 and a better mix of product sold.
Cost of Sales and Gross Profit. As a percentage of revenues, cost of sales
increased to 82.4% for the nine months ended September 30, 1998 compared to
81.9% for the nine months ended September 30, 1997. The decline in gross profit
margins was attributable to discounting certain models acquired in the
acquisition of the new location in July 1998, offset by increases in
higher-margin parts and service revenue and fees from finance, insurance and
warranty contracts.
Selling, General and Administrative Expenses. SG&A expenses remained
relatively constant during the periods. As a percentage of revenues, SG&A
expenses decreased from 13.9% for the nine months ended September 30, 1997 to
12.6% for the nine months ended September 30, 1998. This percentage decrease was
a result of increased revenue with only slightly increased overhead and
reductions in certain compensation plans.
Interest and Other. Interest and other expenses increased by $0.1 million
for the first nine months of 1998 compared to the corresponding period in 1997,
as a result of the increased level of debt used to finance the growth in the
business and the purchase of the assets and assumption of the floor plan debt of
a competitor dealer in July 1998.
RV's Northwest Liquidity and Capital Resources
At September 30, 1998, RV's Northwest had working capital of $0.3 million,
compared to working capital of $0.1 million at December 31, 1997. Total debt was
$3.1 million at September 30, 1998, compared to total debt of $1.8 million at
December 31, 1997. RV's Northwest's principal capital requirement has been to
fund inventory. Historically, this requirement has been met by cash flows from
operating activities and borrowings from finance companies under floor plan
notes secured by vehicle inventory. Capital expenditures were minor during 1997
and the first nine months of 1998. There are currently no significant future
capital expenditure requirements.
38
<PAGE> 43
RESULTS OF OPERATIONS -- LITTLE VALLEY
Little Valley operates a dealership located in the Charleston, West
Virginia area. The following table sets forth certain historic data and such
data as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ ----------------------------
1996 1997 1997 1998
------------- ------------- ------------ ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue............................ $11.2 100.0% $11.8 100.0% $9.8 100.0% $9.0 100.0%
Cost of sales...................... 9.5 84.8 9.5 80.7 7.8 79.6 7.4 82.2
----- ----- ----- ----- ---- ----- ---- -----
Gross profit..................... 1.7 15.2 2.3 19.3 2.0 20.4 1.6 17.8
SG&A expenses...................... 1.1 9.9 1.3 11.0 0.9 9.3 0.8 9.0
Interest and other................. 0.2 1.6 0.2 1.4 0.1 1.4 0.1 1.4
----- ----- ----- ----- ---- ----- ---- -----
Income before taxes.............. $ 0.4 3.7% $ 0.8 6.9% $1.0 9.7% $0.7 7.4%
===== ===== ===== ===== ==== ===== ==== =====
</TABLE>
Little Valley Nine Months Ended September 30, 1998 Compared to Nine Months
Ended September 30, 1997
Revenue. Revenue decreased $0.8 million, or 8.2%, from $9.8 million for the
nine months ended September 30, 1997 to $9.0 million for the nine months ended
September 30, 1998. This decrease was attributable to a slow first quarter due
to huge snow falls in 1998 that caused a roof to collapse and the business to
suffer a major disruption.
Cost of Sales and Gross Profit. As a percentage of revenue, cost of sales
increased to 82.2% for the nine months ended September 30, 1998, compared to
79.6% for the nine months ended September 30, 1997. The reduction in gross
profit margin was due to a change in the mix of product sold, whereby Little
Valley experienced a substantial increase in sales of motorized vehicles and a
reduction in sales of towable products.
Selling, General and Administrative Expenses. SG&A expenses decreased $0.1
million, or 11.1%, from $0.9 million to $0.8 million. As a percentage of
revenue, SG&A expenses decreased from 9.3% for the nine months ended September
30, 1997 to a 9.0% for the nine months ended September 30, 1998. This decrease
was a result of a facility expansion in 1998, which resulted in increased sales
without a proportionate increase in costs.
Interest and Other. Interest and other expenses were relatively constant
during the periods.
Little Valley Year Ended 1997 Compared to Year Ended 1996
Revenue. Revenue increased $0.6 million, or 5.4%, from $11.2 million in
1996 to $11.8 million in 1997. This increase was attributable to favorable
selling conditions with lower interest rates and a stronger local economy.
Cost of Sales and Gross Profit. Cost of sales remained constant at $9.5
million in 1996 and 1997. As a percentage of revenue, cost of sales decreased
from 84.8% in 1996 to 80.7% in 1997. The improvement in gross margin was
attributable to favorable selling conditions with lower interest rates and a
stronger local economy.
Selling, General and Administrative Expenses. SG&A expenses increased $0.2
million, or 18.2%, from $1.1 million in 1996 to $1.3 million in 1997. As a
percentage of revenue, SG&A expenses increased from 9.9% in 1996 to 11.0% in
1997. This increase was due to an increase in rent for the expanded facility and
additional costs for better employee benefit packages in order to attract and
retain qualified employees.
Interest and Other. Interest and other expenses were relatively constant
during the periods.
39
<PAGE> 44
Little Valley Liquidity and Capital Resources
At September 30, 1998, Little Valley had working capital of $0.3 million,
compared to working capital of $0.4 million at December 31, 1997. Total debt was
$2.4 million at September 30, 1998, compared to $2.8 million at December 31,
1997. Little Valley's principal capital requirement has been to fund inventory.
Historically, this requirement has been met by cash flows from operating
activities and borrowings from finance companies under floor plan notes secured
by vehicle inventory. Capital expenditures were $0.1 million in each of the
years ended December 31, 1996 and 1997 and in the nine months ended September
30, 1998, and Little Valley currently has no significant future capital
expenditure requirements.
RESULTS OF OPERATIONS -- MARSHALL'S
Marshall's operates a dealership located in Austin, Texas. The following
table sets forth certain historic data and such data as a percentage of revenue
for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED SEPTEMBER 30,
DECEMBER 31, ---------------------------------
1997 1997 1998
------------- -------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenue..................................... $10.0 100.0% $7.4 100.0% $7.9 100.0%
Cost of sales............................... 8.4 83.7 6.3 84.5 6.5 82.3
----- ----- ---- ----- ---- -----
Gross profit.............................. 1.6 16.3 1.1 15.5 1.4 17.7
SG&A expenses............................... 1.5 15.0 1.0 13.7 1.1 14.2
Interest and other.......................... 0.1 1.3 0.1 1.3 0.1 1.4
----- ----- ---- ----- ---- -----
Income before taxes....................... $ 0.0 0.0% $0.0 0.5% $0.2 2.1%
===== ===== ==== ===== ==== =====
</TABLE>
Marshall's Nine Months Ended September 30, 1998 Compared to Nine Months
Ended September 30, 1997
Revenue. Revenue increased $0.5 million, or 6.8%, from $7.4 million for the
nine months ended September 30, 1997 to $7.9 million for the nine months ended
September 30, 1998. This increase was attributable to the addition of a new
motorized product line.
Cost of Sales and Gross Profit. As a percentage of revenue, cost of sales
decreased from 84.5% for the nine months ended September 30, 1997, compared to
82.3% for the nine months ended September 30, 1998. This gross profit margin
improvement was due to establishing and achieving higher margin targets for
sales personnel and better margins in 1998 on parts and service.
Selling, General and Administrative Expenses. SG&A expenses increased $0.1
million, or 10.0%, from $1.0 million to $1.1 million. As a percentage of
revenue, SG&A expenses increased from 13.7% for the nine months ended September
30, 1997 to a 14.2% for the nine months ended September 30, 1998. This
percentage increase was attributable to adding personnel and other costs to
manage the growth.
Interest and Other. Interest and other expenses increased slightly in 1997,
compared to 1996, due to higher interest expense incurred on higher levels of
borrowings under floor plan notes.
Marshall's Liquidity and Capital Resources
At September 30, 1998, Marshall's had working capital of $0.5 million,
compared to working capital of $0.3 million at December 31, 1997. Total debt was
$1.6 million at September 30, 1998, compared to total debt of $1.7 million at
December 31, 1997. Marshall's principal capital requirement has been to fund
inventory. Historically, this requirement has been met by cash flows from
operating activities and borrowings from finance companies under floor plan
notes secured by vehicle inventory. There were no significant capital
expenditures during 1997 or the first nine months of 1998, and Marshall's
currently has no significant future capital expenditure requirements. However,
the present lease agreement for Marshall's
40
<PAGE> 45
facility in Austin, Texas, expires in July 2000. RV Centers has agreed with
Marshall's stockholder to enter into a new lease agreement. The new lease
agreement will require such stockholder to construct, prior to the expiration of
the existing lease, a new build-to-suit sales and service facility on 15 acres
of land that the stockholder owns near Marshall's present location. The new
lease will have a ten-year term (with one three-year renewal at RV Centers'
option) with annual rent equal to 10% of the landlord's total cost, which RV
Centers expects to be approximately $1.5 to $2.0 million. Other key terms of the
lease agreement are subject to negotiation and mutual agreement between the
parties.
RESULTS OF OPERATIONS -- ACE FOGDALL
Ace Fogdall operates a dealership located in Cedar Falls, Iowa. The
following table sets forth certain historic data and such data as a percentage
of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED SEPTEMBER 30,
DECEMBER 31, ---------------------------------
1997 1997 1998
------------ -------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenue...................................... $6.6 100.0% $5.3 100.0% $6.7 100.0%
Cost of sales................................ 4.8 72.9 3.8 71.6 4.9 73.6
---- ----- ---- ----- ---- -----
Gross profit............................... 1.8 27.1 1.5 28.4 1.8 26.4
SG&A expenses................................ 1.3 20.3 0.8 16.4 1.0 14.3
Other income................................. 0.0 0.8 0.0 0.7 0.0 0.4
---- ----- ---- ----- ---- -----
Income before taxes........................ $0.5 7.6% $0.7 12.7% $0.8 12.5%
==== ===== ==== ===== ==== =====
</TABLE>
Ace Fogdall Nine Months Ended September 30, 1998 Compared to Nine Months Ended
September 30, 1997
Revenue. Revenue increased $1.4 million, or 26.4%, from $5.3 million for
the nine months ended September 30, 1997 to $6.7 million for the nine months
ended September 30, 1998. This increase was attributable to an expanded
marketing plan as well as a new motorized product line which contributed $0.8
million in revenue during the first nine months of 1998.
Cost of Sales and Gross Profit. As a percentage of revenue, cost of sales
increased to 73.6% for the nine months ended September 30, 1998, compared to
71.6% for the nine months ended September 30, 1997. The reduction in gross
profit margin was due to a shift in sales mix in 1998 to higher-dollar motorized
products which generated more total gross profit dollars but lower margins than
towables.
Selling, General and Administrative Expenses. SG&A expenses increased $0.2
million, or 25.0%, from $0.8 million to $1.0 million. As a percentage of
revenue, SG&A expenses decreased from 16.4% for the nine months ended September
30, 1997 to 14.3% for the nine months ended September 30, 1998. This percentage
decrease was a result of not adding personnel and payroll costs as rapidly as
revenues increased during 1998.
Interest and Other. Interest and other expenses, consisting primarily of
interest income on surplus cash investments, decreased slightly in 1998.
Ace Fogdall Liquidity and Capital Resources
At September 30, 1998, Ace Fogdall had working capital of $2.8 million,
compared to working capital of $2.2 million at December 31, 1997. Ace Fogdall
had no borrowings outstanding at either date. Ace Fogdall's principal capital
requirement has been to fund inventory, which it has done through cash flow from
operations. Ace Fogdall had no substantive capital expenditures during 1997 or
for the first nine months of 1998, and currently has no significant future
capital expenditure requirements.
41
<PAGE> 46
CYCLICALITY
Our operations, like the RV retailing industry in general, can be impacted
by a number of factors relating to general economic conditions, including
availability of consumer credit and interest rates, gas prices and consumer
confidence. We believe the impact on our operations of any future negative
trends in such factors will be somewhat mitigated by our (a) variable cost
salary structure, (b) profitable parts, service and collision repair services,
(c) geographic diversity and (d) product diversity.
SEASONALITY
Our operations are subject to seasonal variations, with the second and
third quarters generally contributing a higher volume of sales than the first
and fourth quarters. This seasonality is driven by three primary forces:
- weather-related factors, consumers tend to purchase RVs during times of
the year when weather is conducive to outdoor activity;
- manufacturer-related factors, primarily the timing of manufacturer
incentive programs and model changeovers; and
- consumer buying patterns, including a low level of interest in purchasing
RVs during the Christmas season.
During traditionally slow seasons, we reduce inventory levels and institute
other cost savings in order to minimize the impact of seasonality on earnings.
Quarterly results also may be materially affected by the timing of acquisitions
and the timing and magnitude of acquisition assimilation costs. Accordingly, the
operating results for any three-month period are not necessarily indicative of
the results that may be achieved for any subsequent fiscal quarter or for a full
fiscal year.
INFLATION
Inflation has not had a material impact on our results of operations for
the last three years.
YEAR 2000 ISSUE
We are working to assess and resolve the potential impact of the year 2000
on the processing of date-sensitive information by our computerized information
systems and other infrastructure that contains embedded technology. The year
2000 problem is the result of computer programs being written using two digits
(rather than four) to define the applicable year. Any of our programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000, which could result in miscalculations or system failures,
causing a disruption of operations.
The most significant application of our accounting and operating systems
involves the recording of a relatively few, high-dollar transactions for the
purchase and sale of vehicle inventory and the tracking of parts, sales and
service orders. We have no significant amounts of accounts payable or accounts
receivable. As such, our data processing requirements are modest compared to
most commercial enterprises. The founding companies each use various "off the
shelf" software applications for the retention and analysis of data. Certain of
these applications are not currently year 2000 compliant, although software
upgrades are generally available for purchase or vendors are working to rectify
the situation.
We plan to make all software applications that we intend to retain past the
end of the current year compliant for purposes of processing data in the year
2000, and we believe that this can be accomplished at a minimal cost. We are
taking this factor into consideration in selecting a common systems platform and
software on which to operate the business on an ongoing basis. We expect that
this selection will be made and the implementation process begun, and perhaps
completed, prior to the beginning of the year 2000. In a "worst case scenario,"
given our relatively modest data processing requirements, we could continue
regular operations with manual recording and processing of data.
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We are attempting to assess the level of year 2000 preparedness of our key
suppliers. We will continue to send letters and questionnaires to these
companies inquiring about their year 2000 efforts. If we cannot obtain
assurances that these suppliers have adequately addressed their year 2000
issues, we will seek to identify alternative suppliers. If several of our
significant suppliers fail to be year 2000 compliant and that has a significant
effect on their ability to produce and deliver product to us, it could have a
material short-term impact on our ability to conduct operations.
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BUSINESS
GENERAL
RV Centers was founded to become the leading retailer of recreation
vehicles in the United States. We operate 25 dealership facilities in 13 states
and sell over 100 different models of RVs which are built by over 40 different
manufacturers. We sell new and used RVs and provide complementary products and
services, including sales of parts and accessories, maintenance and repair
services, body shop services, vehicle rentals, and contracts through which our
customers can obtain financing, insurance and extended warranties. The RVs that
we sell range from "pop-up" camping trailers with a sales price of approximately
$5,000 to luxury motor homes with a sales price in excess of $500,000. Our
dealerships have been in business an average of 20 years.
Our dealerships have grown significantly in the past two years. Combined
revenues increased from $219.9 million in 1996 to $252.2 million in 1997, and
from $201.5 million for the nine months ended September 30, 1997 to $231.8
million for the nine months ended September 30, 1998, representing annual growth
rates of approximately 15% during each of these periods. The RV industry as a
whole also achieved significant growth during this time period, as these
vehicles and the lifestyles they afford have become increasingly popular with
consumers. Industry studies are predicting continued strong industry growth over
the next 10 years.
We believe that, as the operator of the largest nationwide network of RV
dealerships, we will bring about significant and beneficial changes in our
industry. In order to be able to serve consumers in all major markets within the
United States and Canada, we intend to continue to expand our dealer network,
primarily through acquisitions of complementary dealerships.
INDUSTRY OVERVIEW
General. The decision to purchase a recreation vehicle represents a travel
and leisure-time lifestyle choice that is becoming increasingly popular with
consumers in the United States. According to the Recreation Vehicle Industry
Association ("RVIA"), there are currently nine million RVs in service, with an
estimated 25 million Americans utilizing RVs. Over 20,000 parks and campgrounds
are available nationwide to meet the needs of these RV owners.
Based on data from a University of Michigan study sponsored by the RVIA
(the "RVIA Study"), we estimate that retail and private sales of new and used
RVs in the United States were approximately $20.0 billion in 1997. Of such
amount, $9.7 billion represented retail sales by dealers and the remainder were
private sales between individuals of used vehicles. We estimate sales of parts
and accessories, maintenance, repair and body shop services, and fees from
customer contracts for financing, insurance and warranty provided another $1.0
to $2.0 billion of revenue for RV dealerships.
The highly-fragmented RV retail industry has experienced no meaningful
consolidation to date. According to the RVIA, the industry is comprised of
approximately 3,000 dealers in the United States, although our management
believes that only about 1,500 of these dealers handle both new and used RVs and
have annual revenue in excess of $3.0 million. The vast majority of dealers are
privately owned and operate from a single location. We believe that the present
fragmented nature of the industry is an impediment to providing customers with
what they desire most from an RV dealership -- a broad selection of product, low
prices, and fast, efficient repair and maintenance service, not only in the
customer's local area, but also throughout the United States. We believe that a
large, nationwide network of dealerships, linked together with common inventory
information systems and operating with a lower cost structure, will provide
consumers with those items they are seeking.
Demographics. Favorable demographic trends indicate that RV ownership
should increase substantially over the next 10 years. The RVIA Study disclosed
that one in ten households in the United States currently owns an RV. Within
households headed by persons aged 45 to 64, that figure increases to one in
seven currently owning an RV. According to the Census Bureau of the U.S.
Department of Commerce,
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the number of adults between the ages of 45 and 64 is projected to increase by
approximately 44% from 1997 through 2010, compared to a projected increase of
approximately 15% for the overall population. The RVIA Study projects that, if
all other factors remain constant, the number of households that own at least
one RV will rise from 8.6 million in 1997 to 10.4 million in 2010, merely as a
result of the "baby boomer" generation moving into the age groups most likely to
purchase an RV. The following tables illustrate these statistics:
GRAPHS
1997 RV Ownership Rates by Age Groups
-------------------------------------
Age of Percent of
Householder U.S. Householders
----------- -----------------
18-24 3.6%
25-34 6.2
35-44 9.4
45-54 12.8
55-64 16.4
65-74 11.6
75+ 5.5
Source: RVIA Study
Projected Change in Number of Households from
1997 to 2010 By Age Groups
----------------------------------------------
Age of Change in
Householder Households (millions)
----------- ---------------------
18-24 1.0
25-34 (0.7)
35-44 (2.8)
45-54 6.1
55-64 8.0
65-74 1.6
75+ 1.8
Source: U.S. Department of Commerce
The RVIA Study reported that 20% of baby boomers who have never owned an RV
expect to purchase one in their lifetime. Baby boomers as a group possess a
substantial amount of income and
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savings, are likely to inherit large sums, and express a desire for the type of
leisure lifestyle that an RV affords.
New Vehicles Sales. In 1997, retail sales of new RVs by dealers were
approximately $6.9 billion, compared to approximately $6.3 billion in 1996. The
following graph illustrates the growth in recent years of new RV sales:
Retail Sales of New Recreational Vehicles
-----------------------------------------
Year Billions of Dollars
---- -------------------
1992 $4.3
1993 4.7
1994 5.7
1995 5.9
1996 6.3
1997 6.9
1998 7.9(estimated)
Source: RVIA Study
According to the RVIA Study, the market for new RVs should also benefit in
the future from the need to replace aging units. According to the RVIA Study,
the average age of all RVs was 13.1 years in 1997. As illustrated below, almost
one-fourth of all RVs currently in use are in excess of 20 years old:
Age of RVs Currently Owned
-----------------------------------------
Age in Years Percent
------------ -------
1-4 18%
5-9 21
10-14 23
15-19 15
20+ 24
Source: RVIA Study
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In recent years, the large stock of RVs produced in the 1970's provided
consumers with an abundant supply of used vehicles. However, the RVIA Study
anticipates that the older RVs will be retired at increasing rates in the near
term. As the 1970's units are retired, the RVIA Study expects the stock of used
vehicles to shrink, resulting in increasing used vehicle prices and increased
future demand for new RVs.
Used Vehicle Sales. Sales of used RVs by both dealers and individuals were
approximately $12.9 billion in 1997, with sales by dealers constituting
approximately $2.8 billion of such amount. Dealerships obtain the majority of
their used vehicle inventory from trade-ins on new sales. Sales of used vehicles
typically have higher profit margins than sales of new vehicles. However, the
large number of sales of used RVs by private individuals limits the supply of
high-quality used RVs available to dealers.
Dealers. The RV retailing industry is highly fragmented with approximately
3,000 dealers in the United States. We estimate that the four largest RV
dealerships in the United States generated less than 5% of total industry
revenue in 1997. None of these large dealers operate more than three locations.
According to an industry source, over the past 10 years, the number of RV
dealers has decreased by 23%. The decrease is due in large part to rising
working capital requirements and the inability of smaller dealerships to compete
with the inventory selection and service capabilities of larger dealers. In
addition, as owners of RV dealerships have reached retirement age or otherwise
sought to exit the business, there historically have been few buyers.
Dealerships generally finance their inventory of RVs through loan programs
known as "floor planning," which are available from numerous financial
institutions. Typical floor planning programs permit a dealer to borrow up to
100% of the cost of new vehicles and 80% of used vehicles. These programs
require the dealer to pay back the loan upon sale of the vehicle. If the vehicle
is not sold within a specified time, floor planning agreements generally require
repayment of a specified increasing percentage of the loan with the passage of
time. Owners of privately-held dealerships are often obligated to personally
guarantee their floor planning loans.
Consumer Financing. Consumers typically pay cash for only a portion of an
RV's purchase price and borrow the remainder from third-party lenders. Numerous
financial institutions compete for these loans since the historical default
rates have been low. In addition, because the anticipated useful life of an RV
is quite long, lenders will provide customers with term loans of up to 15 years,
and in certain circumstances, up to 20 years. Under current tax law, the
interest on most RV loans is deductible to the same extent as interest on
vacation home loans. Most dealers earn fees for arranging financing from banks
and other lenders for consumer purchases, but do not engage in any material
amount of direct lending to their customers. Dealers also earn fees in
connection with the sale of extended service agreements and collision, liability
and credit life insurance policies.
Seasonality of RV Sales. Sales of RVs are seasonal. Dealerships in the
northern states typically have higher sales in the second and third quarters and
experience a significant reduction in sales in the first and fourth quarters.
Dealerships in the southern states typically have their highest sales volumes in
the first and second quarters. Reductions in other quarters in the southern
states are not nearly as dramatic as in northern states. As a result of the
seasonality of the RV business, individual dealers, particularly those in
northern states, cut back on personnel during the slower portions of the year
and will stock fewer models in order to reduce inventory carrying costs.
Manufacturers. Recreation vehicles are manufactured by over 75 different
manufacturers, of which the seven largest manufactured approximately two-thirds
of all RVs produced in 1997. Manufacturers of motorized RVs do not produce the
chassis used as the base for motorized units. The chassis are produced
principally by four manufacturers which are divisions of major automotive or
truck manufacturers.
An RV dealership will generally represent a number of different
manufacturers and not be dependent on any one manufacturer for product. The
dealership agreements entered into by the retailers with the
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manufacturer frequently provide that the retailer will be the exclusive retailer
within a limited territory for certain of the manufacturer's products. The
dealership agreements provide that, in return, the retailer will maintain a
certain number of the manufacturer's products in inventory, maintain a minimum
sales level, conduct a certain amount of advertising and perform other
obligations. Generally, the dealership agreements are terminable on thirty to
sixty days notice. In some cases, manufacturers sell RVs to dealers on an
order-by-order basis without any long-term contract. Some manufacturers offer
cash rebates to dealers that exceed certain volume targets.
Traditionally, RV manufacturers have sold their products to dealers and not
directly to consumers. We are aware of only one manufacturer which operates a
small chain of captive dealerships in the southeastern United States. However,
such dealerships do not carry the same wide variety of inventory as an
independent dealership with multiple brands from different manufacturers.
Customers. RV purchasers are different from most automobile consumers in
that RV purchasers are not simply acquiring a necessary product, but rather have
made a commitment to a lifestyle involving RV use. There is a camaraderie and
fellowship among RV owners that often strengthens the customer's commitment to
the RV lifestyle. Owners frequently join one of the numerous RV clubs and attend
club outings, rallies and similar functions which further reinforce such
commitment. There are over 300 clubs with a combined membership of over one
million RV owners.
Repeat customers are an important source of sales for the RV industry. It
is not uncommon for a customer to initially purchase a less expensive RV and,
over the ensuing years, engage in a series of trade-ins to upgrade to more
expensive models. These trade-in sales provide dealers with a valuable source of
vehicles for their used inventory. According to the RVIA Study, nearly
two-thirds of all RV owners in 1997, or approximately 8.6 million households,
are expected to purchase another vehicle to replace their current unit. Of those
owners planning a replacement, one-third are expected to make that purchase
within three years and approximately 40% are expected to buy a new model.
Products. The RVs sold by retail dealers, including RV Centers, are divided
into two categories: towable recreation vehicles and motorized recreation
vehicles. Towables can be further divided into the following categories: travel
trailers, fifth wheels, folding camping (pop-up) trailers, park models and truck
campers; and motorized RVs can be further divided into the following categories:
Class A, Class B and Class C.
Towable Recreation Vehicles. Towable RVs are designed to be towed by a
motorized vehicle (a sport utility vehicle, van, pickup truck or passenger
car) of appropriate size, weight and engine displacement. These RVs can be
set on a campsite and the tow vehicle is available for sightseeing.
Attaching and detaching is a simple process, except in the case of park
models, allowing easy movement for travel.
<TABLE>
<S> <C>
[CAMPING TRAILER PHOTO] Camping Trailers. Camping trailers are also known as
"pop-up" or "fold-down" units. They are lightweight, easy to
tow RVs with collapsible sides. When open, they provide
ample living space and kitchen, dining and sleeping
facilities. When folded, they can be towed by a small
vehicle and stored in a small garage. The average price for
a camping trailer is approximately $5,000.
[TRUCK CAMPERS PHOTO] Truck Campers. Truck campers are mounted on the bed of a
pickup truck and may or may not be self-contained. These RVs
are popular with sportsmen traveling into remote areas. They
can be removed from the back of the truck; however, most
campers elect to leave the camper shell on the back of the
truck while camping. Truck campers have an average price of
approximately $8,000.
</TABLE>
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<TABLE>
<S> <C>
[TRAVEL TRAILER PHOTO] Travel Trailers. Travel trailers are 12 to 37 feet in
length, with full living accommodations: galley, beds, full
bathroom facilities and living quarters. Travel trailers are
self-contained permitting the use of refrigeration, hot
water and all plumbing systems, lights and 12 volt
electrical conveniences without any connection to external
utilities. They are towed by means of a frame hitch
connected to a tow vehicle. Travel trailers have an average
price of approximately $14,000.
[FIFTH WHEEL TRAVEL TRAILER Fifth Wheels. Fifth wheels are 18 to 40 feet in length. The
PHOTO] bi-level front section mounts over the bed of a pickup truck
equipped with a fifth wheel hitch. Fifth wheel units are
roomier than travel trailers and are self-contained
permitting the use of refrigeration, hot water and all
plumbing systems, lights and 12 volt electrical conveniences
without connection to external utilities. Some fifth wheels
have sections that slide out of the trailer to expand the
internal living space by up to 3 feet by 12 feet. Fifth
wheels are easier to tow and hook up than travel trailers.
Fifth wheels have an average price of approximately $23,000.
Park Models. Park models are 30 to 40 feet in length.
Generally, they have high ceilings and are wider than other
towables. They are delivered to a campsite and set in a
semi-permanent position to withstand storm damage. Park
models are not self-contained and must be hooked up
externally to fresh water, sewer outlet, propane and
electricity for usage. They are mostly used as a second home
and are rarely moved. Park models have an average price of
approximately $22,000.
Motorized Recreation Vehicles. Motorized RVs are recreational camping and travel
vehicles with a self-propelled motor vehicle chassis.
Class A. Class A motorized coaches range from 24 to 45 feet
in length. They are built on a self-propelled chassis
powered by gasoline or diesel engines. Class As are
[CLASS A MOTORIZED TRAILER self-contained permitting the use of refrigeration, hot
PHOTO] water and all plumbing systems, lights and 12 volt
electrical conveniences without connection to external
utilities. Most Class A coaches are equipped with 110-volt
generators to power accessories. There are a wide variety of
styles and floor plans for Class A coaches. Some are
basement models providing additional storage below the
floor. In addition, some coaches have wide bodies (102" wide
rather than the standard 96") affording greater living
space. Some models are built with slide-outs that expand the
living space. Class A coaches have a price range from
$50,000 to $500,000.
Class B. Class B motorized recreation vehicles are also
known as "van campers," are normally the length of a
[CLASS B MOTORIZED TRAILER full-size van and are built on a variety of van chassis.
PHOTO] Some manufacturers extend the length and height for added
living space. These RVs are self-contained, permitting the
use of refrigeration, hot water and all plumbing systems,
lights and 12 volt electrical conveniences without
connection to external utilities; some 110- volt generators
for powering accessories. The average cost of a Class B is
approximately $43,000.
</TABLE>
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<TABLE>
<S> <C>
Class C. Class C motorized recreation vehicles are built on
a variety of van chassis ranging from 20 to 31 feet in
[CLASS C MOTORIZED TRAILER length. They are also known as "mini motorhomes" or
PHOTO] "cab-overs" for sleeping or storage over the driver's
compartment. Class Cs are self-contained permitting the use
of refrigeration, hot water and all plumbing systems, lights
and 12 volt electrical conveniences without connection to
external utilities and some have 110-volt generators for
powering accessories. Class Cs are available in basement
models, and can have wide bodies and slide-outs. Class Cs
have an average price of approximately $43,000.
</TABLE>
All RVs offer sleeping space for between two and ten people depending on
the model. Most RVs can be outfitted with a wide range of accessories, such as
generators, satellite dishes, TVs, stereos, microwave ovens, leveling jacks and
awnings.
Service. RV dealerships generally provide maintenance and repair services
for towables and the "coach" portion (i.e., the inside area and living systems)
of motorized RVs. Traditionally, most dealers have performed preventive
maintenance, but only limited repair on the chassis (i.e., the motor and drive
systems) of motorized RVs due to the extensive training and equipment needed to
perform such service. There are alternative sources, such as truck dealerships,
that commonly provide chassis service for RVs.
Dealers generally maintain service agreements with the manufacturers they
represent. These agreements provide the dealer with access to parts and
technical assistance required to repair and service the models of RVs sold by
the dealer. Most manufacturers have factory training programs which are
available to the dealership's service technicians.
Parts and Accessories. Most dealerships sell a limited selection of parts
and accessories for RVs. These include replacement items for both the exterior
and interior of the vehicle as well as hitches, awnings and numerous other items
to enhance the traveling or camping experience. Many dealerships also maintain a
supply of liquid propane to sell to RV owners.
COMPANY GOAL AND OPERATING STRATEGY
Our goal is to become the leading RV retailer in the United States with the
capability of serving our customers through a nationwide network of dealerships.
Our strategies to accomplish this goal include: (1) increase internal growth;
(2) reduce our costs through operating efficiencies; (3) expand our network of
dealers through acquisitions; and (4) further develop complementary revenue
sources.
(1) INCREASE INTERNAL GROWTH. We intend to increase revenue and our share
of the RV retailing market by pursuing various opportunities available to us as
a national organization that are not generally available to individual dealers.
To increase our internal growth, we intend to:
Provide Nationwide Quality Repair Service. RV customers want
reliable service when traveling across the country. Currently, consumers
frequently have difficulty obtaining service from dealers other than the
dealer from which they purchased their vehicle. We believe that a
courteous, high-quality and dependable nationwide service center network
is critical to establishing, maintaining and expanding long-term
relationships with RV customers. We intend to develop a national network
of fully-equipped service facilities which are capable of handling a
broad range of vehicles and equipment, appliances and accessories
associated with RVs. Such a network should encourage potential customers
to purchase RVs from one of our dealerships. Further, by providing such
services, we will have more opportunities to establish ongoing
relationships with potential customers.
Offer Access to a Broader Inventory Selection. An RV dealer with a
broader inventory selection is more likely to be able to satisfy a
potential customer's request and make a sale. We intend to link all of
our dealerships' inventory databases and use this information to provide
our customers with access to inventory held throughout our entire dealer
network. These activities will enable us to offer our customers the
largest selection of used vehicles and, to the extent
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permitted by manufacturers' agreements, new vehicles. We expect this
larger selection of available vehicles will result in more sales.
Manage Inventory on a Company-Wide Basis. We believe we can manage
inventory on a company-wide basis to reduce costs and increase inventory
turnover. We intend to centralize inventory purchasing activities to
streamline communications with manufacturers and create more reliable
production schedules for our manufacturers. We also expect to be able to
shift some inventory to dealers in their peak selling season from
dealers in areas of the country that are experiencing off-season
reductions in sales. Such a procedure will permit our dealers to carry a
more optimal level of inventory throughout their peak selling season.
Create Nationwide Recognition for the "RV Centers" Name. We intend
to create nationwide recognition for the "RV Centers" name and the
network it represents. We intend to build name recognition using a
national and regional marketing campaign including focused media and
print advertising, prominent displays at numerous trade shows,
telemarketing programs, newsletters and an Internet web site. Such name
recognition and its association with a large, quality, nationwide
organization will encourage potential customers to purchase from us.
Develop Customer Loyalty Through Club Activities. RV owners
frequently join RV clubs and engage in club activities. We plan to
support local, regional and national camping events and clubs. We also
intend to establish our own national club and newsletter for our
customers to foster customer loyalty. We expect that membership in our
club will include benefits such as purchase-related incentives.
Increase Customer Satisfaction Through Training of Our Sales and
Service Organization. Our management includes recognized industry
authorities in the development and implementation of innovative sales
and marketing processes and RV dealership design. We intend to adopt
certain sales and customer service training programs and procedures
which are designed to increase customer satisfaction and result in
higher sales closure rates.
(2) REDUCE OUR COSTS THROUGH OPERATING EFFICIENCIES. We believe that the
combination of the founding companies as well as other targeted acquisitions
will provide significant opportunities to reduce our costs through operating
efficiencies.
Realizing Purchasing Efficiencies. We anticipate that our size will
provide us with increased purchasing power and permit us to procure
certain products and services on more favorable terms than those
available to smaller dealerships. We believe that we will be able to
lower our costs for financing, casualty and health insurance and
marketing and advertising. The founding companies' current indebtedness
carries a weighted average interest rate of 8.8%. We also believe that,
as a combined company, we will be able to strengthen and improve our
contractual relationships with manufacturers. See "Risk Factors -- We Do
Not Have Long-Term Supply Contracts With RV Manufacturers."
Centralizing Administrative Functions. We anticipate that we will
be able to lower our operating costs as a result of centralizing various
administrative functions including purchasing, accounting, financing,
insurance, employee benefits and legal support. Such centralization will
also provide local dealership management with more time to focus on
sales and operations.
Implementing Common Computer and Information Systems. We will
implement a common computer and information system at each of our
dealerships. These common systems will create operating efficiencies by
permitting better company-wide inventory management, purchasing and
financial reporting. The systems will also permit tracking of customer
requests and real-time sales information.
Sharing "Best Practices." We expect to improve our dealerships'
operating efficiencies by identifying and sharing the best management
practices developed by each of them.
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(3) EXPAND OUR NETWORK OF DEALERS THROUGH ACQUISITIONS. In order to expand
our nationwide dealer and service coverage, we intend to pursue a disciplined
acquisition program. We believe there are a significant number of acquisition
candidates available. Our acquisition program will target strategically situated
RV dealers that will enable us to:
- enter new geographic markets;
- increase our presence in geographic markets we currently serve;
- increase our access to popular, high-quality product lines and models;
and
- expand our service capabilities.
As consideration for future acquisitions, we intend to use various
combinations of our common stock, cash and notes. The consideration for each
future acquisition will vary on a case-by-case basis, with the major factors in
establishing the purchase price being the quality and continuity of management,
historical operating results, future prospects of the target and the ability of
the target to provide entry to new markets. Within 90 days following the
completion of the offering, we intend to register approximately 3,000,000 shares
of common stock for use in connection with future acquisitions.
We believe we will be regarded as an attractive acquiror because of:
- our nationwide strategy and scope of operations which bring competitive
advantages to dealers that affiliate with RV Centers;
- our decentralized operating strategy which allows managers of acquired
dealers to continue to direct the local business;
- the ability of management and employees to participate in our growth
through potential stock ownership and career advancement opportunities;
and
- the ability to offer acquired dealers a combination of publicly-traded
common stock and cash.
See "Risk Factors -- There Are Risks Associated With Our Acquisition
Strategy."
(4) FURTHER DEVELOP COMPLEMENTARY REVENUE SOURCES. We expect to increase
our revenue and strengthen our operations through expansion of certain
activities which generally have not been fully exploited by individual RV
dealers. Such activities include:
Financing, Extended Warranty and Insurance Fees. We currently receive
fees for assisting our customers in obtaining loans, insurance and extended
warranties from various financing institutions and insurers. We intend to
consolidate our relationships with these financing institutions and
insurers in order to provide our customers with more favorable loan terms
and insurance rates and to expand our fee-related income.
Services To Assist Used Vehicle Sales. According to a recent industry
study, only 20% of used RV sales involve a dealership. We intend to offer
pre-sale servicing and the sale of extended warranties to individuals who
are selling their used vehicles themselves. We believe that there will be a
significant demand for such servicing and warranties and that such services
will lead to follow-on sales.
Expansion of Sales of Parts and Accessories. Traditionally, RV dealers
have sold a limited number of parts and accessories. Sales of parts and
accessories generally have higher profit margins than vehicle sales. We
intend to expand our sales of parts and accessories by devoting additional
floor space at our dealerships to such items.
Designation as Insurer Approved Service Centers. We believe that
opportunities exist to increase revenue from insurance-related repairs. We
also believe that companies providing insurance to RV owners desire the
advantages and efficiencies to be gained from working with a nationwide
network of service centers. Consequently, we intend to work with the
largest RV insurance providers to become certified as designated service
centers for collision repair and body shop services.
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FACILITIES
We have 25 dealership locations in 13 states across the United States. The
following table lists the various locations of our dealerships. Generally, each
of our dealership facilities consists of one or more buildings containing sales
and administrative offices, parts inventory showrooms and storerooms, a
maintenance and repair shop, and an open display lot to hold our inventory of
RVs. We lease all of our facilities. In many cases, the property is leased by
us, at market rates, from the prior stockholders of the founding company which
operates on the property. See "Certain Transactions."
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE BUILDING LEASE
CITY/STATE FOUNDING COMPANY ACREAGE SPACE EXPIRATION DATE(1)
- ---------- ---------------- ----------- ----------- ------------------
<S> <C> <C> <C> <C>
Dothan, Alabama Emerald Coast......... 1.8 6,000 ft2 March 2011
Carson, California Saddleback............ 1.5 600 September 2009
Irvine, California Saddleback............ 1.7 6,400 March 2001
La Mirada, California Saddleback............ 1.0 1,000 February 2007
Lancaster, California Young's............... 7.2 35,500 April 2008
Wheat Ridge, Colorado Casey's............... 3.9 2,900 Month-to-month
Bartow, Florida Dusty's Camper World.. 5.0 13,600 March 2011
Bushnell, Florida(1) County Line........... 2.0 4,500 Month-to-month
Clermont, Florida County Line........... 12.0 37,000 March 2011
Gulf Breeze, Florida Emerald Coast......... 10.0 19,800 March 2011
Inverness, Florida County Line........... 3.0 5,400 March 2011
Ocala (North), Florida County Line........... 8.0 18,000 March 2011
Ocala (South), Florida County Line........... 3.0 2,500 March 2011
Panama City, Florida Emerald Coast......... 5.5 11,100 March 2011
Cedar Falls, Iowa Ace Fogdall........... 4.0 13,500 March 2011
Lakewood, New Jersey Scott Motor Coach..... 4.0 12,000 March 2011
Lexington (North), Kentucky Hall Enterprises...... 2.5 9,800 March 2011
Lexington (South), Kentucky Hall Enterprises...... 5.0 23,300 March 2007
Olive Branch, Mississippi American RV........... 6.5 13,000 March 2011
West Chester, Pennsylvania Stoltzfus............. 14.0 36,200 March 2011
Memphis, Tennessee American RV........... 5.0 10,000 May 2004
Austin, Texas Marshall's............ 5.0 7,500 July 1999
Greenacres, Washington RV's Northwest........ 3.3 16,000 March 2011
Spokane, Washington RV's Northwest........ 1.0 1,200 February 2007
Prosperity, West Virginia Little Valley......... 6.0 35,400 March 2011
</TABLE>
- ---------------
(1) Assumes all renewal options are exercised.
(2) Seasonal operation only, open during approximately five months of the year.
The leases of these dealership facilities provide for monthly rentals
ranging from approximately $2,100 to $35,700. We do not anticipate difficulty in
renewing leases as they expire or in obtaining alternate sites as necessary.
Our corporate headquarters are located in Houston, Texas. We are in the
process of obtaining office space in Houston under a long-term lease for our
corporate headquarters.
VEHICLE SALES
Sales of new and used vehicles represented 90.7% of our total revenues in
1997. We offer a wide range of new and used RVs, including a variety of both
towable and motorized models. The following table shows the breakdown of vehicle
sales for the year ended December 31, 1997 (dollars in millions):
<TABLE>
<S> <C> <C>
New...................................... $141.5 62%
Used..................................... 87.2 38%
------ ---
$228.7 100%
====== ===
Motorized................................ $ 80.1 35%
Towables................................. 148.6 65%
------ ---
$228.7 100%
====== ===
</TABLE>
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At a few of our locations, we also sell small boats and other recreational
watercraft. Sales of watercraft, included above with towable products,
represented less than 2.0% of total revenue in 1997, and we do not currently
plan to materially expand such operations.
MANUFACTURERS SUPPLYING RV CENTERS
We purchase new RV inventory from over 40 different manufacturers. There is
significant competition between RV manufacturers, and generally there are
comparable models made by more than one manufacturer. While occasionally we have
been unable to promptly obtain certain popular RV models, we do not expect to
experience significant difficulties in obtaining inventory.
MARKETING
Our founding companies each conduct advertising campaigns through
newspaper, television, radio, billboards, direct mail, yellow pages, consumer
magazines and the Internet. Total advertising expense was $2.6 million in 1997.
We anticipate that our local dealerships will continue to direct a significant
portion of our advertising. We believe that the management of our dealerships
best understand their local markets and the most effective means of reaching
potential customers in their markets. We plan to conduct some uniform
advertising across each of the geographic markets served by our dealerships to
build consumer awareness of our products and services on a national basis. In
connection with such advertising, we intend to adopt a trademark and/or service
mark that will be used by all our dealerships in their advertisements. Such a
trademark and/or service mark will support consumer identification of each of
our dealerships.
We intend to have a presence at a number of consumer shows featuring RVs
which are conducted by trade groups and others. We believe that consumer shows
provide an excellent opportunity to display our diverse range of products and
attract trade-in sales.
PARTS AND SERVICES
We sell parts and accessories for RVs and provide a variety of RV repair,
maintenance and body shop services. Revenue from parts and services represented
6.6% of our total revenue in 1997. The services we provide include basic vehicle
maintenance services as well as more extensive repairs to living area fixtures.
We perform automotive type repairs on a limited basis. We will often assist the
customer in obtaining such repairs by referring the customer or by arranging
delivery of a vehicle to an automotive repair shop. We plan to achieve a high
level of customer satisfaction and long-term customer loyalty by establishing a
nationwide network of high-quality service centers at our dealership locations.
OTHER REVENUE
Fees associated with the sales of finance, insurance and warranty contracts
represented 2.7% of total revenue in 1997. We intend to expand this source of
revenue as we consolidate our relationships with RV insurers and financing
institutions in order to offer our customers favorable terms and rates.
We also engage in a minor amount of RV rentals at a few locations, which
represented less than 1.0% of total revenue in 1997 and 1998. Rentals, however,
are an excellent way for first-time RV users to determine whether they will
enjoy the lifestyle enough to warrant the purchase of a vehicle. As a result, we
are likely to expand this activity, although we do not expect it to be a
significant part of dealership operations.
COMPETITION
We operate in a highly-fragmented and competitive industry. Competition is
based primarily on model selection, quality of customer service, geographic
proximity and price. We compete with a large number of RV dealers on a regional
and local basis, some of which have larger operations than us or other
competitive advantages in their particular markets.
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We believe that we will be able to compete effectively because of our
significant number of locations, geographic diversity, knowledgeable and trained
sales force, broad-based product line, long-term customer relationships and
combined operational and administrative economies of scale. We intend to
differentiate ourselves from our competition in terms of service by developing a
nationwide system of dealers that can provide service to our customers while
traveling. In addition, our size gives us a competitive advantage with a lower
cost of capital and the ability to take advantage of national advertising and
marketing programs.
MANAGEMENT INFORMATION SYSTEMS
An integral part of our strategy is the implementation of common,
company-wide information systems. We intend to solicit proposals from certain
vendors that have experience providing operating systems, hardware and software
to automobile, marine and RV dealerships. We expect to have the selection
process completed and installation under way prior to the end of 1999. Once all
our dealership locations are linked on a common information system, we expect
that each dealership will have real-time access to in-stock inventory
information of all our dealerships. This should stimulate additional vehicle and
parts sales and give customers, particularly those seeking a particular model of
used vehicle, a much greater selection. In addition, each dealership as well as
corporate management will have access to real-time sales information and other
measures of performance.
GOVERNMENT REGULATION
A number of regulations affect the business of marketing, selling,
financing and servicing RVs. We also are subject to laws and regulations
relating to businesses generally.
The laws of certain states require us and/or our salespeople to have a
license in order to establish, operate or relocate a dealership or provide
certain repair services. These laws can also regulate our conduct of business,
including its advertising and sales practices.
Our financing activities with our customers are subject to federal truth in
lending, consumer leasing and equal credit opportunity regulations as well as
state and local motor vehicle finance laws, installment finance laws, insurance
laws, usury laws and other installment sales laws. Some states regulate finance
fees that may be paid as a result of vehicle sales. Penalties for violation of
any of these laws or regulations may include revocation of certain licenses,
assessment of criminal and civil fines and penalties, and in certain instances,
create a private cause of action for individuals. We believe that we comply
substantially with all laws and regulations affecting our business and do not
have any material liabilities under such laws and regulations and that
compliance with all such laws and regulations will not, individually or in the
aggregate, have a material adverse effect on our capital expenditures, earnings
or competitive position, and we do not anticipate that maintaining such
compliance will have a material effect on us in the future.
ENVIRONMENTAL MATTERS
We are subject to a wide range of federal, state, and local environmental
laws and regulations, including those governing discharges to the air and water,
the storage of petroleum substances and chemicals, the handling and disposal of
wastes, and the remediation of contamination arising from spills and releases.
As with RV dealerships generally, our business involves the generation, use,
handling and disposal of relatively small amounts of hazardous or toxic
substances or wastes. Operations involving the management of hazardous and
nonhazardous wastes are subject to requirements of the Federal Resource
Conservation and Recovery Act and comparable state statutes. Pursuant to these
laws, federal and state environmental agencies have established approved methods
for storage, treatment, and disposal of regulated wastes with which we must
comply. As we expand the amount of services provided to our customers, we will
generate more used oil and similar hazardous wastes.
We are also subject to laws and regulations governing remediation of
contamination at facilities we operate or to which we send hazardous or toxic
substances or wastes for treatment, recycling or disposal. The Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), also known
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<PAGE> 60
as the "Superfund" law, imposes liability, without regard to fault or the
legality of the original conduct, on certain classes of persons that are
considered to have contributed to the release of a "hazardous substance" into
the environment. These persons include the owner or operator of the disposal
site or sites where the release occurred and companies that disposed or arranged
for the disposal of the hazardous substances released at such sites. Under
CERCLA, these "responsible parties" may be subject to joint and several
liability for the costs of cleaning up the hazardous substances that have been
released into the environment, for damages to natural resources and for the
costs of certain health studies, and it is not uncommon for neighboring
landowners and other third parties to file claims for personal injury and
property damage allegedly caused by the release of hazardous substances.
Environmental laws and regulations have become very complex and it has
become very difficult for businesses that routinely handle hazardous and
non-hazardous wastes to achieve and maintain full compliance with all applicable
environmental laws. Like virtually any network of vehicle dealerships and
vehicle service facilities, from time to time we can be expected to experience
incidents and encounter conditions that will not be in full compliance with all
applicable environmental laws and regulations. However, none of the founding
companies have been subject to any material environmental liabilities in the
past and we do not anticipate that any material environmental liabilities will
be incurred in the future. Nevertheless, environmental laws and regulations and
their interpretation and enforcement are changed frequently and we believe that
the trend of more expansive and more strict environmental legislation and
regulations is likely to continue. Hence, there can be no assurance that
compliance with environmental laws or regulations or the future discovery of
unknown environmental conditions will not require additional expenditures by us,
or that such expenditures would not be material.
EMPLOYEES
At December 31, 1998, we had 630 employees, consisting of 325 in sales, 292
in parts and service, 102 in clerical and administrative support and 33 in
dealership management. We are not a party to any collective bargaining agreement
and have never experienced a work stoppage. We believe that our relationship
with our employees is good. The founding companies have developed various types
of internal quality control programs and utilize periodic customer satisfaction
surveys to help evaluate the performance of our sales and service staff. We
intend to standardize these practices and establish career advancement
opportunities for managers and employees, including policies for the transfer of
personnel between dealerships when such a move is desirable for both RV Centers
and the employee.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings other than ordinary
routine litigation incidental to our business that our management believes will
not have a material adverse effect on our business, financial condition or
results of operations.
INSURANCE
Our founding companies maintain general liability, worker's compensation
and property insurance in amounts considered adequate and customary for
businesses of this kind. We intend to consolidate insurance coverages as soon as
practical following the offering in order to take advantage of our increased
purchasing power and standardize the levels and types of coverage. Working with
an insurance advisor, we will explore the advisability and feasibility of
increasing the deductibles presently maintained and possibly self-insuring
certain risks, subject to agreed retention levels. There can be no assurance
that future claims will not exceed insurance coverage.
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<PAGE> 61
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning our directors and
executive officers, and those persons who will become directors following the
consummation of the offering:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Clayton K. Trier.................. 46 Chairman of the Board, President and Chief Executive
Officer
John Mancinelli................... 56 Vice Chairman of the Board and Chief Development
Officer
A. John Kreft..................... 48 Director
J. Christian Baker, III........... 51 Vice President, Secretary and Director*
Peter A. Albano................... 56 President of American RV and Director+
Armando Alonso.................... 55 President of County Line and Director+
Allen M. Binford.................. 53 President of Emerald Coast and Director+
James A. Fogdall.................. 56 President of Ace Fogdall and Director+
Earl Stoltzfus.................... 57 President of Stoltzfus and Director+
</TABLE>
- ---------------
* Mr. Baker will resign as an officer and a Director upon consummation of the
offering.
+ Appointment as a Director to be effective as of the consummation of the
offering.
Clayton K. Trier became Chairman of the Board, President and Chief
Executive Officer of RV Centers in October 1998. Mr. Trier has been involved in
the organization of RV Centers, the acquisition of the founding companies and
the offering. Since April 1997, Mr. Trier has been a private investor. In 1993,
he was a founder of U.S. Delivery Systems, Inc. ("U.S. Delivery"), a company
created to consolidate the highly-fragmented local delivery industry, and Mr.
Trier served as Chairman and Chief Executive Officer of U.S. Delivery from its
inception until April 1997. In March 1996, U.S. Delivery, a NYSE-listed company
at that time, was acquired by Corporate Express, Inc., a large publicly-owned
office products company, and Mr. Trier served as a director of Corporate
Express, Inc. from the acquisition date until January 1997. From 1991 to 1993,
Mr. Trier was President of Trier & Partners, Inc., a consulting and investment
banking firm. From 1987 through 1990, Mr. Trier served as President and Co-Chief
Executive Officer of Allwaste, Inc., an environmental services company listed on
the NYSE. From 1974 to 1987, Mr. Trier was at the international accounting firm
of Arthur Andersen & Co., in which he was a partner from 1983 to 1987. Mr. Trier
also serves as a director of Pentacon, Inc. (NYSE: JIT), a distributor of
fasteners and provider of small parts inventory management services, and as a
director of Creative Master International, Inc. (Nasdaq: CMST), a manufacturer
and distributor of collectible-quality, die-cast replicas of cars, trucks and
other items.
John Mancinelli became Vice Chairman of the Board and Chief Development
Officer of RV Centers in October 1998. Mr. Mancinelli has been involved in the
organization of RV Centers, the acquisition of the founding companies and the
offering. Mr. Mancinelli has 27 years of experience in the RV industry. From
March 1998 until joining RV Centers, Mr. Mancinelli served as an independent
consultant providing training and consulting services to RV dealerships. Prior
to establishing his consulting firm, Mr. Mancinelli was a Vice President with
Lazydays RV Supercenter in Tampa Florida ("Lazydays"). During his 12 years at
Lazydays commencing in 1986, Mr. Mancinelli was a salesperson, sales manager,
wholesale manager, director of planning and development, service operations
manager and Vice President. During the period of his service, Lazydays grew to
become the largest RV dealership, in sales, in the United States. From 1994 to
1996, Mr. Mancinelli served on the Board of Directors of the Recreation Vehicle
Dealers Association. Mr. Mancinelli was Vice President, general manager and a
partner of Crestwood RV Center, a New York based RV dealership, between 1971 and
1978 and again between 1980 and 1986. Mr. Mancinelli was also general manager at
Crowley RV Center, an RV dealership in Bristol, Connecticut, from 1978 to 1980.
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A. John Kreft served as President of RV Centers from its formation until
October 1998 and has served as a Director of RV Centers since it was formed. Mr.
Kreft has been involved in the organization of RV Centers, the acquisition of
the founding companies and the offering. Since 1997, Mr. Kreft has been employed
by the Houston-based investment banking and venture capital firm of Baker Kreft
Securities, L.L.C., a NASD member firm which he co-founded. Mr. Kreft is the
firm's Chief Executive Officer and a registered securities principal. Prior to
co-founding Baker Kreft Securities, L.L.C., Mr. Kreft co-founded TriCap
Partners, L.L.C., a Houston-based venture capital firm, in 1996. From 1994 to
1996, Mr. Kreft was a principal with Alex Brown & Sons Incorporated. From 1984
to 1994, Mr. Kreft was with CS First Boston, where he was elected a Managing
Director in 1989.
J. Christian Baker, III has served as Vice President, Secretary and a
Director of RV Centers since it was formed. Mr. Baker has been involved in the
organization of RV Centers, the acquisition of the founding companies and the
offering. Since 1997, Mr. Baker has been employed by the Houston-based
investment banking and venture capital firm of Baker Kreft Securities, L.L.C. a
NASD member firm which he co-founded. Mr. Baker is the firm's Chief Financial
Officer and a registered securities principal. Prior to co-founding Baker Kreft
Securities, L.L.C., Mr. Baker co-founded TriCap Partners, L.L.C., a
Houston-based venture capital firm, in 1996. From November 1995 until the
founding of TriCap Partners, Mr. Baker provided independent financial advisory
and consulting services to healthcare and financial services clients. From 1994
to 1995, Mr. Baker was with Morgan Keegan & Company. From 1992 to 1994, Mr.
Baker was with Stephens, Inc. Mr. Baker will relinquish his positions as an
officer and director of RV Centers upon consummation of the offering.
Peter A. Albano will become a director of RV Centers upon consummation of
the offering. Mr. Albano served 26 years at Procter and Gamble, retiring from
his position as associate director in 1993. In 1993, Mr. Albano purchased
American RV. He has served as President of American RV since 1993.
Armando Alonso will become a director of RV Centers upon consummation of
the offering. Mr. Alonso has over 30 years of experience in the recreation
vehicle retail business and has served as President of County Line since 1979.
Allen M. Binford will become a director of RV Centers upon consummation of
the offering. Mr. Binford has over 30 years of experience in the recreation
vehicle retail business and has served as President of Emerald Coast since 1990.
James A. Fogdall will become a director of RV Centers upon consummation of
the offering. Mr. Fogdall has over 35 years of experience in the recreation
vehicle retail business. He served as Chairman of the Recreation Vehicle Dealers
Association in 1996-97 and has served as President of Ace Fogdall since 1984.
Mr. Fogdall also served on the National Go RVing Committee on Excellence from
1995 to 1997.
Earl Stoltzfus will become a director of RV Centers upon consummation of
the offering. Mr. Stoltzfus has over 31 years of experience in the recreation
vehicle retail business and has served as President of Stoltzfus since 1969.
We intend to appoint three independent directors to serve immediately
following the offering. We also expect to hire additional officers, including a
Chief Financial Officer, a Chief Operating Officer and a General Counsel prior
to the consummation of the offering. None of such directors or officers have
been identified or hired at this time.
Directors are elected at each annual meeting of stockholders. All officers
serve at the discretion of the board of directors, subject to the terms of their
respective employment agreements. See "-- Employment Agreements" and
"Description of Capital Stock."
Our board of directors will establish an Audit Committee, Compensation
Committee, Acquisitions Committee and Director Affairs Committee. The Audit
Committee will recommend the appointment of independent auditors, review and
approve the scope of work and fees of the independent auditors, and review with
executive management and independent auditors the adequacy of RV Centers'
accounting
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systems, internal controls and financial reporting processes. The Compensation
Committee will determine executive officers' and key employees' salaries and
bonuses and will administer the RV Centers, Inc. 1999 Stock Option Plan and
other company-wide employee benefit programs. The Acquisitions Committee will
oversee and monitor RV Centers' acquisition program and its progress toward
achieving strategic objectives established by the full Board as well as have the
authority to approve the terms and conditions of acquisitions with annual
revenues and a proposed purchase price less than certain pre-established levels
to be determined by the full Board. The Director Affairs Committee will
periodically review and recommend changes in compensation and benefit
arrangements for non-employee directors, monitor the performance of directors,
recruit new directors, as needed, and make recommendations to the full Board as
to which persons should be nominated for election or reelection to the Board at
annual meetings of the stockholders, review and advise the full Board on any
potential conflicts of interest of directors, and monitor RV Centers' overall
corporate governance policies.
The Audit and Compensation Committees will consist solely of independent
directors whereas the Acquisitions and Director Affairs Committees will consist
of a combination of independent and employee directors.
DIRECTORS' COMPENSATION
Directors who are employees of RV Centers will not receive additional
compensation for serving as directors. Each director who is not an employee of
RV Centers will receive a fee of $2,000 for attendance at each
regularly-scheduled board of directors meeting and $500 for any special
telephonic board meetings and for each committee meeting (unless held on the
same day as a board of directors meeting). We will reimburse Directors for
out-of-pocket expenses incurred in attending meetings of the board of directors
or committees thereof, and for other expenses incurred in their capacity as
directors of RV Centers. We will grant each non-employee director appointed
effective as of the consummation of the offering stock options to purchase
15,000 shares of common stock at the initial public offering price. We will also
grant to each non-employee director elected after consummation of the offering
stock options to purchase 10,000 shares of common stock upon their initial
election to the board of directors. In addition, each year we will grant to each
non-employee director options to purchase 5,000 shares of common stock after the
initial year of service. See "-- 1999 Stock Plan."
EXECUTIVE COMPENSATION
RV Centers was incorporated in May 1998 and, prior to the offering, has not
conducted any operations other than activities related to the Acquisitions and
the offering. During 1999, we anticipate that the annualized base salaries of
each of our most highly compensated executive officers, Messrs. Trier and
Mancinelli will be $150,000. Nonqualified options for a total of 308,006 and
107,133 shares of common stock at the initial public offering price were granted
in October 1998 to Messrs. Trier and Mancinelli, respectively. Such options vest
at various intervals over five and one-half years from the date of grant. We
intend to hire a Chief Financial Officer, Chief Operating Officer and a General
Counsel, and we anticipate granting stock options to each of these officers and
that the salaries of each of these officers will exceed $100,000 per year.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with each of our executive
officers. The agreements have an initial term of three years and may then be
renewed, at our option, on a year-to-year basis. Each employment agreement is
terminable by us for "good cause" upon ten days' written notice. The employment
agreements are terminable without "good cause" by us or for no reason or for
"good reason" by the officer upon thirty days' written notice. Each employment
agreement provides that, if we terminate the officer's employment without "good
cause," such officer will be entitled to receive a severance payment equal to
the officer's base salary for the greater of one year or the remainder of the
then current term. Such severance will be paid in equal monthly installments.
The employment agreements prohibit such officers from disclosing our
confidential information and trade secrets and generally restrict these
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<PAGE> 64
individuals from competing with us for a period of two years after the
termination of their respective employment agreements. Such non-compete period
is reduced to one year if we terminate the agreement without "good cause" or the
officer terminates the agreement for "good reason."
The employment agreement of each executive officer contains certain
provisions concerning a change-in-control of RV Centers. If the officer is not
notified, at least five days prior to the transaction giving rise to the
change-in-control, that the successor company is assuming his employment
agreement, then the officer may terminate their employment and will be entitled
to triple the payment that would have been payable upon termination without
"good cause." Notwithstanding the successor company's agreement to assume the
officer's employment agreement, in any change-in-control situation, Messrs.
Trier and Mancinelli may elect to terminate their employment by giving five
days' written notice prior to the change-in-control, and they will be entitled
to double the payment that would have been payable upon termination without
"good cause." The change-in-control provisions in the employment agreements may
discourage bids to acquire RV Centers or reduce the amount an acquiror is
willing to pay for RV Centers.
1999 STOCK OPTION PLAN
We plan to adopt an RV Centers, Inc. 1999 Stock Option Plan (the "1999
Stock Option Plan") prior to consummation of the offering. The purpose of the
1999 Stock Option Plan is to provide officers, directors, key employees and
certain other persons who will be instrumental in the success of RV Centers with
additional incentives by increasing their proprietary interest in RV Centers.
The aggregate amount of common stock with respect to which options may be
granted may not exceed the greater of (a) 1,500,000 shares or (b) 15% of the
total shares authorized (subject to adjustment to reflect stock splits).
The 1999 Stock Option Plan will be administered by the Compensation
Committee of the board of directors, which will be composed entirely of
non-employee directors. Subject to the terms of the 1999 Stock Option Plan, the
Committee will determine to whom options will be granted and the terms and
conditions of option grants. Options granted under the 1999 Stock Option Plan
may be either non-qualified stock options, or may qualify as incentive stock
options ("ISOs"), provided that the aggregate fair market value (determined at
the time the ISO is granted) of the common stock with respect to which ISOs are
exercisable for the first time by any employee during any calendar year under
all plans of RV Centers and any parent or subsidiary corporation shall not
exceed $100,000. Under the 1999 Stock Option Plan, no person may receive an
option in any year to purchase more than 250,000 shares of common stock. The
Compensation Committee will determine the period over which options become
exercisable, provided that all options become immediately exercisable upon death
of the grantee or upon a change-in-control (as defined in the 1999 Stock Option
Plan) of RV Centers.
The 1999 Stock Option Plan will also provide for automatic option grants to
directors who are not otherwise employed by RV Centers or its subsidiaries. Each
non-employee director appointed effective as of the consummation of the offering
will receive stock options to purchase 15,000 shares of common stock, and each
non-employee director newly elected after consummation of the offering will
receive stock options to purchase 10,000 shares of common stock upon election to
the board of directors. All non-employee directors will receive an annual grant
of options to purchase 5,000 shares of common stock for each year of service as
a director after their initial year of service. Options granted to non-employee
directors are exercisable in full six months after their grant (subject to
applicable securities laws) and shall have a term of ten years.
Upon consummation of the offering, under the 1999 Stock Option Plan, it is
anticipated that a total of 45,000 stock options will be granted to three
non-employee directors at the initial public offering price, and a total of
approximately 280,000 stock options will be granted to employees of the founding
companies at the initial public offering price. The stock options to be granted
to the employees of the founding companies will all vest and become exercisable
ratably over the five years following consummation of the offering. The annual
automatic grants to non-employee directors and all other future grants under the
1999
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Stock Option Plan are anticipated to be made at an exercise price equal to the
market value of the common stock at the time of the grant.
Options that are not exercisable at the time of a voluntary termination of
the grantee's employment (or directorship) or a termination without "cause" as
defined in the 1999 Stock Option Plan will be immediately forfeited. In the case
of a termination for "cause," all options are immediately forfeited. In no event
may an ISO granted to a control person (as defined in the 1999 Stock Option
Plan) be exercisable more than five years from the date of grant.
Section 162(m) of the Internal Revenue Code of 1986 (the "Code"), places a
$1 million cap on the deductible compensation that can be paid to certain
executives of publicly-traded corporations. Amounts that qualify as "performance
based" compensation under Section 162(m)(4)(C) of the Code are exempt from the
cap and do not count toward the $1 million limit. Generally, options granted
with an exercise price at least equal to the fair market value of the shares of
common stock on the date of grant will qualify as performance based.
Upon exercise of a non-qualified option, the optionee generally will
recognize ordinary income in the amount of the "option spread" (the difference
between the market value of the option shares at the time of exercise and the
exercise price), and RV Centers is generally entitled to a corresponding tax
deduction (subject to certain withholding requirements). When an optionee sells
shares issued upon the exercise of a non-qualified stock option, the optionee
realizes a short-term or long-term capital gain or loss, depending on the length
of the holding period, but RV Centers is not entitled to any tax deduction in
connection with such sale.
An optionee will not be subject to federal income taxation upon the
exercise of ISOs granted under the 1999 Stock Option Plan, and RV Centers will
not be entitled to a federal income tax deduction by reason of such exercise. A
sale of shares of common stock acquired by exercise of an ISO that does not
occur within one year after the exercise or within two years after the grant of
the option generally will result in the recognition of long-term capital gain or
loss in the amount of the difference between the amount realized on the sale and
the exercise price, and RV Centers will not be entitled to any tax deduction in
connection therewith. If a sale of shares of common stock acquired upon exercise
of an ISO occurs within one year from the date of exercise of the option or
within two years from the date of the option grant (a "disqualifying
disposition"), the optionee generally will recognize ordinary income equal to
the lesser of (i) the excess of the fair market value of the shares on the date
of exercise of the options over the exercise price, or (ii) the excess of the
amount realized on the sale of the shares over the exercise price. Any amount
realized on a disqualifying disposition in excess of the amount treated as
ordinary income will be a long-term or a short-term capital gain, depending upon
the length of time the shares were held. RV Centers generally will be entitled
to a tax deduction on a disqualifying disposition corresponding to the ordinary
income recognized by the participant.
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CERTAIN TRANSACTIONS
ORGANIZATION OF RV CENTERS
During 1998, Messrs. Trier and Mancinelli joined with BKF to found RV
Centers and pursue the acquisitions of the founding companies. BKF, an
investment entity formed to focus on consolidations in highly-fragmented
industries, provided RV Centers with expertise regarding the consolidation
process and advanced RV Centers the capital needed to pay organizational and
offering expenses.
Upon the formation of RV Centers, BKF purchased 1,339,157 shares of common
stock. In May 1998, RV Centers sold 133,916 shares of common stock to Mr.
Mancinelli. In October 1998, RV Centers sold 401,748 shares of common stock to
Mr. Trier (including 200,874 shares purchased by trusts for the benefit of Mr.
Trier's minor children) and 60,262 shares of common stock to Mr. Mancinelli. All
such sales were made for nominal amounts. As a result, RV Centers has recorded
non-recurring, non-cash compensation charges of approximately $ million and
$ million in the second and fourth quarters of 1998, respectively,
representing the difference between the amounts paid for the shares and the
estimated initial public offering price, net of a 20% marketability discount.
RV Centers has agreed to reimburse BKF and its affiliates for expenses
incurred by BKF in connection with the Acquisitions and the offering. As of
September 30, 1998, BKF had incurred $481,450 of such expenses, which have been
accrued in the financial statements of RV Centers appearing elsewhere in this
prospectus. RV Centers has also entered into a Credit Agreement with BKF,
pursuant to which RV Centers has borrowed a total of $950,000 as of September
30, 1998, in order to pay offering expenses. The Credit Agreement provides that
RV Centers will pay an origination fee of 8% of the amounts borrowed thereunder
plus interest at the prime rate announced by Chase Bank of Texas, N.A. plus 200
basis points.
Simultaneously with the closing of the offering, RV Centers will acquire
all of the issued and outstanding capital stock of the founding companies except
Young's, at which time each such founding company will become a wholly-owned
subsidiary of RV Centers. Young's RVs, Inc., a newly-formed, wholly-owned
subsidiary of RV Centers, will acquire from Mr. Padgett all the assets used in
the operation of Young's business and assume certain liabilities. The aggregate
consideration that will be paid by RV Centers to acquire the founding companies
consists of (a) approximately $17.7 million in cash and (b) 3,780,100 shares of
common stock.
The following table sets forth for each founding company the consideration
to be paid to the stockholders of the founding companies in cash and in shares
of common stock:
<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
----------- ------------
<S> <C> <C>
County Line............................................... $ 3,314,000 773,200
Saddleback................................................ 1,188,000 277,200
Emerald Coast(1).......................................... 1,708,000 398,500
Casey's................................................... 1,277,000 298,000
Stoltzfus................................................. 1,303,000 303,900
Dusty's Camper World...................................... 1,764,000 411,600
Hall Enterprises.......................................... 629,000 146,800
Scott Motor Coach......................................... 747,000 174,200
American RV(2)............................................ 475,000 110,900
Young's................................................... 1,660,000 129,100
RV's Northwest............................................ 314,000 73,300
Little Valley............................................. 1,380,000 321,900
Marshall's................................................ 668,000 155,900
Ace Fogdall............................................... 1,227,000 205,600
----------- ---------
Total........................................... $17,654,000 3,780,100
=========== =========
</TABLE>
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- ---------------
(1) Prior to or on the consummation of the offering, Emerald Coast shall
distribute to Mr. Binford real estate in Gulf Breeze and Panama City,
Florida on which Emerald Coast operates dealership facilities, and Emerald
Coast will enter into lease agreements with Mr. Binford for the ongoing use
of such facilities. The properties were appraised in 1998 at approximately
$1,500,000.
(2) RV Centers has agreed to pay the stockholder of American RV an additional
$176,000 in cash and 41,000 shares of common stock if American RV attains a
stipulated level of pretax income during the first year after the offering.
Prior to consummation of the Acquisitions, certain of the founding
companies will make distributions representing S-corporation retained earnings
previously taxed to their respective stockholders. The amount of such
distributions (in excess of estimated stockholder tax liabilities attributable
to the earnings of their founding company for 1998 and 1999) shall be deducted
from the cash payments indicated in the table above.
In connection with the Acquisitions, RV Centers has agreed to appoint five
representatives of the founding companies as directors of RV Centers upon
consummation of the offering. As consideration for their interests in their
respective founding companies, these director nominees, their spouses, or trusts
for the benefit of their children, will receive cash and shares of common stock
of RV Centers as follows:
<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
---------- ------------
<S> <C> <C>
Peter A. Albano(1)......................................... $ 475,000 110,900
Armando Alonso............................................. 1,657,000 386,600
Allen M. Binford........................................... 1,537,200 358,650
James S. Fogdall........................................... 1,119,751 187,630
Earl Stoltzfus............................................. 1,303,000 303,900
---------- ---------
Total............................................ $6,091,951 1,347,680
========== =========
</TABLE>
- ---------------
(1) Excludes $176,000 in cash and 41,000 shares of common stock that will be
issued if American RV attains a stipulated level of pretax income during the
first year after the offering.
The consummation of each Acquisition is subject to customary conditions.
These conditions include, among others, the accuracy on the closing date of the
Acquisitions of the representations and warranties by the founding companies,
their principal stockholders and by RV Centers; the performance by each of the
parties of their respective covenants; and the nonexistence of a material
adverse change in the results of operations, financial condition or business of
each founding company.
Certain of the founding companies have incurred indebtedness that has been
personally guaranteed by their stockholders or by entities controlled by their
stockholders. At September 30, 1998, the aggregate amount of indebtedness of
these founding companies that was subject to personal guarantees was
approximately $51.1 million. RV Centers intends to use a portion of the net
proceeds from this offering, together with borrowings available from RV Centers'
anticipated revolving credit facility, to repay substantially all of the
indebtedness of the founding companies.
The founding companies and founding company stockholders agreed, prior to
the initial filing of the Registration Statement for this offering to the terms
of the Acquisition Agreements. The offers and sales of common stock pursuant to
the Acquisition Agreements have not been registered under the Securities Act and
have been structured as private placements exempt from registration under the
Securities Act.
There can be no assurance that the conditions to the closing of the
Acquisitions will be satisfied or waived or that the agreements relating to the
Acquisitions will not be terminated prior to the closing. If any of the
Acquisitions is terminated for any reason, RV Centers does not intend to
consummate the offering on the terms described herein.
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Pursuant to the agreements relating to the Acquisitions, all significant
stockholders of each of the founding companies have agreed not to compete with
RV Centers for a period of five years commencing on the date of closing of the
Acquisitions.
TRANSACTIONS INVOLVING CERTAIN OFFICERS, DIRECTORS AND STOCKHOLDERS
Leases of Real Property by Founding Companies
Following the Acquisitions, certain subsidiaries will continue to lease
facilities from certain founders or entities controlled by certain founders as
described below. RV Centers believes that the rent for each of these facilities
does not exceed fair market value. The initial term for all of the leases
described below expire on the third anniversary of the consummation of the
offering. The leases include three options to renew the lease; each renewal term
will be for three years at a rent adjusted for inflation. The leases provide
that the tenant is responsible for payment of all utilities, taxes, maintenance
and non-structural repairs of existing improvements on the leased premises.
Following the Acquisitions, American RV will continue to sublease its
facilities in Olive Branch, Mississippi from Peter A. Albano. Mr. Albano leases
the Olive Branch facilities from an unrelated third party. Mr. Albano will
become a director of RV Centers upon consummation of the offering. The sublease
provides for an annual rent of $96,000 which is the rent owed pursuant to the
master lease with the third party.
Following the Acquisitions, County Line will continue to lease its
facilities in Inverness, Florida, Ocala, Florida and Clermont, Florida from
Armando Alonso and Francisco Alonso, Jr. Mr. Armando Alonso will become a
director of RV Centers upon consummation of the offering. The leases provide for
annual rents of $216,840 and $180,000 for the Clermont and Ocala North
facilities, respectively, and an annual rent of $60,000 for each of the
Inverness, Ocala South and Ocala North retail facilities.
Following the Acquisitions, Emerald Coast will lease its facilities in Gulf
Breeze, Florida and Panama City, Florida and will continue to lease its facility
in Dothan, Alabama from Mr. Binford. Mr. Binford will become a director of RV
Centers upon consummation of the offering. The leases for the Gulf Breeze,
Panama City and Dothan properties provide for annual rentals of $86,000, $40,000
and $30,000, respectively.
Following the Acquisitions, Stoltzfus will continue to lease its facilities
in West Chester, Pennsylvania from the Vir Mar Family Limited Partnership, an
entity owned and controlled by Earl Stoltzfus and members of his family. Mr.
Earl Stoltzfus will become a director of RV Centers upon consummation of the
offering. The lease provides for an annual rent of $168,000.
Following the Acquisitions, Ace Fogdall will continue to lease its
facilities in Cedar Falls, Iowa from JJS&J Corporation, an entity owned by James
S. Fogdall, his wife and their two children. Mr. Fogdall will become a director
of RV Centers upon consummation of the offering. The lease provides for an
annual rent of $72,000.
Other Transactions
Following the Acquisitions, County Line will continue to lease minor
equipment used in the operation of the County Line dealership from Alonso Joint
Ventures, an entity owned and controlled by Francisco and Armando Alonso. The
equipment is leased on a month-to-month basis for aggregate fees of
approximately $6,900 per month.
COMPANY POLICY
Any future transactions with directors, officers, employees or affiliates
of RV Centers are anticipated to be minimal, and must be approved in advance by
a majority of disinterested members of the board of directors.
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<PAGE> 69
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of RV Centers' common stock, after giving effect to the issuance of
shares of common stock in connection with the Acquisitions and after giving
effect to the offering, by (a) all persons known to RV Centers to be the
beneficial owner of 5% or more thereof, (b) each director and nominee for
director, (c) each executive officer and (d) all officers and directors as a
group. Unless otherwise indicated, the address of each such person is c/o RV
Centers, Inc., 600 Travis, Suite 2100, Houston, Texas 77002. All persons listed
have sole voting and investment power with respect to their shares unless
otherwise indicated.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AFTER OFFERING
---------------------
NUMBER PERCENT
---------- --------
<S> <C> <C>
BKF(1)...................................................... 1,339,157 %
Clayton K. Trier(2)......................................... 401,748 %
John Mancinelli............................................. 194,178 %
J. Christian Baker, III(3).................................. 1,339,157 %
A. John Kreft(3)............................................ 1,339,157 %
Peter A. Albano(4).......................................... 110,900 %
The Armando Alonso Living Trust(5).......................... 386,600 %
Allen M. Binford............................................ 358,650 %
James S. Fogdall(6)......................................... 187,730 %
Earl Stoltzfus.............................................. 303,900 %
All officers and directors as a group (8 persons)........... 3,282,863 %
</TABLE>
- ---------------
(1) BKF intends to distribute to its members the shares of common stock it holds
immediately after the consummation of the offering.
(2) Includes 100,437 shares held by each of the KKT Trust and JCT Trust, trusts
for the benefit of minor children of Mr. Trier, to which Mr. Trier disclaims
beneficial ownership.
(3) Consists of the 1,339,157 shares of common stock issued to BKF. Messrs.
Baker and Kreft are the Managers of BKF.
(4) Excludes 41,000 shares of common stock that will be issued to Mr. Albano if
American RV attains a stipulated level of pretax income during the first
year after the offering.
(5) Mr. Armando Alonso is the trustee of The Armando Alonso Living Trust.
(6) Includes 54,675 shares owned by Mr. Fogdall's wife; of which Mr. Fogdall
disclaims beneficial ownership.
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<PAGE> 70
DESCRIPTION OF CAPITAL STOCK
GENERAL
RV Centers' authorized capital stock consists of 30,000,000 shares of
common stock, par value $0.01 per share, 5,000,000 shares of preferred stock,
par value $0.01 per share and 1,000,000 shares of restricted common stock par
value $0.01. After giving effect to the Acquisitions, there will be 5,748,661
shares of common stock outstanding, including shares of restricted
common stock, which will be held of record by approximately 30 stockholders and
no shares of preferred stock issued and outstanding. After the closing of the
offering, shares of common stock, including shares of
restricted common stock, will be issued and outstanding, and approximately
740,000 shares of common stock will be reserved for issuance upon exercise of
outstanding employee stock options and warrants. No shares of preferred stock
will be issued or outstanding. The following summary of the terms and provisions
of RV Centers' capital stock does not purport to be complete and is qualified in
its entirety by reference to RV Centers' Certificate of Incorporation and
Bylaws, which have been filed as exhibits to RV Centers' registration statement,
of which this prospectus is a part, and applicable law.
COMMON STOCK AND RESTRICTED COMMON STOCK
The holders of common stock are each entitled to one vote for each share
held on all matters to which they are entitled to vote, including the election
of directors. Cumulative voting for the election of directors is not permitted.
Any director, or the entire board of directors, may be removed at any time, with
cause, by 66 2/3% of the aggregate number of votes that may be cast by the
holders of outstanding shares of common stock entitled to vote for the election
of directors.
If necessary to qualify the Acquisitions for treatment under Section 351 of
the Code, prior to the Acquisitions RV Centers will authorize and issue to BKF
shares of restricted common stock in exchange for an equal number of shares of
common stock currently held by BKF. The holders of restricted common stock,
voting together as a single class, will be entitled to elect one member of RV
Centers' board of directors and will be entitled to 0.25 vote per share on all
matters on which the common stock is entitled to vote other than the election of
directors. Each share of restricted common stock will automatically convert to
common stock on a share-for-share basis in the event of either (1) a disposition
of such share of restricted common stock by the holder thereof (other than a
distribution by a holder to its partners or beneficial owners, or a transfer to
a related party of such holder (as defined in Sections 267, 707, 318 and/or 4946
of the Internal Revenue Code of 1986) or (2) any person acquires, or offers to
acquire, beneficial ownership of 30% or more of the outstanding shares of common
stock. After January 1, 2004, the board of directors may elect to convert any
outstanding shares of restricted common stock into shares of common stock.
Except as otherwise described above, the restricted common stock shall have all
the rights of the common stock.
Subject to the rights of any then outstanding shares of preferred stock,
the holders of the common stock are entitled to such dividends as may be
declared in the discretion of the board of directors out of funds legally
available therefor. See "Dividend Policy." Holders of common stock are entitled
to share ratably in the net assets of RV Centers upon liquidation after payment
or provision for all liabilities and any preferential liquidation rights of any
preferred stock then outstanding. The holders of common stock have no preemptive
rights to purchase shares of stock of RV Centers. Shares of common stock are not
subject to any redemption provisions and are not convertible into any other
securities of RV Centers. All outstanding shares of common stock are fully paid
and nonassessable.
PREFERRED STOCK
The preferred stock may be issued from time to time by the board of
directors as shares of one or more classes or series. Subject to the provisions
of RV Centers' Certificate of Incorporation and limitations prescribed by law,
the board of directors is expressly authorized to adopt resolutions to issue the
shares, to fix the number of shares and to change the number of shares
constituting any series, and to provide for or
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change the voting powers, designations, preferences and relative, participating,
optional or other special rights, qualifications, limitations or restrictions
thereof, including dividend rights (including whether dividends are cumulative),
dividend rates, terms of redemption (including sinking fund provisions),
redemption prices, conversion rights and liquidation preferences of the shares
constituting any class or series of the preferred stock, in each case without
any further action or vote by the stockholders. RV Centers has no current plans
to issue any shares of preferred stock of any class or series.
One of the effects of undesignated preferred stock may be to enable the
board of directors to render more difficult or to discourage an attempt to
obtain control of RV Centers by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of RV Centers' management.
The issuance of shares of preferred stock pursuant to the board of directors'
authority described above may adversely affect the rights of the holders of
common stock. For example, preferred stock issued by RV Centers may rank prior
to the common stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of common
stock. Accordingly, the issuance of shares of preferred stock may discourage
bids for the common stock at a premium or may otherwise adversely affect the
market price of the common stock.
STATUTORY BUSINESS COMBINATION PROVISION
RV Centers is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Section 203 provides, with certain
exceptions, that a Delaware corporation may not engage in any of a broad range
of business combinations with a person or an affiliate, or an associate of such
person, who is an "interested stockholder" for a period of three years from the
date that such person became an interested stockholder unless:
(1) the transaction resulting in a person becoming an interested
stockholder, or the business combination, is approved by the board of
directors of the corporation before the person becomes an interested
stockholder;
(2) the interested stockholder acquired 85% or more of the outstanding
voting stock of the corporation in the same transaction that makes
such person an interested stockholder (excluding shares owned by
persons who are both officers and directors of the corporation, and
shares held by certain employee stock ownership plans); or
(3) on or after the date the person becomes an interested stockholder,
the business combination is approved by the corporation's board of
directors and by the holders of at least 66% of the corporation's
outstanding voting stock at an annual or special meeting, excluding
shares owned by the interested stockholder.
Under Section 203, an "interested stockholder" is defined as any person who
is (1) the owner of 15% or more of the outstanding voting stock of the
corporation or (2) an affiliate or associate of the corporation and who was the
owner of 15% or more of the outstanding voting stock of the corporation at any
time within the three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested stockholder.
A corporation may, by action of its stockholders, adopt an amendment to its
certificate of incorporation or bylaws to exclude itself from the coverage of
Section 203. RV Centers has not adopted such an amendment to its Certificate of
Incorporation or Bylaws.
LIMITATION ON DIRECTORS' LIABILITIES
Pursuant to RV Centers' Certificate of Incorporation and under Delaware
law, directors of RV Centers are not liable to RV Centers or its stockholders
for monetary damages for breach of fiduciary duty, except for liability in
connection with a breach of the duty of loyalty, for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, for dividend payments or stock repurchases illegal under Delaware law or
any transaction in which a director has derived an
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improper personal benefit. RV Centers intends to enter into indemnification
agreements with its directors and executive officers which indemnify such
persons to the fullest extent permitted by its Certificate of Incorporation, its
Bylaws and the Delaware General Corporation Law. We intend to obtain directors'
and officers' liability insurance.
CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
RV Centers' Certificate of Incorporation and Bylaws include provisions that
may have the effect of discouraging, delaying or preventing a change in control
of RV Centers or an unsolicited acquisition proposal that a stockholder might
consider favorable, including a proposal that might result in the payment of a
premium over the market price for the shares held by stockholders. These
provisions are summarized in the following paragraphs.
Supermajority Voting. The Certificate of Incorporation requires the
approval of the holders of at least 75% of the then outstanding shares of RV
Centers' capital stock entitled to vote thereon on, among other things, certain
amendments to the Certificate of Incorporation. The board of directors may
amend, alter, change or repeal any bylaws without the assent or vote of the
stockholders, but any bylaws made by the board of directors may be altered,
amended or repealed upon the affirmative vote of at least 66 2/3% of the stock
entitled to vote thereon.
Authorized but Unissued or Undesignated Capital Stock. RV Centers'
authorized capital stock consists of 30,000,000 shares of common stock,
1,000,000 shares of restricted common stock and 5,000,000 shares of preferred
stock. After the offering, RV Centers will have outstanding shares of
common stock and restricted common stock (assuming the Underwriters'
over-allotment option is not exercised). The authorized but unissued (and in the
case of preferred stock, undesignated) stock may be issued by the board of
directors in one or more transactions. In this regard, RV Centers' Certificate
of Incorporation grants the board of directors broad power to establish the
rights and preferences of authorized and unissued preferred stock. The issuance
of shares of preferred stock pursuant to the board of directors' authority
described above could decrease the amount of earnings and assets available for
distribution to holders of common stock and adversely affect the rights and
powers, including voting rights, of such holders and may also have the effect of
delaying, deferring or preventing a change in control of RV Centers. The board
of directors does not currently intend to seek stockholder approval prior to any
issuance of preferred stock, unless otherwise required by law.
Special Meeting of Stockholders. The Certificate of Incorporation and
Bylaws provide that special meetings of stockholders of RV Centers may only be
called by the Chairman of the board of directors upon the written request of the
board of directors pursuant to a resolution approved by a majority of the whole
board of directors.
Stockholder Action by Written Consent. The Certificate of Incorporation and
Bylaws generally provide that any action required or permitted by the
stockholders of RV Centers must be effected at a duly called annual or special
meeting of the stockholders and may not be effected by any written consent of
the stockholders.
Notice Procedures. The Bylaws establish advance notice procedures with
regard to stockholder proposals relating to the nomination of candidates for
election as director, the removal of directors and amendments to the Certificate
of Incorporation or Bylaws to be brought before annual meetings of stockholders
of RV Centers. These procedures provide that notice of such stockholder
proposals must be timely given in writing to the Secretary of RV Centers prior
to the annual meeting. Generally, to be timely, notice must be received at the
principal executive offices of RV Centers not less than 80 days prior to an
annual meeting (or if fewer than 90 days' notice or prior public disclosure of
the date of the annual meeting is given or made by RV Centers, not later than
the tenth day following the date on which the notice of the date of the annual
meeting was mailed or such public disclosure was made). The notice must contain
certain information specified in the Bylaws, including a brief description of
the business desired to be brought before the annual meeting and certain
information concerning the stockholder submitting the proposal.
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TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock will be .
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SHARES ELIGIBLE FOR FUTURE SALE
The market price of the common stock could be adversely affected by the
sale of substantial amounts of common stock in the public market. Upon
consummation of the offering there will be shares of common stock
issued and outstanding. All of the shares sold in the offering,
except for shares acquired by affiliates of RV Centers, will be freely
tradeable.
Simultaneously with the closing of the offering, the stockholders of the
founding companies will receive, in the aggregate, 3,780,100 shares of common
stock as a portion of the consideration for their businesses. Certain other
stockholders of RV Centers will hold, in the aggregate, an additional 1,968,561
shares of common stock. None of these 5,748,661 shares were issued in a
transaction registered under the Securities Act, and, accordingly, such shares
may not be sold except in transactions registered under the Securities Act or
pursuant to an exemption from registration, including the exemption contained in
Rule 144 under the Securities Act. An additional 41,000 shares may be issued in
an unregistered transaction to the stockholder of American RV one year after the
consummation of the offering.
In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, who has beneficially owned his or her shares for at
least one year, or a person who may be deemed an "affiliate" of RV Centers who
has beneficially owned shares for at least one year, would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of the common stock or the average
weekly trading volume of the common stock during the four calendar weeks
preceding the date on which notice of the proposed sale is sent to the
Securities and Exchange Commission. Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about RV Centers. A person who is not deemed to have
been an affiliate of RV Centers at any time for 90 days preceding a sale and who
has beneficially owned his shares for at least two years would be entitled to
sell such shares under Rule 144 without regard to the volume limitations, manner
of sale provisions, notice requirements or the availability of current public
information about RV Centers.
RV Centers expects to authorize the issuance of up to the greater of (a)
1,500,000 shares or (b) 15% of the total outstanding shares of common stock of
its common stock in accordance with the terms of the 1999 Stock Option Plan. RV
Centers has granted options to purchase 415,139 shares to certain executive
officers. It is anticipated that, upon closing of the offering, RV Centers will
grant options to purchase approximately 325,000 shares of common stock to
certain employees of the founding companies and three non-employee directors. RV
Centers intends to file a registration statement on Form S-8 under the
Securities Act registering the issuance of shares upon exercise of options
granted under the 1999 Stock Option Plan. As a result, such shares will be
eligible for resale in the public market.
RV Centers currently intends to file a registration statement within 90
days of the offering covering 3,000,000 additional shares of common stock under
the Securities Act for its use in connection with future acquisitions. These
shares generally will be freely tradeable after their issuance by persons not
affiliated with RV Centers unless their resale is contractually restricted by RV
Centers.
RV Centers will agree that it will not sell or offer any shares of common
stock or options, rights or warrants to acquire any common stock for a period of
approximately 180 days after the date of this prospectus without the prior
written consent of the underwriters of RV Centers' initial public offering,
subject to certain exceptions. Further, RV Centers' directors, officers and
certain stockholders are also expected to agree not to directly or indirectly
sell or offer for sale or otherwise dispose of any common stock for a period of
180 days after the date of this prospectus without the prior written consent of
such underwriters. Each of the founding company stockholders has agreed not to
directly or indirectly sell or offer for sale or otherwise dispose of 80% of the
shares of common stock received in the Acquisitions for a period of two years
from the date of the Acquisitions and 20% of the shares of common stock received
in the Acquisitions for a period of one year from the date of the Acquisitions.
The executive officers of RV Centers and the principals of BKF have each agreed
not to directly or indirectly sell or offer for sale or otherwise dispose of 60%
of the shares of common stock purchased prior to the consummation of the
offering for a period of two years from the date of the Acquisitions, and 15% of
the shares of common
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stock purchased prior to the consummation of the offering for a period of one
year from the date of the Acquisitions.
Prior to RV Centers' initial public offering, there will be no established
trading market for the common stock, and no predictions can be made as to the
effect that sales of common stock under Rule 144, pursuant to a registration
statement, or otherwise, or the availability of shares of common stock for sale,
will have on the market price prevailing from time to time. Sales of substantial
amounts of common stock in the public market, or the perception that such sales
could occur, could depress the prevailing market price. Such sales may also make
it more difficult for RV Centers to issue or sell equity securities or
equity-related securities in the future at a time and price that it deems
appropriate. See "Risk Factors -- There Are A Number of Shares Eligible for
Future Sale Which May Affect the Price of Our Common Stock."
The former stockholders of the founding companies are entitled to certain
rights with respect to the registration of their shares of common stock under
the Securities Act. If RV Centers proposes to register any of its securities
under the Securities Act while the shares of such stockholders are subject to
the resale restrictions of Rule 144, such stockholders are entitled to notice of
such registration and are entitled to include, at RV Centers' expense, all or a
portion of their shares therein, subject to certain conditions and potential
limitations. These registration rights will not apply to the registration
statement RV Centers intends to file for use in future acquisitions.
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UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), J.C.
Bradford & Co., and Sanders Morris Mundy, Inc., are acting as representatives
(the "Representatives") of each of the underwriters named below (the
"Underwriters"). Subject to the terms and conditions set forth in a purchase
agreement (the "Purchase Agreement") among RV Centers and the Underwriters, RV
Centers has agreed to sell to the Underwriters and the Underwriters have
severally agreed to purchase from RV Centers the number of shares of common
stock set forth below opposite their respective names, at the initial public
offering price less the underwriting discount set forth on the cover page of
this prospectus.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
J.C. Bradford & Co. ........................................
Sanders Morris Mundy, Inc...................................
----------
Total..........................................
==========
</TABLE>
The several Underwriters have agreed, subject to the terms and conditions
set forth in the Purchase Agreement, to purchase all of the shares of common
stock being sold pursuant to such agreement if any of the shares being sold
pursuant to such agreement are purchased. In the event of a default by an
Underwriter, the Purchase Agreement provides that, in certain circumstances, the
purchase commitments of the nondefaulting Underwriters may be increased or the
Purchase Agreement may be terminated.
The shares of common stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.
The Representatives have advised RV Centers that the Underwriters propose
initially to offer the shares of common stock to the public at the public
offering price set forth on the cover page of this prospectus, and to certain
dealers at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may re-allow, a discount not in excess
of $ per share on sales to certain other dealers. After the initial public
offering, the public price, concession and discount may be changed by the
Representatives.
RV Centers has granted the Underwriters an option, exercisable by the
Representatives, to purchase up to additional shares of common stock
at the initial public offering price set forth on the cover page of this
prospectus, less the underwriting discount. Such option, which expires 30 days
after the date of this prospectus, may be exercised solely to cover
over-allotments. To the extent that the Representatives exercise such option,
each of the Underwriters will have a firm commitment, subject to certain
conditions, to purchase approximately the same percentage of the option shares
that the number of shares to be purchased initially by that Underwriter bears to
the total number of shares to be purchased initially by the Underwriters.
RV Centers' executive officers and directors holding beneficially
shares of common stock prior to the offering have agreed that during the 180-day
period following the date of the prospectus, (the "Lock-up Period") they will
not (a) directly or indirectly, offer, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant for the sale of, or otherwise dispose of or transfer
any shares of common stock or any securities convertible into or exchangeable or
exercisable for common stock or file any registration statement under the
Securities Act with respect to any of the foregoing or (b) enter into any swap
or any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the common
stock or any securities convertible into or exercisable or exchangeable for
common stock whether any such swap or transaction described in clause (a) or (b)
above is to be settled by delivery of common
72
<PAGE> 77
stock or such other securities, in cash or otherwise, without the prior written
consent of Merrill Lynch, on behalf of the Underwriters.
RV Centers has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act or to
contribute to payments the Underwriters may be required to make in respect
thereof.
Until the distribution of the common stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the common stock. As an exception to these
rules, the Underwriters are permitted to engage in certain transactions that
stabilize the price of the common stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
common stock.
The Underwriters may create a short position for the account of the
Underwriters by selling more common stock in connection with the offering than
they are committed to purchase from RV Centers and, in such case, may purchase
common stock in the open market following the completion of the offering to
cover all or a portion of such short position. In addition, the Underwriters may
cover all or a portion of such short position, up to shares of common
stock, by exercising the Underwriters' over-allotment option referred to above.
Merrill Lynch, on behalf of the Underwriters, may also impose "penalty bids"
under contractual arrangements with the Underwriters whereby it may reclaim from
an Underwriter or other selling group member, for the account of the
Underwriters, the selling concession with respect to the common stock that is
distributed in the offering but subsequently purchased for the account of the
Underwriters in the open market.
In general, purchases of a security for the purpose of price stabilization
or to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an affect on the price of a security to the extent that it
were to discourage resales of the security.
Neither RV Centers nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
RV Centers nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
RV Centers intends to file an application to list its common stock on the
NYSE under the symbol "RVC."
Prior to the offering, there has been no established public market for RV
Centers' common stock. Consequently, the initial public offering price for the
common stock will be determined by negotiations between RV Centers and the
Representatives. Among the factors to be considered in such negotiations will be
the operating histories of the founding companies viewed on a combined basis,
the prospects for RV Centers and the industry in which it competes, the
prospects for future earnings of RV Centers, an assessment of RV Centers'
management, the general condition of the economy and the securities markets at
the time of the offering and the market prices of and demand for publicly traded
common stock of comparable companies. There can be no assurance that an active
trading market will develop for the common stock or that the common stock will
trade in the public market subsequent to the offerings at or above the initial
public offering price.
At the request of RV Centers, the Underwriters have reserved up to
shares of common stock for sale, at the initial public offering price, to
certain directors, officers, employees, and business associates of, and certain
other persons designated by, RV Centers who have expressed an interest in
purchasing such shares of common stock. The number of shares of common stock
available for sale to the general public in the offering will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares which are
not so purchased will be offered by the Underwriters to the general public on
the same basis as the other shares offered hereby.
The Underwriters have informed RV Centers that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
73
<PAGE> 78
LEGAL MATTERS
Certain legal matters in connection with the common stock being offered
hereby will be passed upon for RV Centers by Andrews & Kurth L.L.P., Houston,
Texas and for the Underwriters by Vinson & Elkins L.L.P., Houston, Texas
EXPERTS
The following financial statements appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing:
- the financial statements of RV Centers, Inc. as of September 30, 1998 and
for the period of inception (May 8, 1998) through September 30, 1998;
- the financial statements of Ace Fogdall, Inc. as of December 31, 1997 and
for the year ended December 31, 1997;
- the combined financial statements of American RV Centers, Inc., as of
December 31, 1996 and 1997 and for the years ended December 31, 1996 and
1997;
- the financial statements of Casey Motors, Inc. (d.b.a. Casey's
Recreational Sales, Inc.) as of December 31, 1996 and 1997 and for the
years ended December 31, 1995, 1996 and 1997;
- the financial statements of County Line Select Cars, Inc. as of December
31, 1996 and 1997 and for the years ended December 31, 1995, 1996 and
1997;
- the financial statements of Dusty's Camper World of Bartow, Inc. as of
December 31, 1996 and 1997 and for the years ended December 31, 1995,
1996 and 1997;
- the financial statements of Emerald Coast RV Center, Inc. as of December
31, 1996 and 1997 and for the years ended December 31, 1995, 1996 and
1997;
- the financial statements of Hall Enterprises, Inc. as of December 31,
1996 and 1997 and for the years ended December 31, 1995, 1996 and 1997;
- the financial statements of Little Valley Auto & RV Sales, Inc. as of
December 31, 1996 and 1997 and for the years ended December 31, 1996 and
1997;
- the financial statements of Growth Ventures, Inc. (d.b.a. Marshall's
Traveland) as of December 31, 1997 and for the year ended December 31,
1997;
- the financial statements of RV's Northwest, Inc. as of December 31, 1997
and for the year ended December 31, 1997;
- the financial statements of Saddleback RVs, Inc. as of December 31, 1996
and 1997 and for the years ended December 31, 1995, 1996 and 1997;
- the financial statements of Scott Motor Coach, Inc. as of December 31,
1996 and 1997 and for the years ended December 31, 1996 and 1997;
- the financial statements of Stoltzfus Trailer Sales, Inc. as of October
31, 1996 and 1997 and for the years ended October 31, 1996 and 1997; and
- the financial statements of Roy B. Padgett (d.b.a. Young's RV Center) as
of December 31, 1997 and for the year ended December 31, 1997.
74
<PAGE> 79
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a Registration Statement on Form S-1
under the Securities Act with respect to the common stock offered hereby. This
prospectus, filed as part of the Registration Statement, omits certain
information contained in the Registration Statement, in accordance with the
rules and regulations of the Commission. For further information with respect to
RV Centers and the common stock offered hereby, reference is made to the
Registration Statement including the exhibits and schedules thereto. Statements
made in the prospectus as to the contents of any document are not necessarily
complete and, in each instance, reference is made to a copy of such document
filed as an exhibit to the Registration Statement, and each such statement shall
be deemed qualified in its entirety by such reference. The Registration
Statement and the exhibits thereto may be inspected, without charge, at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices at Citicorp Center, 500 West Madison Street, Room 1400,
Chicago, IL 60661, and 7 World Trade Center, Suite 1300, New York, NY 10048 or
on the Internet at http://www.sec.gov. Copies of such materials can also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
RV Centers intends to furnish its stockholders with annual reports
containing audited financial statements examined by an independent public
accounting firm for each fiscal year.
75
<PAGE> 80
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
RV CENTERS, INC. AND FOUNDING COMPANIES UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
Introduction to Unaudited Pro Forma Combined Financial
Statements............................................. F-4
Unaudited Pro Forma Combined Balance Sheet................ F-5
Unaudited Pro Forma Combined Statements of Operations..... F-7
Notes to Unaudited Pro Forma Combined Financial
Statements............................................. F-11
RV CENTERS, INC.
Balance Sheets............................................ F-14
Statements of Operations.................................. F-15
Statements of Shareholders' Equity........................ F-16
Statements of Cash Flows.................................. F-17
Notes to Financial Statements............................. F-18
FOUNDING COMPANIES
COUNTY LINE SELECT CARS, INC.
Report of Independent Auditors............................ F-20
Balance Sheets............................................ F-21
Statements of Operations.................................. F-22
Statements of Shareholders' Equity........................ F-23
Statements of Cash Flows.................................. F-24
Notes to Financial Statements............................. F-25
SADDLEBACK RECREATIONAL VEHICLES, INC.
Report of Independent Auditors............................ F-29
Balance Sheets............................................ F-30
Statements of Operations.................................. F-31
Statements of Shareholder's Equity........................ F-32
Statements of Cash Flows.................................. F-33
Notes to Financial Statements............................. F-34
EMERALD COAST RV CENTER, INC.
Report of Independent Auditors............................ F-38
Balance Sheets............................................ F-39
Statements of Operations.................................. F-40
Statements of Shareholder's Equity........................ F-41
Statements of Cash Flows.................................. F-42
Notes to Financial Statements............................. F-43
CASEY MOTORS, INC.
D/B/A CASEY'S RECREATIONAL SALES
Report of Independent Auditors............................ F-48
Balance Sheets............................................ F-49
Statements of Operations.................................. F-50
Statements of Shareholder's Equity........................ F-51
Statements of Cash Flows.................................. F-52
Notes to Financial Statements............................. F-53
</TABLE>
F-1
<PAGE> 81
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
STOLTZFUS TRAILER SALES, INC.
Report of Independent Auditors............................ F-56
Balance Sheets............................................ F-57
Statements of Operations.................................. F-58
Statements of Shareholders' Equity........................ F-59
Statements of Cash Flows.................................. F-60
Notes to Financial Statements............................. F-61
DUSTY'S CAMPER WORLD OF BARTOW, INC.
Report of Independent Auditors............................ F-66
Balance Sheets............................................ F-67
Statements of Operations.................................. F-68
Statements of Shareholders' Equity........................ F-69
Statements of Cash Flows.................................. F-70
Notes to Financial Statements............................. F-71
HALL ENTERPRISES, INC.
Report of Independent Auditors............................ F-75
Balance Sheets............................................ F-76
Statements of Operations.................................. F-77
Statements of Shareholders' Deficit....................... F-78
Statements of Cash Flows.................................. F-79
Notes to Financial Statements............................. F-80
SCOTT MOTOR COACH SALES, INC.
Report of Independent Auditors............................ F-84
Balance Sheets............................................ F-85
Statements of Operations.................................. F-86
Statements of Shareholder's Equity........................ F-87
Statements of Cash Flows.................................. F-88
Notes to Financial Statements............................. F-89
AMERICAN RV CENTERS, INC.
Report of Independent Auditors............................ F-94
Combined Balance Sheets................................... F-95
Combined Statements of Operations......................... F-96
Combined Statements of Shareholders' Equity............... F-97
Combined Statements of Cash Flows......................... F-98
Notes to Combined Financial Statements.................... F-99
ROY B. PADGETT D/B/A YOUNG'S RV CENTER
Report of Independent Auditors............................ F-103
Balance Sheets............................................ F-104
Statements of Operations.................................. F-105
Statements of Owner's Equity.............................. F-106
Statements of Cash Flows.................................. F-107
Notes to Financial Statements............................. F-108
RV'S NORTHWEST, INC.
Report of Independent Auditors............................ F-111
Balance Sheets............................................ F-112
Statements of Operations.................................. F-113
Statements of Shareholders' Equity........................ F-114
Statements of Cash Flows.................................. F-115
Notes to Financial Statements............................. F-116
</TABLE>
F-2
<PAGE> 82
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
LITTLE VALLEY AUTO & RV SALES, INC.
Report of Independent Auditors............................ F-120
Balance Sheets............................................ F-121
Statements of Operations.................................. F-122
Statements of Shareholders' Equity........................ F-123
Statements of Cash Flows.................................. F-124
Notes to Financial Statements............................. F-125
GROWTH VENTURES, INC. D/B/A MARSHALL'S TRAVELAND
Report of Independent Auditors............................ F-130
Balance Sheets............................................ F-131
Statements of Operations.................................. F-132
Statements of Shareholder's Equity........................ F-133
Statements of Cash Flows.................................. F-134
Notes to Financial Statements............................. F-135
ACE FOGDALL, INC.
Report of Independent Auditors............................ F-138
Balance Sheets............................................ F-139
Statements of Operations.................................. F-140
Statements of Shareholders' Equity........................ F-141
Statements of Cash Flows.................................. F-142
Notes to Financial Statements............................. F-143
</TABLE>
F-3
<PAGE> 83
RV CENTERS, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give effect
to the acquisition by RV Centers, Inc. ("RV Centers"), of the outstanding
capital stock of (a) County Line Select Cars, Inc., (b) Saddleback Recreational
Vehicles, Inc., (c) Emerald Coast RV Center, Inc., (d) Casey Motors, Inc. d/b/a
Casey's Recreational Sales, (e) Stoltzfus Trailer Sales, Inc., (f) Dusty's
Camper World of Bartow, Inc., (g) Hall Enterprises, Inc., (h) Scott Motor Coach,
Inc., (i) American RV Centers, Inc., (j) RV's Northwest, Inc., (k) Little Valley
Auto & RV Sales, Inc., (l) Growth Ventures Inc. d/b/a Marshall's Traveland, and
(m) Ace Fogdall, Inc., and give effect to the acquisition by RV Centers of all
the operating assets and the business of Roy B. Padgett d/b/a Young's RV Center
(together, the "Founding Companies"). RV Centers and the Founding Companies are
hereinafter referred to as the "Company." These acquisitions (the
"Acquisitions") will occur simultaneously with the closing of RV Centers'
initial public offering (the "Offering") and will be accounted for using the
purchase method of accounting. RV Centers has been identified as the accounting
acquiror.
These unaudited pro forma combined financial statements are based on the
historical financial statements of RV Centers and the Founding Companies
included elsewhere in the Prospectus. The unaudited pro forma combined balance
sheet gives effect to the Acquisitions and the Offering as if they had occurred
on September 30, 1998. The unaudited pro forma combined statements of operations
give effect to these transactions as if they were consummated as of the
beginning of each of the periods presented.
To the extent the owners and certain key employees of the Founding
Companies have agreed prospectively to reductions in salary, bonuses, benefits,
and rent expense paid to the owners, these reductions have been reflected in the
unaudited pro forma combined statements of operations. The Company expects that
revenue will be increased and cost savings will be realized by consolidating
certain operational and general and administrative functions. The Company has
not and cannot quantify these revenue increases or cost savings until completion
of the combination of the Founding Companies. It is anticipated that these
savings will be offset somewhat by the costs of being a publicly-held company
and the incremental increase in costs related to the Company's corporate
management. However, these costs, like the savings that they offset, cannot be
estimated at this time. Neither the anticipated increased revenues, the cost
savings, nor the anticipated corporate costs, except for salaries of corporate
management, have been included in the unaudited pro forma combined financial
information.
The pro forma adjustments are based on preliminary estimates and certain
assumptions and may be revised as additional information becomes available. The
unaudited pro forma financial data does not purport to represent what the
Company's financial position or results of operations would actually have been
if such transactions in fact had occurred on those dates and is not
representative of the Company's financial position or results of operations for
any future period. Since the Founding Companies were not under common control or
management, historical combined results may not be comparable to, or indicative
of, future performance. The unaudited pro forma combined financial statements
should be read in conjunction with the other financial statements and notes
thereto included elsewhere in this Prospectus. See "Risk Factors" included
elsewhere herein.
F-4
<PAGE> 84
RV CENTERS, INC.
PRO FORMA COMBINED BALANCE SHEET -- UNAUDITED
SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
RV CENTERS, COUNTY LINE SADDLEBACK EMERALD COAST CASEY'S RECR.
INC. SELECT CARS, INC. RV RV CENTER, INC. SALES, INC.
----------- ----------------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.................... $ 161,161 $ 646,917 $ 121,987 $ 1,019,896 $ 792,998
Accounts receivable.......................... -- 366,640 459,341 150,221 6,954
Due from shareholders/affiliates............. -- -- 83,994 288,924 --
Inventories.................................. -- 10,787,048 7,592,158 8,608,818 4,107,984
Prepaid expenses and other................... -- 118,363 56,906 19,456 45,039
----------- ----------- ---------- ----------- ----------
Total current assets................... 161,161 11,918,968 8,314,386 10,087,315 4,952,975
Property and equipment, net.................. -- 484,479 511,226 1,431,684 51,246
Goodwill..................................... -- -- -- -- --
Deferred financing costs..................... 1,326,112 -- -- -- --
Cash value of life insurance/other
securities................................. -- -- 50,988 -- --
Other assets, net............................ -- -- 49,855 -- --
----------- ----------- ---------- ----------- ----------
Total Assets........................... $1,487,273 $12,403,447 $8,926,455 $11,518,999 $5,004,221
=========== =========== ========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable..................... $ -- $ 7,893,677 $7,263,640 $ 6,976,900 $3,477,668
Current maturities of long-term debt......... -- 75,000 -- 181,000 --
Due to shareholders/affiliates............... 1,431,450 1,164,094 -- -- --
Accounts payable............................. -- 735,081 522,672 917,224 59,551
Accrued liabilities and other................ 55,812 453,621 347,501 223,387 178,743
----------- ----------- ---------- ----------- ----------
Total current liabilities.............. 1,487,262 10,321,473 8,133,813 8,298,511 3,715,962
Long-term debt............................... -- 21,877 -- 14,653 --
Deferred income taxes........................ -- -- -- -- --
Due to shareholders/affiliates............... -- -- -- 317,500 --
----------- ----------- ---------- ----------- ----------
Total Liabilities...................... 1,487,262 10,343,350 8,133,813 8,630,664 3,715,962
Shareholders' equity:
Common stock................................. 14,731 200 200,000 500 1,000
Paid-in capital in excess of par............. 1,337,819 400 -- -- --
Treasury stock............................... -- -- -- -- --
Retained earnings/Owner's equity............. 1,352,539 2,059,497 592,642 2,887,835 1,287,259
----------- ----------- ---------- ----------- ----------
Total Shareholders' Equity............. 11 2,060,097 592,642 792,642 1,288,259
----------- ----------- ---------- ----------- ----------
Total Liabilities and Shareholders'
Equity................................ $1,487,273 $12,403,447 $8,926,455 $11,518,999 $5,004,221
=========== =========== ========== =========== ==========
<CAPTION>
STOLTZFUS TRAILER DUSTY'S HALL ENTER- SCOTT MOTOR AMERICAN RV
SALES, INC. CAMPERS PRISES, INC. COACH SALES, INC. CENTERS, INC.
----------------- ---------- ------------ ----------------- -------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.................... $ 197,598 $ 348,474 $ 397,619 $ 974,200 $ 150,532
Accounts receivable.......................... 0 27,746 90,295 48,808 79,706
Due from shareholders/affiliates............. 60,402 -- -- -- --
Inventories.................................. 4,039,888 4,254,966 2,146,342 3,945,152 3,425,644
Prepaid expenses and other................... 38,378 39,200 21,856 50,424 --
---------- ---------- ---------- ---------- ----------
Total current assets................... 4,336,266 4,670,386 2,656,112 5,018,584 3,655,882
Property and equipment, net.................. 397,041 210,572 1,051,354 228,669 67,166
Goodwill..................................... -- -- -- --
Deferred financing costs..................... -- -- -- -- --
Cash value of life insurance/other
securities................................. -- -- -- -- --
Other assets, net............................ 52,917 717 69,558 9,652 19,480
---------- ---------- ---------- ---------- ----------
Total Assets........................... $4,786,224 $4,881,675 $3,777,024 $5,256,905 $3,742,528
========== ========== ========== ========== ==========
L LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable..................... $2,804,874 $3,450,663 $2,812,096 $3,343,894 $2,696,285
Current maturities of long-term debt......... -- -- -- -- 50,025
Due to shareholders/affiliates............... 855,646 -- 81,138 49,546 --
Accounts payable............................. 111,893 52,665 82,305 250,206 27,359
Accrued liabilities and other................ 276,119 210,199 177,132 404,577 406,816
---------- ---------- ---------- ---------- ----------
Total current liabilities.............. 4,048,532 3,713,527 3,152,671 4,048,133 3,180,485
Long-term debt............................... -- -- 562,259 -- --
Deferred income taxes........................ -- 165,709 -- 67,128 --
Due to shareholders/affiliates............... -- -- 140,000 237,083 300,300
---------- ---------- ---------- ---------- ----------
Total Liabilities...................... 4,048,532 3,879,236 3,854,930 4,352,344 3,480,785
Shareholders' equity:
Common stock................................. 40,000 12,000 331,000 1,000 9,000
Paid-in capital in excess of par............. 3,347 (9,792) -- -- --
Treasury stock............................... (63,365) -- -- -- --
Retained earnings/Owner's equity............. 757,710 1,000,231 (408,906) 903,561 252,743
---------- ---------- ---------- ---------- ----------
Total Shareholders' Equity............. 737,692 1,002,439 (77,906) 904,561 261,743
---------- ---------- ---------- ---------- ----------
Total Liabilities and Shareholders'
Equity................................ $4,786,224 $4,881,675 $3,777,024 $5,256,905 $3,742,528
========== ========== ========== ========== ==========
</TABLE>
F-5
<PAGE> 85
RV CENTERS, INC.
PRO FORMA COMBINED BALANCE SHEET -- UNAUDITED
SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
YOUNG'S RV RV'S NORTH- LITTLE VALLEY MARSHALL'S ACE FOGDALL, RV CENTERS
CENTER WEST, INC. RV TRAVELAND INC. SUB-TOTAL
---------- ----------- ------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........ $ 646,127 $ 31,070 $ 78,118 $ 269,288 $1,074,152 $ 6,910,137
Accounts receivable.............. 74,247 64,926 227,087 68,147 322,341 1,986,459
Due from
shareholders/affiliates........ -- -- -- -- -- 433,320
Inventories...................... 3,237,895 3,756,628 3,180,210 2,080,507 1,411,993 62,575,233
Prepaid expenses and other....... 48,466 54,266 11,984 22,173 -- 526,511
---------- ---------- ---------- ---------- ---------- -----------
Total current assets....... 4,006,735 3,906,890 3,497,399 2,440,115 2,808,486 72,431,660
Property and equipment, net...... 173,251 76,287 270,285 79,453 55,440 5,088,153
Goodwill......................... -- -- -- -- -- --
Deferred financing costs......... -- -- -- -- -- 1,326,112
Cash value of life
insurance/other securities..... -- -- -- -- 157,428 208,416
Other assets, net................ -- -- 1,023,214 50 -- 1,225,443
---------- ---------- ---------- ---------- ---------- -----------
Total Assets............... $4,179,986 $3,983,177 $4,790,898 $2,519,618 $3,021,354 $80,279,784
========== ========== ========== ========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable......... $2,304,697 $3,133,328 $2,218,862 $1,530,142 $ -- $49,906,726
Current maturities of long-term
debt........................... -- -- 90,593 24,624 -- 421,242
Due to shareholders/affiliates... -- -- -- -- -- 3,581,784
Accounts payable................. 128,965 177,006 843,403 425,660 3,010 4,337,000
Accrued liabilities and other.... 101,490 263,093 30,295 -- -- 3,128,785
---------- ---------- ---------- ---------- ---------- -----------
Total current
liabilities.............. 2,535,152 3,573,427 3,183,153 1,980,426 3,010 61,375,537
Long-term debt................... -- -- 108,209 32,653 -- 739,651
Deferred income taxes............ -- -- -- -- -- 232,837
Due to shareholders/affiliates... -- -- -- -- -- 994,883
---------- ---------- ---------- ---------- ---------- -----------
Total Liabilities.......... 2,535,152 3,573,427 3,291,362 2,013,079 3,010 63,342,908
Shareholders' equity:.............. -- -- -- -- -- --
Common stock..................... -- 50,000 5,000 -- 135,000 799,431
Paid-in capital in excess of
par............................ -- -- -- 26,376 -- 1,358,150
Treasury stock................... -- -- (155,000) -- -- (218,365)
Retained earnings/Owner's
equity......................... 1,644,834 359,750 1,649,536 480,163 2,883,344 14,997,660
---------- ---------- ---------- ---------- ---------- -----------
Total Shareholders'
Equity................... 1,644,834 409,750 1,499,536 506,539 3,018,344 16,936,876
---------- ---------- ---------- ---------- ---------- -----------
Total Liabilities and
Shareholders' Equity..... $4,179,986 $3,983,177 $4,790,898 $2,519,618 $3,021,354 $80,279,784
========== ========== ========== ========== ========== ===========
<CAPTION>
MERGER PRO FORMA OFFERING AS
ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........ $ -- $ 6,910,137 $ -- $ 6,910,137
Accounts receivable.............. -- 1,986,459 -- 1,986,459
Due from
shareholders/affiliates........ -- 433,320 -- 433,320
Inventories...................... -- 62,575,233 -- 62,575,233
Prepaid expenses and other....... -- 526,511 -- 526,511
------------ ------------ ------------ ------------
Total current assets....... -- 72,431,660 -- 72,431,660
Property and equipment, net...... -- 5,088,153 -- 5,088,153
Goodwill......................... 39,528,993 39,528,993 -- 39,528,993
Deferred financing costs......... -- 1,326,112 (1,326,112) --
Cash value of life
insurance/other securities..... -- 208,416 -- 208,416
Other assets, net................ -- 1,225,443 -- 1,225,443
------------ ------------ ------------ ------------
Total Assets............... $ 39,528,993 $119,808,777 $ (1,326,112) $118,482,665
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUIT
Current liabilities:
Floor plan notes payable......... $ -- $ 49,906,726 $(25,407,945) $ 24,498,781
Current maturities of long-term
debt........................... -- 421,242 -- 421,242
Due to shareholders/affiliates... 17,654,000 21,235,784 (21,235,784) --
Accounts payable................. -- 4,337,000 -- 4,337,000
Accrued liabilities and other.... -- 3,128,785 -- 3,128,785
------------ ------------ ------------ ------------
Total current
liabilities.............. 17,654,000 79,029,537 (46,643,729) 32,385,808
Long-term debt................... -- 739,651 -- 739,651
Deferred income taxes............ -- 232,837 -- 232,837
Due to shareholders/affiliates... -- 994,883 (994,883) --
------------ ------------ ------------ ------------
Total Liabilities.......... 17,654,000 80,996,908 (47,638,612) 33,358,296
Shareholders' equity:.............. -- -- -- --
Common stock..................... (741,944) 57,487 45,000 102,487
Paid-in capital in excess of
par............................ 37,396,232 38,754,382 46,267,500 85,021,882
Treasury stock................... 218,365 -- -- --
Retained earnings/Owner's
equity......................... (14,997,660) -- -- --
------------ ------------ ------------ ------------
Total Shareholders'
Equity................... 21,874,993 38,811,869 46,312,500 85,124,369
------------ ------------ ------------ ------------
Total Liabilities and
Shareholders' Equity..... $ 39,528,993 $119,808,777 $ (1,326,112) $118,482,665
============ ============ ============ ============
</TABLE>
F-6
<PAGE> 86
RV CENTERS, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS -- UNAUDITED
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
RV CENTERS, COUNTY LINE SADDLEBACK EMERALD COAST CASEY'S RECR. STOLTZFUS TRAILER
INC. SELECT CARS, INC. RV RV CENTER, INC. SALES, INC. SALES, INC.
----------- ----------------- ----------- --------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Vehicles................. $ -- $39,355,374 $24,628,401 $23,981,069 $18,791,484 $15,972,631
Parts and service........ -- 3,094,988 1,098,543 1,622,530 -- 2,179,837
Other, net............... -- 660,995 1,129,976 644,926 563,243 462,391
----------- ----------- ----------- ----------- ----------- -----------
-- 43,111,357 26,856,920 26,248,525 19,354,727 18,614,859
Cost of sales:
Vehicles................. -- 35,402,465 21,924,251 20,478,347 16,551,166 13,931,571
Parts and service........ -- 1,455,334 529,331 759,014 -- 1,180,047
----------- ----------- ----------- ----------- ----------- -----------
Gross profit............... -- 6,253,558 4,403,338 5,011,164 2,803,561 3,503,241
Selling, general, and
administrative
expenses................. 1,339,157 4,238,469 3,276,875 3,040,529 1,653,343 3,072,307
Goodwill amortization...... -- -- -- -- -- --
Other income (expense):
Interest expense......... -- (572,289) (511,197) (434,075) (269,892) (331,990)
Other, net............... -- -- 57,500 36,178 49,885 39,778
----------- ----------- ----------- ----------- ----------- -----------
-- (572,289) (453,697) (397,897) (220,007) (292,212)
----------- ----------- ----------- ----------- ----------- -----------
Income before taxes........ (1,339,157) 1,442,800 672,766 1,572,738 930,211 138,722
Income tax expense......... -- -- -- -- -- 51,853
----------- ----------- ----------- ----------- ----------- -----------
Net income................. $(1,339,157) $ 1,442,800 $ 672,766 $ 1,572,738 $ 930,211 $ 86,869
=========== =========== =========== =========== =========== ===========
Net income per share.......
Shares used in computing
net income per share.....
<CAPTION>
DUSTY'S HALL ENTER- SCOTT MOTOR AMERICAN RV
CAMPERS PRISES, INC. COACH SALES, INC. CENTERS, INC.
----------- ------------ ----------------- -------------
<S> <C> <C> <C> <C>
Revenue
Vehicles................. $16,354,009 $11,114,676 $10,355,474 $ 9,848,104
Parts and service........ 1,118,975 507,673 820,819 733,745
Other, net............... 558,924 320,204 572,099 612,703
----------- ----------- ----------- -----------
18,031,908 11,942,553 11,748,392 11,194,552
Cost of sales:
Vehicles................. 14,904,065 9,292,617 8,899,333 8,373,748
Parts and service........ 484,128 377,376 425,364 436,463
----------- ----------- ----------- -----------
Gross profit............... 2,643,715 2,272,560 2,423,695 2,384,341
Selling, general, and
administrative
expenses................. 1,946,110 1,392,335 1,837,231 2,154,228
Goodwill amortization...... -- -- -- --
Other income (expense):
Interest expense......... (178,988) (370,921) (258,010) (238,301)
Other, net............... 17,339 3,209 53,683 39,468
----------- ----------- ----------- -----------
(161,649) (367,712) (204,327) (198,833)
----------- ----------- ----------- -----------
Income before taxes........ 535,956 512,513 382,137 31,280
Income tax expense......... 202,491 -- 155,366 5,000
----------- ----------- ----------- -----------
Net income................. $ 333,465 $ 512,513 $ 226,771 $ 26,280
=========== =========== =========== ===========
Net income per share.......
Shares used in computing
net income per share.....
</TABLE>
F-7
<PAGE> 87
RV CENTERS, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS -- UNAUDITED
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
YOUNG'S RV RV'S NORTH- LITTLE VALLEY MARSHALL'S ACE FOGDALL, RV CENTER
CENTER WEST, INC. RV TRAVELAND INC. SUB-TOTAL
----------- ----------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Vehicles........................ $ 8,583,036 $ 9,328,421 $8,412,098 $6,865,482 $6,016,289 $209,606,548
Parts and service............... 2,043,648 710,353 359,656 797,094 645,881 15,733,742
Other, net...................... 354,467 140,780 181,512 205,261 76,170 6,483,651
----------- ----------- ---------- ---------- ---------- ------------
10,981,151 10,179,554 8,953,266 7,867,837 6,738,340 231,823,941
Cost of sales:
Vehicles........................ 7,553,344 7,942,132 7,103,588 5,936,390 4,685,080 182,978,097
Parts and service............... 1,014,469 443,374 258,256 537,419 276,051 8,176,626
----------- ----------- ---------- ---------- ---------- ------------
Gross profit...................... 2,413,338 1,794,048 1,591,422 1,394,028 1,777,209 40,669,218
Selling, general, and
administrative expenses......... 1,647,509 1,286,597 806,256 1,121,294 964,513 29,776,753
Goodwill amortization............. -- -- -- -- -- --
Other income (expense):
Interest expense................ (158,662) (194,791) (126,585) (126,417) -- (3,772,118)
Other, net...................... -- 1,250 1,462 17,068 26,990 343,810
----------- ----------- ---------- ---------- ---------- ------------
(158,662) (193,541) (125,123) (109,349) 26,990 (3,428,308)
----------- ----------- ---------- ---------- ---------- ------------
Income before taxes............... 607,167 313,910 660,043 163,385 839,686 7,464,157
Income tax expense................ -- 106,729 -- -- -- 521,439
----------- ----------- ---------- ---------- ---------- ------------
Net income........................ $ 607,167 $ 207,181 $ 660,043 $ 163,385 $ 839,686 $ 6,942,718
=========== =========== ========== ========== ========== ============
Net income per share..............
Shares used in computing net
income per share................
<CAPTION>
MERGER PRO FORMA OFFERING AS
ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenue:
Vehicles........................ $ -- $209,606,548 $ -- $209,606,548
Parts and service............... -- 15,733,742 -- 15,733,742
Other, net...................... -- 6,483,651 -- 6,483,651
----------- ------------ ---------- ------------
-- 231,823,941 -- 231,823,941
Cost of sales:
Vehicles........................ -- 182,978,097 -- 182,978,097
Parts and service............... -- 8,176,626 -- 8,176,626
----------- ------------ ---------- ------------
Gross profit...................... -- 40,669,218 -- 40,669,218
Selling, general, and
administrative expenses......... (3,035,301) 26,741,452 -- 26,741,452
Goodwill amortization............. 741,169 741,169 -- 741,169
Other income (expense):
Interest expense................ -- (3,772,118) 2,011,920 (1,760,198)
Other, net...................... -- 343,810 -- 343,810
----------- ------------ ---------- ------------
-- (3,428,308) 2,011,920 (1,416,388)
----------- ------------ ---------- ------------
Income before taxes............... 2,294,132 9,758,289 2,011,920 11,770,210
Income tax expense................ 3,678,344 4,199,783 804,768 5,004,551
----------- ------------ ---------- ------------
Net income........................ $(1,384,212) $ 5,558,506 $1,207,152 $ 6,765,658
=========== ============ ========== ============
Net income per share.............. $
============
Shares used in computing net
income per share................
============
</TABLE>
F-8
<PAGE> 88
RV CENTERS, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS -- UNAUDITED
TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
STOLTZFUS
RV CENTERS COUNTY LINE SADDLEBACK EMERALD COAST CASEY'S RECR. TRAILER
INC. SELECT CARS, INC. RV RV CENTER, INC. SALES, INC. SALES, INC.
---------- ----------------- ----------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Vehicles.................... $ -- $38,133,335 $23,373,561 $ 26,072,167 $20,583,766 $13,218,654
Parts and service........... -- 2,487,517 835,903 2,170,055 -- 2,185,296
Other, net.................. -- 763,319 1,174,786 538,451 507,819 317,111
---- ----------- ----------- ------------ ----------- -----------
-- 41,384,171 25,384,250 28,780,673 21,091,585 15,721,061
Cost of sales:
Vehicles.................... -- 33,857,448 20,966,718 22,082,514 18,101,953 11,934,832
Parts and service........... -- 1,276,924 453,215 986,878 -- 1,110,799
---- ----------- ----------- ------------ ----------- -----------
Gross profit.................. -- 6,249,799 3,964,317 5,711,281 2,989,632 2,675,430
Selling, general, and
administrative expenses..... -- 4,493,563 3,657,793 4,111,799 1,787,401 2,245,685
Goodwill amortization......... -- -- -- -- -- --
Other income (expense):
Interest expense............ -- (596,016) (598,708) (549,076) (337,527) (327,714)
Other, net.................. -- -- 42,842 48,823 28,302 35,907
---- ----------- ----------- ------------ ----------- -----------
-- (596,016) (555,866) (500,253) (309,225) (291,807)
---- ----------- ----------- ------------ ----------- -----------
Income before taxes........... -- 1,160,220 (249,342) 1,099,229 893,006 137,938
Income tax expense............ -- -- -- -- -- 56,143
---- ----------- ----------- ------------ ----------- -----------
Net income.................... $ -- $ 1,160,220 $ (249,342) $ 1,099,229 $ 893,006 $ 81,795
==== =========== =========== ============ =========== ===========
Net income per share..........
Shares used in computing net
income per share............
<CAPTION>
DUSTY'S HALL ENTER- SCOTT MOTOR AMERICAN RV
CAMPERS PRISES, INC. COACH SALES, INC CENTERS, INC.
----------- ------------ ---------------- -------------
<S> <C> <C> <C> <C>
Revenue
Vehicles.................... $18,930,143 $15,674,467 $12,548,945 $13,434,149
Parts and service........... 1,227,871 670,348 861,916 1,044,291
Other, net.................. 595,390 336,856 574,753 606,089
----------- ----------- ----------- -----------
20,753,404 16,681,671 13,985,614 15,084,529
Cost of sales:
Vehicles.................... 16,703,120 13,132,128 10,693,101 11,606,341
Parts and service........... 541,818 452,842 499,156 519,612
----------- ----------- ----------- -----------
Gross profit.................. 3,508,466 3,096,701 2,793,357 2,958,576
Selling, general, and
administrative expenses..... 2,844,591 2,639,682 2,380,709 2,469,440
Goodwill amortization......... -- -- -- --
Other income (expense):
Interest expense............ (263,698) (471,494) (328,747) (320,159)
Other, net.................. 15,512 19,674 (61,843) 47,838
----------- ----------- ----------- -----------
(248,186) (451,820) (390,590) (272,321)
----------- ----------- ----------- -----------
Income before taxes........... 415,689 5,199 22,058 216,815
Income tax expense............ 150,829 -- 14,241 11,100
----------- ----------- ----------- -----------
Net income.................... $ 264,860 $ 5,199 $ 7,817 $ 205,715
=========== =========== =========== ===========
Net income per share..........
Shares used in computing net
income per share............
</TABLE>
F-9
<PAGE> 89
RV CENTERS, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS -- UNAUDITED
TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
YOUNG'S
RV RV'S NORTH- LITTLE VALLEY MARSHALL'S ACE FOGDALL, RV CENTER
CENTER WEST, INC. RV TRAVELAND INC. SUB-TOTAL
----------- ----------- ------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Vehicles.................... $11,340,340 $9,848,962 $11,011,743 $ 8,774,242 $5,772,012 $228,716,486
Parts and service........... 2,515,255 694,212 417,679 963,399 692,713 16,766,455
Other, net.................. 424,135 175,610 355,510 266,445 88,804 6,725,078
----------- ----------- ----------- ----------- ---------- ------------
14,279,730 10,718,784 11,784,932 10,004,086 6,553,529 252,208,019
Cost of sales:
Vehicles.................... 9,939,482 8,523,058 9,281,712 7,671,058 4,472,230 198,965,695
Parts and service........... 1,303,727 393,569 230,653 699,860 303,212 8,772,265
----------- ----------- ----------- ----------- ---------- ------------
Gross profit.................. 3,036,521 1,802,157 2,272,567 1,633,168 1,778,087 44,470,059
Selling, general, and
administrative expenses..... 2,243,068 1,558,292 1,294,156 1,505,934 1,333,585 34,565,698
Goodwill amortization......... -- ........ -- -- -- -- --
Other income (expense):
Interest expense............ (208,497) (176,680) (172,630) (137,647) -- (4,488,593)
Other, net.................. -- 1,292 5,922 3,658 52,095 240,022
----------- ----------- ----------- ----------- ---------- ------------
(208,497) (175,388) (166,708) (133,989) 52,095 (4,248,571)
----------- ----------- ----------- ----------- ---------- ------------
Income before taxes........... 584,956 68,477 811,703 (6,755) 496,597 5,655,790
Income tax expense............ -- 14,017 -- -- -- 246,330
----------- ----------- ----------- ----------- ---------- ------------
Net income.................... $ 584,956 $ 54,460 $ 811,703 $ (6,755) $ 496,597 $ 5,409,460
=========== =========== =========== =========== ========== ============
Net income per share..........
Shares used in computing net
income per share............
<CAPTION>
MERGER PRO FORMA OFFERING AS
ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenue
Vehicles.................... $ -- $228,716,486 $ -- $228,716,486
Parts and service........... -- 16,766,455 -- 16,766,455
Other, net.................. -- 6,725,078 -- 6,725,078
----------- ------------ ---------- ------------
-- 252,208,019 -- 252,208,019
Cost of sales:
Vehicles.................... -- 198,965,695 -- 198,965,695
Parts and service........... -- 8,772,265 -- 8,772,265
----------- ------------ ---------- ------------
Gross profit.................. -- 44,470,059 -- 44,470,059
Selling, general, and
administrative expenses..... (2,015,000) 32,550,698 -- 32,550,698
Goodwill amortization......... 988,225 988,225 -- 988,225
Other income (expense):
Interest expense............ -- (4,488,593) 2,682,560 (1,806,033)
Other, net.................. -- 240,022 -- 240,022
----------- ------------ ---------- ------------
-- (4,248,571) 2,682,560 (1,566,011)
----------- ------------ ---------- ------------
Income before taxes........... 1,026,775 6,682,565 2,682,560 9,365,126
Income tax expense............ 2,821,986 3,068,316 1,073,024 4,141,340
----------- ------------ ---------- ------------
Net income.................... $(1,795,211) $ 3,614,249 $1,609,536 $ 5,223,785
=========== ============ ========== ============
Net income per share.......... $
============
Shares used in computing net
income per share............ $
============
</TABLE>
F-10
<PAGE> 90
RV CENTERS, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
1. BUSINESS
RV Centers, Inc. ("RV Centers") was organized in May 1998 to (i) become the
leading retailer of recreation vehicles in the United States and (ii) pursue the
consolidation of the highly-fragmented RV industry. RV Centers has conducted no
operations to date and will acquire the Founding Companies simultaneously with
the consummation of the Offering.
2. HISTORICAL FINANCIAL STATEMENTS
The historical financial statements represent the combined financial
position and results of operations of RV Centers and the Founding Companies and
were derived from the respective financial statements. The Company has selected
a fiscal year-end of December 31st. The Founding Companies' operations have been
presented for the twelve months ended December 31, 1997, except for Stoltzfus
Trailer Sales, Inc., which has been presented for the twelve months ended
October 31, 1997, and as of and for the nine months ended September 30, 1998,
except for Stoltzfus, which has been presented as of and for the twelve months
ended October 31, 1998.
3. ACQUISITION OF FOUNDING COMPANIES
Concurrent with consummation of the Offering, RV Centers will acquire the
Founding Companies. The Acquisitions will be accounted for using the purchase
method of accounting, and RV Centers has been identified as the accounting
acquiror. Aggregate consideration to be paid to the Founding Companies consists
of approximately $17.7 million in cash and 3,780,100 shares of Common Stock.
4. ADJUSTMENTS TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
MERGER OFFERING
(A) (B) ADJUSTMENTS (C) (D) ADJUSTMENTS
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents...... $ $ -- $ -- $ 46,312,500 $(46,312,500) $ --
Deferred financing costs....... -- -- -- (1,326,112) (1,326,112)
Goodwill....................... 39,528,993 39,528,993 -- -- --
Floor plan notes payable....... -- -- -- 25,407,945 25,407,945
Due to
shareholders/affiliates...... (17,654,000) (17,654,000) -- 21,235,784 21,235,784
Due to
shareholders/affiliates --
noncurrent................... -- -- -- 994,883 994,883
Common stock................... 741,944 741,944 (45,000) -- (45,000)
Paid-in capital in excess of
par.......................... (37,396,232) (37,396,232) (46,267,500) -- (46,267,500)
Retained earnings.............. 14,997,660 14,997,660 -- -- --
Treasury stock................. (218,365) (218,365) -- -- --
</TABLE>
- ---------------
(a) Reflects the cumulative S-Corporation earnings that will be repaid with the
cash portion of the purchase consideration as accrued dividends as of
September 30, 1998.
(b) Records the consideration paid for the Acquisitions, consisting of $17.7
million in cash and 3,780,100 shares of Common Stock for a total estimated
purchase price of $ million (based upon estimated fair value per share
which represents a marketability discount of 20% from the initial offering
price), resulting in excess purchase price over the estimated fair market
value of assets acquired of $39.5 million. The Company has utilized a 20%
discount for marketability in valuing the stock issued in connection with
the Acquisitions. Discounts for marketability are subject to many factors
which may be interpreted differently by different parties. Any difference
between the 20% marketability discount used by the Company and a nominal
discount rate would be immaterial to the financial position and future
results of operations of the Company.
F-11
<PAGE> 91
RV CENTERS, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
(c) Records the proceeds of $56.3 million (based on an initial public offering
price of $ per share) from the issuance of shares of Common
Stock, net of estimated underwriting discounts and commissions and offering
costs of $10.0 million.
(d) Records the payment of the cash portion of the consideration to the
stockholders of the Founding Companies in connection with the Acquisitions
and the repayment of certain debt obligations with the proceeds of the
Offering.
5. ADJUSTMENTS TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
Twelve months ended December 31, 1997 and nine months ended September 30,
1998:
(a) Adjusts salaries, bonuses, and benefit amounts to reflect those
established in contractual agreements between the Company and certain
owners of the Founding Companies.
(b) Records goodwill amortization using a 40-year estimated life.
(c) Reflects the reduction in interest expense attributed to
obligations retired with proceeds from Offering.
(d) Adjusts the provision for federal and state income taxes to the
estimated combined effective tax rate for the Company, after giving effect
to nondeductible goodwill amortization.
(e) Adjusts selling, general, and administrative expenses to reflect
the elimination of the nonrecurring, noncash compensation charge of $1.4
million recorded by RV Centers during the nine months ended September 30,
1998, related to Common Stock issued to management.
F-12
<PAGE> 92
REPORT OF INDEPENDENT AUDITORS
Board of Directors
RV Centers, Inc.
We have audited the accompanying balance sheet of RV Centers, Inc. as of
September 30, 1998, and the related statements of operations, shareholders'
deficit, and cash flows for the period of inception (May 8, 1998) through
September 30, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RV Centers, Inc., at
September 30, 1998, and the results of its operations and its cash flows for the
period of inception (May 8, 1998) through September 30, 1998, in conformity with
generally accepted accounting principles.
Houston, Texas
January 25, 1999
F-13
<PAGE> 93
RV CENTERS, INC.
BALANCE SHEET
SEPTEMBER 30, 1998
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents................................. $ 161,161
-----------
Total current assets.............................. 161,161
Deferred offering costs................................... 1,326,112
-----------
Total assets...................................... $ 1,487,273
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued liabilities....................................... $ 55,812
Advances from shareholders................................ 1,431,450
-----------
Total current liabilities......................... 1,487,262
Shareholders' equity:
Common Stock, $.01 par value:
Shares authorized -- 31,000,000
Shares issued and outstanding -- 1,473,073............. 14,731
Additional paid-in capital................................ 1,337,819
Accumulated deficit, net of subscriptions receivable...... (1,352,539)
-----------
Total shareholders' equity........................ 11
-----------
Total liabilities and shareholders' equity........ $ 1,487,273
===========
</TABLE>
See accompanying notes.
F-14
<PAGE> 94
RV CENTERS, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (MAY 8, 1998) THROUGH SEPTEMBER 30, 1998
<TABLE>
<S> <C>
Revenue..................................................... $ --
Selling, general, and administrative expenses............... 1,339,157
----------
Loss before income taxes.................................... 1,339,157
Income tax benefit.......................................... --
----------
Net loss.................................................... $1,339,157
==========
</TABLE>
See accompanying notes.
F-15
<PAGE> 95
RV CENTERS, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (MAY 8, 1998) THROUGH SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------- SUBSCRIPTIONS PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT RECEIVABLE CAPITAL DEFICIT EQUITY
--------- ------- ------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization......... 1,339,157 $13,392 $(13,382) $ -- $ -- $ 10
Issuance of management
shares.................... 133,916 1,339 1,337,819 -- 1,339,158
Net loss..................... -- -- -- -- (1,339,157) (1,339,157)
--------- ------- -------- ---------- ----------- -----------
Balance at September 30,
1998......................... 1,473,073 $14,731 $(13,382) $1,337,819 $(1,339,157) $ 11
========= ======= ======== ========== =========== ===========
</TABLE>
See accompanying notes.
F-16
<PAGE> 96
RV CENTERS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (MAY 8, 1998) THROUGH SEPTEMBER 30, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $(1,339,157)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Compensation expense related to issuance of management
shares................................................. 1,339,157
Increase in deferred offering costs....................... (1,326,112)
Increase in accrued liabilities........................... 1,431,450
Increase in advances from shareholder..................... 55,812
-----------
Net cash provided by operating activities................... 161,150
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of stock........................................... 11
-----------
Net cash provided by financing activities................... 11
-----------
Net increase in cash and cash equivalents................... 161,161
Cash and cash equivalents at beginning of period............ --
-----------
Cash and cash equivalents at end of period.................. $ 161,161
===========
</TABLE>
See accompanying notes.
F-17
<PAGE> 97
RV CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
RV Centers, Inc., a Delaware corporation ("RV Centers"), was founded on May
8, 1998 to become the leading retailer of RVs in the United States. RV Centers
intends to acquire 14 businesses (the "Acquisitions"), complete an initial
public offering (the "Offering") of its Common Stock and, subsequent to the
Offering, continue to acquire through merger or purchase similar companies to
expand its operations.
RV Centers has not conducted any operations, and all activities to date
have related to the Offering and the Acquisitions. The Company's cash balances
were generated from the initial capitalization of the Company (see Note 3) and
advances from its principal shareholder. All other expenditures to date have
been funded by the primary shareholder, Baker Kreft Funding ("BKF"), on behalf
of the Company. BKF has committed to fund the organization expenses and offering
costs. As of September 30, 1998, costs of $1,326,112 have been incurred by BKF
in connection with the Offering. RV Centers has treated these costs as deferred
offering costs. RV Centers is dependent upon the Offering to execute the pending
Acquisitions. There is no assurance that the pending Acquisitions discussed
below will be completed or that RV Centers will be able to generate future
operating revenues.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. SHAREHOLDERS' EQUITY
Common Stock
RV Centers will effect a 1,339.157 for one stock split in January 1999 for
each share of common stock ("Common Stock") then outstanding. In addition, RV
Centers increased the number of authorized shares of Common Stock to 30,000,000
voting shares and 1,000,000 restricted voting shares. The effects of the pending
Common Stock split and the increase in the shares of authorized Common Stock
have been retroactively reflected on the balance sheet and in the accompanying
notes.
In connection with the organization and initial capitalization of RV
Centers, the Company issued 1,339,157 shares of Common Stock to BKF for a total
of $10.00.
In May 1998, 133,916 shares of Common Stock were sold to management for a
total of $1.00.
4. STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, allows entities to choose between a new fair
value-based method of accounting for employee stock options or similar equity
instruments and the current intrinsic, value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25").
Entities electing to remain with the accounting in APB No. 25 must make pro
forma disclosures of net income and earnings per share as if the fair value
method of accounting had been applied. RV Centers will provide pro forma
disclosure of net income and earnings per share, as applicable, in the notes to
future consolidated financial statements.
5. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Financial
Accounting Standards (FAS) No. 130 Reporting Comprehensive Income and No. 131
Disclosures About Segments of an Enterprise and
F-18
<PAGE> 98
RV CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Related Information. Both FAS No. 130 and FAS No. 131 are not expected to have a
material effect on RV Centers, Inc. for calendar year ending December 31, 1998.
6. SUBSEQUENT EVENT
In January 1999, RV Centers signed definitive agreements to acquire 14
companies to be effective with the Offering. The companies to be acquired are
(a) Ace Fogdall, Inc., (b) American RV Centers, Inc., (c) Casey's Motors, Inc.
d/b/a Casey's Recreational Sales, (d) County Line Select Cars, Inc., (e) Dusty's
Camper World, (f) Emerald Coast RV Center, Inc., (g) Growth Ventures d/b/a
Marshall's Traveland, (h) Hall Enterprises, Inc., (i) Little Valley Auto & RV
Sales, Inc., (j) RV's Northwest, Inc., (k) Saddleback Recreational Vehicles,
Inc., (l) Scott Motor Coach, Inc., (m) Stoltzfus Trailer Sales, Inc., and (n)
Young's RV Center. The aggregate consideration that will be paid by RV Centers
to acquire the Founding Companies is $17,654,000 in cash and 3,780,100 shares of
Common Stock.
In October 1998, RV Centers' management and other investors purchased an
additional 495,488 shares of Common Stock for a total of $3.70, RV Centers'
management and received options to purchase 415,139 shares of Common Stock at
the initial public offering price.
F-19
<PAGE> 99
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholders
County Line Select Cars, Inc.
We have audited the accompanying balance sheets of County Line Select Cars,
Inc., as of December 31, 1997 and 1996, and the related statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of County Line Select Cars,
Inc., at December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
September 3, 1998
Houston, Texas
F-20
<PAGE> 100
COUNTY LINE SELECT CARS, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------ SEPTEMBER 30
1996 1997 1998
---------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................ $ 879,801 $ 853,908 $ 646,917
Accounts receivable.................................. 97,819 231,836 366,640
Inventories.......................................... 8,574,952 10,280,236 10,787,048
Prepaid expenses and other........................... 23,496 69,026 118,363
---------- ----------- -----------
Total current assets......................... 9,576,068 11,435,006 11,918,968
Property and equipment, net............................ 255,766 403,543 484,479
---------- ----------- -----------
Total assets................................. $9,831,834 $11,838,549 $12,403,447
========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable............................. $6,456,604 $ 7,793,001 $ 7,893,677
Due to shareholders.................................. 525,545 1,020,194 1,164,094
Other short-term debt................................ 80,000 140,000 75,000
Accounts payable..................................... 836,188 764,059 696,619
Accounts payable -- related party.................... 34,505 29,273 38,462
Accrued liabilities and other........................ 267,272 414,720 453,621
---------- ----------- -----------
Total current liabilities.................... 8,200,114 10,161,247 10,321,473
Other noncurrent liabilities........................... 43,768 35,237 21,877
Commitments and contingencies
Shareholders' equity:
Common stock -- $1 par value, 7,500 shares
authorized, 200 shares issued and outstanding..... 200 200 200
Paid-in capital in excess of par..................... 400 400 400
Retained earnings.................................... 1,587,352 1,641,465 2,059,497
---------- ----------- -----------
Total shareholders' equity................... 1,587,952 1,642,065 2,060,097
---------- ----------- -----------
Total liabilities and shareholders' equity... $9,831,834 $11,838,549 $12,403,447
========== =========== ===========
</TABLE>
See accompanying notes.
F-21
<PAGE> 101
COUNTY LINE SELECT CARS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Vehicles....................... $33,106,711 $29,804,370 $38,133,335 $28,115,585 $39,355,374
Parts and service.............. 2,290,468 1,790,549 2,487,517 1,744,088 3,094,988
Other, net..................... 46,961 759,875 763,319 516,975 660,995
----------- ----------- ----------- ----------- -----------
35,444,140 32,354,794 41,384,171 30,376,648 43,111,357
Cost of sales:
Vehicles....................... 29,887,973 26,657,886 33,857,448 24,950,173 35,402,465
Parts and service.............. 1,377,150 986,065 1,276,924 928,799 1,455,334
----------- ----------- ----------- ----------- -----------
Gross profit..................... 4,179,017 4,710,843 6,249,799 4,497,676 6,253,558
Selling, general, and
administrative expenses........ 3,614,117 3,665,935 4,493,563 3,201,519 4,238,469
Other expense:
Interest expense............... (599,259) (478,350) (596,016) (451,702) (572,289)
----------- ----------- ----------- ----------- -----------
Net (loss) income.............. $ (34,359) $ 566,558 $ 1,160,220 $ 844,455 $ 1,442,800
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-22
<PAGE> 102
COUNTY LINE SELECT CARS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PAID-IN
COMMON CAPITAL IN RETAINED
STOCK EXCESS OF PAR EARNINGS TOTAL
------ ------------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994..................... $200 $400 $ 1,684,277 $ 1,684,877
Distributions to shareholders.................. -- -- (329,719) (329,719)
Net loss....................................... -- -- (34,359) (34,359)
---- ---- ----------- -----------
Balance at December 31, 1995..................... 200 400 1,320,199 1,320,799
Distributions to shareholders.................. -- -- (299,405) (299,405)
Net income..................................... -- -- 566,558 566,558
---- ---- ----------- -----------
Balance at December 31, 1996..................... 200 400 1,587,352 1,587,952
Distributions to shareholders.................. -- -- (1,106,107) (1,106,107)
Net income..................................... -- -- 1,160,220 1,160,220
---- ---- ----------- -----------
Balance at December 31, 1997..................... 200 400 1,641,465 1,642,065
Distributions to shareholders (unaudited)...... -- -- (1,024,768) (1,024,768)
Net income (unaudited)......................... -- -- 1,442,800 1,442,800
---- ---- ----------- -----------
Balance at September 30, 1998 (unaudited)........ $200 $400 $ 2,059,497 $ 2,060,097
==== ==== =========== ===========
</TABLE>
See accompanying notes.
F-23
<PAGE> 103
COUNTY LINE SELECT CARS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income................. $ (34,359) $ 566,558 $ 1,160,220 $ 844,455 $ 1,442,800
Adjustments to reconcile net
(loss) income to net cash (used
in) provided by operating
activities:
Depreciation.................... 55,126 60,080 64,128 54,000 54,000
Changes in operating assets and
liabilities:
Accounts receivable.......... 76,152 1,023 (134,017) (22,205) (134,804)
Due to/from related
parties.................... -- 10,543 (5,232) -- --
Inventories.................. 5,404,086 (2,751,247) (1,705,284) 1,141,688 (506,812)
Prepaid expenses and other... (41,417) 46,434 (54,061) (109,708) (49,337)
Floor plan notes payable..... (5,130,621) 1,956,675 1,336,397 (1,691,382) 100,676
Accounts payable............. (76,962) 778,619 (72,129) (520,230) (71,611)
Accrued liabilities and
other...................... (449,876) 113,916 147,448 152,062 38,901
----------- ----------- ----------- ----------- -----------
Net cash (used in) provided by
operating activities............ (197,871) 782,601 737,470 (151,320) 873,813
INVESTING ACTIVITIES
Net additions to property and
equipment....................... (6,714) (161,410) (211,905) (108,461) (134,936)
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities...................... (6,714) (161,410) (211,905) (108,461) (134,936)
FINANCING ACTIVITIES
Net borrowings (repayments) on
debt............................ -- 80,000 60,000 (80,000) (65,000)
Net borrowings from
shareholders.................... 186,828 88,589 494,649 533,111 143,900
Distributions to shareholders..... (329,719) (299,405) (1,106,107) (894,335) (1,024,768)
----------- ----------- ----------- ----------- -----------
Net cash used in financing
activities...................... (142,891) (130,816) (551,458) (441,224) (945,868)
----------- ----------- ----------- ----------- -----------
Net change in cash and cash
equivalents..................... (347,476) 490,375 (25,893) (701,005) (206,991)
Cash and cash equivalents at
beginning of year............... 736,902 389,426 879,801 879,801 853,908
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end
of year......................... $ 389,426 $ 879,801 $ 853,908 $ 178,796 $ 646,917
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-24
<PAGE> 104
COUNTY LINE SELECT CARS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
County Line Select Cars, Inc. (the "Company") was incorporated in 1979 and
operates four recreational vehicle ("RV") dealerships in Florida. From 1979 to
1995, the Company grew from one dealership to three. During 1995, the Company
sold one of its larger dealerships and opened a smaller one in its place. The
Company continued to operate its three dealerships until 1998 when it purchased
back the dealership it had sold in 1995. In addition to new and used RV sales,
the Company offers complementary products and services including parts, repair
and maintenance services, body shop services, and financing and insurance
contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles are stated at the lower of cost or
market. Cost is determined using the specific-identification method. New vehicle
cost includes the invoice price, delivery, and the cost of any special features
added to the vehicles. Used vehicle cost includes the purchase price plus
reconditioning and make-ready costs. Parts are stated at the lower of cost or
market, cost being determined on the first-in, first-out basis.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 15
Furniture and fixtures...................................... 5
Machinery, vehicles, and equipment.......................... 5
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are sold. Finance, insurance, and warranty revenues are recognized at
the time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees, insurance commissions and
extended warranty contract income.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Insurance
income represents commissions earned on credit life, accident, and disability
insurance sold in connection with the vehicle on behalf of third-party insurance
companies. Warranty income represents revenues earned on extended warranty
contracts sold on behalf of a third party.
F-25
<PAGE> 105
COUNTY LINE SELECT CARS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The Company is an S corporation and, as such, no provision for income taxes
has been included in the accompanying financial statements since the Company's
taxable income is reported directly by the shareholders for tax purposes.
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $297,000, $356,000, and $511,000 for 1995, 1996, and 1997,
respectively, and $342,181 and $302,989 for the nine months ended September 30,
1997 and 1998, respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits and other items which require subjective decisions during the
course of the year. These interim estimates are subject to adjustment based upon
the final year-end results.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31
------------------------ SEPTEMBER 30
1996 1997 1998
---------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
New vehicles................................... $5,531,256 $ 6,796,485 $ 6,535,605
Used vehicles.................................. 2,959,120 3,377,728 4,054,742
Parts and accessories.......................... 84,576 106,023 196,701
---------- ----------- -----------
$8,574,952 $10,280,236 $10,787,048
========== =========== ===========
</TABLE>
F-26
<PAGE> 106
COUNTY LINE SELECT CARS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31
------------------- SEPTEMBER 30
1996 1997 1998
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Buildings and improvements......................... $233,859 $273,177 $280,142
Furniture and fixtures............................. 106,078 165,798 228,281
Machinery, vehicles, and equipment................. 165,666 180,082 229,696
Construction in progress........................... -- 77,512 93,387
-------- -------- --------
505,603 696,569 831,506
Less accumulated depreciation...................... 249,837 293,026 347,027
-------- -------- --------
$255,766 $403,543 $484,479
======== ======== ========
</TABLE>
5. FLOOR PLAN NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Floor plan notes payable to finance companies, secured by
new and used vehicle inventories and contracts in
transit................................................... $6,456,604 $7,793,001
========== ==========
</TABLE>
Interest rates on floor plan notes vary by product line and product age.
Interest rates on the floor plan notes are at prime to prime minus .5% during
the period presented. The average interest rate on floor plan notes was 8.8%,
8.3% and 7.9% for the years ended at December 31, 1995, 1996 and 1997,
respectively. The notes are due upon the sale of the related inventory.
Interest paid for both the floor plan notes and other debt was $599,259,
$478,350, and $596,016 for the years ended December 31, 1995, 1996, and 1997,
respectively.
6. OTHER SHORT-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31
--------------------- SEPTEMBER 30
1996 1997 1998
-------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Promissory notes with the Company's shareholders,
payable on demand, interest at 10% at December
31, 1996 and 1997, secured by the net assets of
the Company..................................... $525,545 $1,020,194 $1,164,094
$200,000 draft line of credit with a bank, payable
on demand, interest at 9% and 9.25% at December
31, 1996 and 1997, secured by property of the
shareholders.................................... 80,000 140,000 75,000
-------- ---------- ----------
$605,545 $1,160,194 $1,239,094
======== ========== ==========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in significant liability.
F-27
<PAGE> 107
COUNTY LINE SELECT CARS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
8. RELATED PARTY TRANSACTIONS
The Company had vehicle sales to a related party totaling $-0-, $278,000,
and $413,000 for the years ended December 31, 1995, 1996, and 1997,
respectively, for use in the related party's rental business. The Company also
leases its facilities from a related party. These related party leases are
renewed annually and vary in lease payment amounts from year to year. Lease
payments to the related party totaled $237,000, $175,000, and $267,000 for the
years ended December 31, 1995, 1996, and 1997, respectively.
F-28
<PAGE> 108
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholder
Saddleback Recreational Vehicles, Inc.
We have audited the accompanying balance sheets of Saddleback Recreational
Vehicles, Inc., as of December 31, 1997 and 1996, and the related statements of
operations, shareholder's equity, and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Saddleback Recreational
Vehicles, Inc., at December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
September 25, 1998
Houston, Texas
F-29
<PAGE> 109
SADDLEBACK RECREATIONAL VEHICLES, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 12,280 $ 54,994 $ 121,987
Accounts receivable................................... -- 67,198 459,341
Due from shareholders and employees................... 163,545 93,665 83,994
Inventories, net...................................... 4,231,589 6,657,539 7,592,158
Prepaid expenses and other............................ 21,038 19,696 56,906
---------- ---------- ----------
Total current assets.......................... 4,428,452 6,893,092 8,314,386
Property and equipment, net............................. 708,608 697,052 511,226
Cash value of life insurance policies................... 56,378 76,127 50,988
Other assets, net....................................... 50,065 41,913 49,855
---------- ---------- ----------
Total assets.................................. $5,243,503 $7,708,184 $8,926,455
========== ========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Floor plan notes payable.............................. $4,453,946 $6,703,864 $7,263,640
Accounts payable...................................... 208,583 455,429 522,672
Accrued liabilities and other......................... 271,756 429,015 347,501
---------- ---------- ----------
Total current liabilities..................... 4,934,285 7,588,308 8,133,813
Commitments and contingencies
Shareholder's equity:
Common stock -- no par value
Authorized shares -- 100,000
Issued and outstanding shares -- 1,000............. 200,000 200,000 200,000
Retained earnings (deficit)........................... 109,218 (80,124) 592,642
---------- ---------- ----------
Total shareholder's equity.................... 309,218 119,876 792,642
---------- ---------- ----------
Total liabilities and shareholder's equity.... $5,243,503 $7,708,184 $8,926,455
========== ========== ==========
</TABLE>
See accompanying notes.
F-30
<PAGE> 110
SADDLEBACK RECREATIONAL VEHICLES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Vehicles.................. $15,515,523 $15,973,156 $23,373,561 $18,135,378 $24,628,401
Parts and service......... -- -- 835,903 485,073 1,098,543
Other, net................ 487,013 609,957 1,174,786 965,290 1,129,976
----------- ----------- ----------- ----------- -----------
16,002,536 16,583,113 25,384,250 19,585,741 26,856,920
Cost of sales:
Vehicles.................. 13,421,822 13,590,604 20,966,718 16,130,955 21,924,251
Parts and service......... -- -- 453,215 260,919 529,331
----------- ----------- ----------- ----------- -----------
Gross profit................ 2,580,714 2,992,509 3,964,317 3,193,867 4,403,338
Selling, general, and
administrative expenses... 2,230,978 2,630,733 3,657,793 2,708,930 3,276,875
Other income (expense):
Interest expense.......... (356,423) (436,118) (598,708) (377,565) (511,197)
Other, net................ 67,128 65,834 42,842 32,131 57,500
----------- ----------- ----------- ----------- -----------
(289,295) (370,284) (555,866) (345,434) (453,697)
----------- ----------- ----------- ----------- -----------
Net income (loss)........... $ 60,441 $ (8,508) $ (249,342) $ 139,503 $ 672,766
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-31
<PAGE> 111
SADDLEBACK RECREATIONAL VEHICLES, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
RETAINED
COMMON EARNINGS
STOCK (DEFICIT) TOTAL
-------- --------- ---------
<S> <C> <C> <C>
Balance at December 31, 1994............................... $200,000 $ 162,678 $ 362,678
Distributions to shareholder............................. -- (130,393) (130,393)
Net income............................................... -- 60,441 60,441
-------- --------- ---------
Balance at December 31, 1995............................... 200,000 92,726 292,726
Contributions to capital................................. -- 30,000 30,000
Distributions to shareholder............................. -- (5,000) (5,000)
Net loss................................................. -- (8,508) (8,508)
-------- --------- ---------
Balance at December 31, 1996............................... 200,000 109,218 309,218
Contributions to capital................................. -- 60,000 60,000
Net loss................................................. -- (249,342) (249,342)
-------- --------- ---------
Balance at December 31, 1997............................... 200,000 (80,124) 119,876
Net income (unaudited)................................... -- 672,766 672,766
-------- --------- ---------
Balance at September 30, 1998 (unaudited).................. $200,000 $ 592,642 $ 792,642
======== ========= =========
</TABLE>
See accompanying notes.
F-32
<PAGE> 112
SADDLEBACK RECREATIONAL VEHICLES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
------------------------------------- -----------------------
1995 1996 1997 1997 1998
----------- --------- ----------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................... $ 60,441 $ (8,508) $ (249,342) $ 139,503 $ 672,766
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation...................... 31,018 79,251 176,485 127,770 123,560
Changes in operating assets and
liabilities:
Accounts receivable............ 54,207 11,979 (67,198) (436,757) (392,143)
Inventories.................... (1,223,802) 448,576 (2,425,950) (1,425,514) (934,619)
Prepaid expenses and other..... 3,176 (9,284) 1,342 1,342 (37,210)
Due from shareholders and
employees.................... 61,117 (163,545) 69,880 95,164 9,671
Cash value of insurance
policies and other assets.... (61,048) 248,369 (11,597) (125,309) 17,197
Accounts payable............... 199,559 (141,704) 246,846 198,986 67,243
Floor plan notes payable....... 1,109,197 (3,278) 2,249,918 1,664,314 559,776
Accrued liabilities and
other........................ (21,019) 206,388 157,259 (34,468) (81,514)
----------- --------- ----------- ----------- ---------
Net cash provided by operating
activities........................ 212,846 668,244 147,643 205,031 4,727
INVESTING ACTIVITIES
Purchase of property and
equipment......................... (19,950) (903,447) (519,732) (439,275) (8,334)
Proceeds from sale of property and
equipment......................... -- 153,670 354,803 125,364 70,600
----------- --------- ----------- ----------- ---------
Net cash (used in) provided by
investing activities.............. (19,950) (749,777) (164,929) (313,911) 62,266
FINANCING ACTIVITIES
Repayments of long-term debt........ (22,271) -- -- -- --
(Distributions) contributions of
capital........................... (130,393) 25,000 60,000 -- --
----------- --------- ----------- ----------- ---------
Net cash (used in) provided by
financing activities.............. (152,664) 25,000 60,000 -- --
----------- --------- ----------- ----------- ---------
Net change in cash and cash
equivalents....................... 40,232 (56,533) 42,714 (108,880) 66,993
Cash and cash equivalents at
beginning of year................. 28,581 68,813 12,280 12,280 54,994
----------- --------- ----------- ----------- ---------
Cash and cash equivalents at end of
year.............................. $ 68,813 $ 12,280 $ 54,994 $ (96,600) $ 121,987
=========== ========= =========== =========== =========
</TABLE>
See accompanying notes.
F-33
<PAGE> 113
SADDLEBACK RECREATIONAL VEHICLES, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Saddleback Recreational Vehicles, Inc. (the "Company") was incorporated in
1991 and operates a recreational vehicle ("RV") dealership in Irvine,
California, and during 1997, the Company opened a new dealership in La Mirada,
California. During 1997, the Company also established a parts and service center
at its Irvine facility. The Company has plans to open a third dealership in
Carson, California, during the fourth quarter of 1998. In addition to new and
used RV sales, the Company offers complementary products and services including
parts, repair and maintenance services, body shop services, and financing and
insurance contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles are stated at the lower of cost or
market. New vehicle cost is determined using the last-in, first-out ("LIFO")
method and includes the invoice price, delivery, and the cost of any special
features added to the vehicles. Used vehicle costs are determined using the
specific-identification method and include the purchase price plus
reconditioning and make-ready costs. Parts are stated at the lower of cost or
market, cost being determined on the first-in, first-out ("FIFO") basis.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 5
Furniture and fixtures...................................... 5
Machinery, vehicles, and equipment.......................... 5
Rental units................................................ 5
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are delivered. Finance, insurance, and warranty revenues are
recognized at the time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees, insurance commissions,
extended warranty contract income, and rental fees.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Insurance
income represents commissions earned on credit life, accident, and disability
insurance sold in connection with the vehicle on behalf of third-party insurance
companies. Warranty income represents revenues earned on extended warranty
contracts sold on behalf of a third party.
F-34
<PAGE> 114
SADDLEBACK RECREATIONAL VEHICLES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The Company is an S corporation, and as such, no provision for income taxes
has been included in the accompanying financial statements as the Company's
taxable income is reported directly by the shareholders for tax purposes.
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $150,530, $125,173, and $217,127 for 1995, 1996, and 1997,
respectively, and $172,963 and $136,976 for the nine months ended September 30,
1997 and 1998, respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits, LIFO reserves based upon anticipated year-end inventory balances
and inflation levels, and other items which require subjective decisions during
the course of the year. These interim estimates are subject to adjustment based
upon the final year-end results.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
New vehicles.................................... $4,030,557 $6,303,992 $7,116,462
Used vehicles................................... 614,811 718,691 919,975
Parts and accessories........................... 590 58,199 166,064
---------- ---------- ----------
4,645,958 7,080,882 8,202,501
Excess of FIFO costs over LIFO costs............ (414,369) (423,343) (610,343)
---------- ---------- ----------
$4,231,589 $6,657,539 $7,592,158
========== ========== ==========
</TABLE>
F-35
<PAGE> 115
SADDLEBACK RECREATIONAL VEHICLES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31
------------------- SEPTEMBER 30
1996 1997 1998
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Land............................................... $ -- $ 25,000 $ 25,000
Buildings and improvements......................... 27,420 42,490 45,941
Furniture and fixtures............................. 60,000 78,796 86,500
Machinery, vehicles, and equipment................. 164,618 277,435 279,498
Rental units....................................... 596,958 533,203 264,210
-------- -------- --------
848,996 956,924 701,149
Less accumulated depreciation...................... 140,388 259,872 189,923
-------- -------- --------
$708,608 $697,052 $511,226
======== ======== ========
</TABLE>
5. FLOOR PLAN NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Floor plan notes payable to finance companies, secured by
new and used vehicle inventories and contracts in
transit................................................... $4,453,946 $6,703,864
========== ==========
</TABLE>
Interest rates on floor plan notes vary by product line and product age.
Interest rates on the floor plan notes were at prime plus one to two percent
during the periods presented. The average interest rate on floor plan notes was
9.4%, 9.7%, and 10.1% for the years ended December 31, 1995, 1996, and 1997,
respectively. The notes are due upon the sale of the related inventory.
Interest paid for the floor plan notes and long-term debt (see Note 6) was
$356,423, $424,954, and $562,935 for the years ended December 31, 1995, 1996,
and 1997, respectively.
6. CASH VALUE OF LIFE INSURANCE POLICIES
At December 31, 1996 and 1997, the Company had borrowings from the cash
value of life insurance policies of $241,392 and $236,029, respectively. The
interest rates on the loans range from 6.35% to 6.60%. The loans have no
maturity date or payment schedule. Any amount outstanding will be deducted at
the time benefits are paid on a policy. These loans are shown netted against the
cash value of life insurance policies.
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its facilities under operating leases. Rent expense
related to operating leases were $172,800, $172,800, and $364,000 for 1995,
1996, and 1997, respectively. The Company's most significant lease is with a
third party and is on a month to month basis.
F-36
<PAGE> 116
SADDLEBACK RECREATIONAL VEHICLES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments required under operating leases include:
<TABLE>
<S> <C>
1998........................................................ $156,000
1999........................................................ 228,000
2000........................................................ 120,000
2001........................................................ 120,000
2002........................................................ 20,000
Thereafter.................................................. --
--------
$644,000
========
</TABLE>
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability.
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
8. RETIREMENT PLAN
The Company maintains a 401(k) retirement plan which became effective in
1994. Employees are eligible to participate in the plan if they have been
employed by the Company for at least one year. Participants are allowed to make
elective income deferrals to the plan per the plan specifications. The Company
can make discretionary contributions as authorized by the Board of Directors.
The Company made discretionary contributions of $-0-, $4,898, and $4,751 during
1995, 1996, and 1997, respectively.
F-37
<PAGE> 117
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholder
Emerald Coast RV Center, Inc.
We have audited the accompanying balance sheets of Emerald Coast RV Center,
Inc., as of December 31, 1997 and 1996, and the related statements of
operations, shareholder's equity, and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Emerald Coast RV Center,
Inc., at December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
September 11, 1998
Houston, Texas
F-38
<PAGE> 118
EMERALD COAST RV CENTER, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------ SEPTEMBER 30
1996 1997 1998
---------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................ $ 455,845 $ 632,531 $ 1,019,896
Accounts receivable.................................. 150,420 130,390 150,221
Due from shareholders................................ -- -- 288,924
Inventories.......................................... 6,286,433 8,541,670 8,608,818
Prepaid expenses and other........................... 69,577 15,238 19,456
---------- ----------- -----------
Total current assets......................... 6,962,275 9,319,829 10,087,315
Property and equipment, net............................ 1,456,780 1,550,827 1,431,684
Other assets........................................... 25,327 -- --
---------- ----------- -----------
Total assets................................. $8,444,382 $10,870,656 $11,518,999
========== =========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Floor plan notes payable............................. $5,375,674 $ 7,230,314 $ 6,976,900
Current maturities of long-term debt................. 87,071 114,026 181,000
Accounts payable..................................... 369,054 799,145 917,224
Accrued liabilities and other........................ 304,969 263,549 223,387
---------- ----------- -----------
Total current liabilities.................... 6,136,768 8,407,034 8,298,511
Long-term debt......................................... 132,885 18,861 14,653
Due to shareholder..................................... 265,000 295,000 317,500
---------- ----------- -----------
Total liabilities............................ 6,534,653 8,720,895 8,630,664
Commitments and contingencies
Shareholder's equity:
Common stock -- $1 par value:
Authorized shares -- 500
Issued and outstanding shares -- 500.............. 500 500 500
Retained earnings.................................... 1,909,229 2,149,261 2,887,835
---------- ----------- -----------
Total shareholder's equity................... 1,909,729 2,149,761 2,888,335
---------- ----------- -----------
Total liabilities and shareholder's equity... $8,444,382 $10,870,656 $11,518,999
========== =========== ===========
</TABLE>
See accompanying notes.
F-39
<PAGE> 119
EMERALD COAST RV CENTER, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Vehicles.................. $18,503,208 $23,843,668 $26,072,167 $20,752,622 $23,981,069
Parts and service......... 1,857,446 2,150,982 2,170,055 1,678,834 1,622,530
Other, net................ 237,661 354,062 538,451 431,863 644,926
----------- ----------- ----------- ----------- -----------
20,598,315 26,348,712 28,780,673 22,863,319 26,248,525
Cost of sales:
Vehicles.................. 15,179,401 20,051,824 22,082,514 17,327,845 20,478,347
Parts and service......... 847,381 1,078,859 986,878 762,540 759,014
----------- ----------- ----------- ----------- -----------
Gross profit................ 4,571,533 5,218,029 5,711,281 4,772,934 5,011,164
Selling, general, and
administrative expenses... 3,322,635 3,650,683 4,111,799 3,065,314 3,040,529
Other income (expense):
Interest expense.......... (404,189) (441,796) (549,076) (381,782) (434,075)
Other, net................ 32,774 44,324 48,823 29,039 36,178
----------- ----------- ----------- ----------- -----------
(371,415) (397,472) (500,253) (352,743) (397,897)
----------- ----------- ----------- ----------- -----------
Net income.................. $ 877,483 $ 1,169,874 $ 1,099,229 $ 1,354,877 $ 1,572,738
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-40
<PAGE> 120
EMERALD COAST RV CENTER, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------ ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1994................................ $500 $1,201,941 $1,202,441
Distributions to shareholder.............................. -- (426,653) (426,653)
Net income................................................ -- 877,483 877,483
---- ---------- ----------
Balance at December 31, 1995................................ 500 1,652,771 1,653,271
Distributions to shareholder.............................. -- (913,416) (913,416)
Net income................................................ -- 1,169,874 1,169,874
---- ---------- ----------
Balance at December 31, 1996................................ 500 1,909,229 1,909,729
Distributions to shareholder.............................. -- (859,197) (859,197)
Net income................................................ -- 1,099,229 1,099,229
---- ---------- ----------
Balance at December 31, 1997................................ 500 2,149,261 2,149,761
Distributions to shareholder (unaudited).................. -- (834,164) (834,164)
Net income (unaudited).................................... -- 1,572,738 1,572,738
---- ---------- ----------
Balance at September 30, 1998 (unaudited)................... $500 $2,887,835 $2,888,335
==== ========== ==========
</TABLE>
See accompanying notes.
F-41
<PAGE> 121
EMERALD COAST RV CENTER, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
------------------------------------- -----------------------
1995 1996 1997 1997 1998
--------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................... $ 877,483 $ 1,169,874 $ 1,099,229 $1,354,877 $1,572,738
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation................. 76,485 68,267 104,481 78,361 100,859
Changes in operating assets
and liabilities:
Accounts receivable....... 2,772 (33,517) 20,030 (149,791) (19,831)
Inventories............... (445,577) (2,264,998) (2,255,237) (785,795) (67,148)
Prepaid expenses and
other................... (12,523) (5,413) 54,339 (3,303) (4,218)
Other assets.............. -- -- 25,327 22,327 --
Change in floor plan notes
payable................. 181,958 2,210,271 1,854,640 187,730 (253,414)
Accounts payable.......... (173,017) 194,459 430,091 (13,572) 118,079
Due from shareholders..... -- -- -- -- (288,924)
Due to shareholders....... 30,000 30,000 30,000 22,500 22,500
Accrued liabilities and
other................... 143,866 57,078 (41,420) (1,355) (40,162)
--------- ----------- ----------- ---------- ----------
Net cash provided by operating
activities................... 681,447 1,426,021 1,321,480 711,979 1,140,479
INVESTING ACTIVITIES
Purchase of property and
equipment.................... (59,321) (483,423) (265,002) (242,684) (14,772)
Proceeds from sale of property
and equipment................ 65,139 38,384 66,474 9,856 33,056
--------- ----------- ----------- ---------- ----------
Net cash provided by (used in)
investing activities......... 5,818 (445,039) (198,528) (232,828) 18,284
FINANCING ACTIVITIES
Repayments of long-term debt... (96,849) (86,853) (87,069) (71,958) (4,712)
Borrowings on long-term debt... -- -- -- -- 67,478
Distributions to shareholder... (426,653) (913,416) (859,197) (203,200) (834,164)
--------- ----------- ----------- ---------- ----------
Net cash used in financing
activities................... (523,502) (1,000,269) (946,266) (275,158) (771,398)
--------- ----------- ----------- ---------- ----------
Net change in cash and cash
equivalents.................. 163,763 (19,287) 176,686 203,993 387,365
Cash and cash equivalents at
beginning of year............ 311,369 475,132 455,845 455,845 632,531
--------- ----------- ----------- ---------- ----------
Cash and cash equivalents at
end of year.................. $ 475,132 $ 455,845 $ 632,531 $ 659,838 $1,019,896
========= =========== =========== ========== ==========
</TABLE>
See accompanying notes.
F-42
<PAGE> 122
EMERALD COAST RV CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Emerald Coast RV Center, Inc. (the "Company") was incorporated in 1990 and
operates three recreational vehicle ("RV") dealerships in Gulf Breeze, Florida;
Panama City, Florida; and Dothan, Alabama. In addition to new and used RV sales,
the Company offers complementary products and services including parts, repair
and maintenance services, body shop services, and financing and insurance
contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles are stated at the lower of cost or
market. Cost is determined using the specific-identification method. New vehicle
cost includes the invoice price, delivery, and the cost of any special features
added to the vehicles. Used vehicle cost includes the purchase price plus
reconditioning and make-ready costs.
Parts are stated at the lower of cost or market, cost being determined on
the first-in, first-out basis.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 5-40
Furniture and fixtures...................................... 5-10
Machinery, vehicles, and equipment.......................... 3-7
Rental units................................................ 5
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are sold. Finance insurance and warranty contract revenues are
recognized at the time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees, insurance and extended
warranty contract income, and rental fees.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Insurance
income represents commissions earned on credit life, accident, and disability
insurance sold in connection with the vehicle on behalf of third-party insurance
companies. Warranty income represents revenues earned on extended warranty
contracts sold on behalf of a third party.
F-43
<PAGE> 123
EMERALD COAST RV CENTER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The Company is an S corporation and, as such, no provision for income taxes
has been included in the accompanying financial statements as the Company's
taxable income is reported directly by the shareholders for tax purposes.
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $183,353, $198,905, and $157,562 for 1995, 1996, and 1997,
respectively, and $91,942 and $149,434 for the nine months ended September 30,
1997 and 1998, respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits and other items which require subjective decisions during the
course of the year. These interim estimates are subject to adjustment based upon
the final year-end results.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
New vehicles.................................... $5,430,099 $7,386,508 $7,379,865
Used vehicles................................... 720,052 956,401 886,263
Parts and accessories........................... 136,282 198,761 342,690
---------- ---------- ----------
$6,286,433 $8,541,670 $8,608,818
========== ========== ==========
</TABLE>
F-44
<PAGE> 124
EMERALD COAST RV CENTER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Land............................................ $ 468,717 $ 468,717 $ 468,717
Buildings and improvements...................... 938,635 1,129,792 1,131,147
Furniture and fixtures.......................... 72,978 78,834 78,836
Machinery, vehicles, and equipment.............. 320,493 307,590 321,005
Rental units.................................... 34,978 33,053 --
---------- ---------- ----------
1,835,801 2,017,986 1,999,705
Less accumulated depreciation................... 379,021 467,159 568,021
---------- ---------- ----------
$1,456,780 $1,550,827 $1,431,684
========== ========== ==========
</TABLE>
5. FLOOR PLAN NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Floor plan notes payable to finance companies, secured by
new and used vehicle inventories and contracts in
transit................................................... $5,375,674 $7,230,314
========== ==========
</TABLE>
Interest rates on floor plan notes vary by product line and product age.
Interest rates on the floor plan notes during the periods presented range from
prime minus 1/4% to prime +3%. The average rate was 8.8%, 8.3%, and 8.4% for
the years ended December 31, 1995, 1996, and 1997, respectively. The floor plan
notes are due upon the sale of the related inventory.
Interest paid for both the floor plan notes and long-term debt (see Note 6)
was $404,189, $441,796, and $549,076 for the years ended December 31, 1995,
1996, and 1997, respectively.
In 1998, the Company became a guarantor of $1,850,000 in debt for a
shareholder. This guarantee will expire at the date of the acquisition of the
Company by RV Center Inc.
F-45
<PAGE> 125
EMERALD COAST RV CENTER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1996 1997
-------- --------
<S> <C> <C>
Note payable to shareholder, beginning December 1994, 11.50%
interest rate, annual interest payments of $20,125,
maturing in December 2001................................. $175,000 $175,000
Note payable to bank beginning August 1993, 7.50% interest
rate, monthly payment of $645, maturing in July 1998; paid
in August 1997............................................ 10,949 --
Note payable to related party beginning September 1992, 9.0%
interest rate, monthly payment of $2,076, maturing in
August 1997............................................... 16,059 --
Note payable to bank beginning August 1991, 9.5% interest
rate, monthly payment of $1,703, maturing in August 1998,
secured by real estate.................................... 24,253 5,062
Note payable to bank beginning November 1993, 8.0% interest
rate, monthly payment of $3,164, maturing in November
1998, secured by real estate.............................. 57,569 23,021
Line of credit with bank, interest at prime rate, payable on
demand, secured by real estate............................ 81,802 80,242
Note payable to mortgage company beginning October 1991,
9.75% interest rate, monthly payment of $654, maturing in
2001...................................................... 29,324 24,562
-------- --------
394,956 307,887
Less current maturities..................................... 87,071 114,026
-------- --------
$307,885 $193,861
======== ========
</TABLE>
Future maturities of long-term debt as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................................ $114,026
1999........................................................ 6,283
2000........................................................ 6,924
2001........................................................ 180,654
--------
$307,887
========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability.
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
F-46
<PAGE> 126
EMERALD COAST RV CENTER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. RELATED PARTY TRANSACTIONS
The Company has balances due from and to its shareholder arising in the
normal course of business. The Company has a note payable to shareholder for
$175,000 which is classified as long-term debt (see Note 6).
In addition, the Company leases the Dothan, Alabama, facility under a
month-to-month operating lease from its shareholder. Rent expense related to the
facility was $30,000 for all years presented. Included in the due to shareholder
is $90,000 and $120,000 for December 31, 1996 and 1997, respectively, related to
this lease.
9. RETIREMENT PLAN
The Company maintains a 401(k) retirement plan which became effective
December 15, 1996. Employees are eligible to participate in the plan if they
have been employed by the Company for one year, are full-time employees, and are
at least 21 years of age. Participants are allowed to make elective income
deferrals to the plan per the plan specifications. The Company does not offer a
match for employee contributions and has not made any discretionary
contributions since the inception of the plan.
F-47
<PAGE> 127
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholder
Casey Motors, Inc.
D/B/A Casey's Recreational Sales
We have audited the accompanying balance sheets of Casey Motors, Inc. D/B/A
Casey's Recreational Sales as of December 31, 1997 and 1996, and the related
statements of operations, shareholder's equity, and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Casey Motors, Inc. D/B/A
Casey's Recreational Sales at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
September 18, 1998
Houston, Texas
F-48
<PAGE> 128
CASEY MOTORS, INC.
D/B/A CASEY'S RECREATIONAL SALES
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 301,589 $ 90,396 $ 792,998
Receivables........................................... 3,392 5,032 6,954
Inventories........................................... 3,550,341 4,657,934 4,107,984
Prepaid expenses and other............................ 14,192 19,796 45,039
---------- ---------- ----------
Total current assets.......................... 3,869,514 4,773,158 4,952,975
Property and equipment, net............................. 50,315 50,608 51,246
---------- ---------- ----------
Total assets.................................. $3,919,829 $4,823,766 $5,004,221
========== ========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Floor plan notes payable.............................. $3,088,645 $3,825,514 $3,477,668
Accounts payable...................................... 26,616 29,725 59,551
Accrued liabilities and other......................... 91,704 36,925 178,743
---------- ---------- ----------
Total current liabilities..................... 3,206,965 3,892,164 3,715,962
Commitments and contingencies
Shareholder's equity:
Common stock -- no par, 50,000 shares authorized,
1,000 shares issued and outstanding................ 1,000 1,000 1,000
Retained earnings..................................... 711,864 930,602 1,287,259
---------- ---------- ----------
Total shareholder's equity.................... 712,864 931,602 1,288,259
---------- ---------- ----------
Total liabilities and shareholder's equity.... $3,919,829 $4,823,766 $5,004,221
========== ========== ==========
</TABLE>
See accompanying notes.
F-49
<PAGE> 129
CASEY MOTORS, INC.
D/B/A CASEY'S RECREATIONAL SALES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Vehicle................... $16,803,586 $18,298,768 $20,583,766 $17,841,463 $18,791,484
Other, net................ 223,213 442,019 507,819 453,751 563,243
----------- ----------- ----------- ----------- -----------
17,026,799 18,740,787 21,091,585 18,295,214 19,354,727
Cost of sales............... 15,138,755 16,242,820 18,101,953 15,748,680 16,551,166
----------- ----------- ----------- ----------- -----------
Gross profit................ 1,888,044 2,497,967 2,989,632 2,546,534 2,803,561
Selling, general, and
administrative expenses... 1,075,975 1,488,489 1,787,401 1,435,725 1,653,343
Other income (expense):
Interest expense.......... (324,571) (312,311) (337,527) (263,559) (269,892)
Other, net................ 14,567 17,459 28,302 25,125 49,885
----------- ----------- ----------- ----------- -----------
(310,004) (294,852) (309,225) (238,434) (220,007)
----------- ----------- ----------- ----------- -----------
Net income.................. $ 502,065 $ 714,626 $ 893,006 $ 872,375 $ 930,211
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-50
<PAGE> 130
CASEY MOTORS, INC.
D/B/A CASEY'S RECREATIONAL SALES
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------ ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1994................................ $1,000 $ 214,613 $ 215,613
Distributions to shareholder.............................. -- (246,241) (246,241)
Net income................................................ -- 502,065 502,065
------ ---------- ----------
Balance at December 31, 1995................................ 1,000 470,437 471,437
Distributions to shareholder.............................. -- (473,199) (473,199)
Net income................................................ -- 714,626 714,626
------ ---------- ----------
Balance at December 31, 1996................................ 1,000 711,864 712,864
Distributions to shareholder.............................. -- (674,268) (674,268)
Net income................................................ -- 893,006 893,006
------ ---------- ----------
Balance at December 31, 1997................................ 1,000 930,602 931,602
Distributions to shareholder (unaudited).................. -- (573,554) (573,554)
Net income (unaudited).................................... -- 930,211 930,211
------ ---------- ----------
Balance at September 30, 1998 (unaudited)................... $1,000 $1,287,259 $1,288,259
====== ========== ==========
</TABLE>
See accompanying notes.
F-51
<PAGE> 131
CASEY MOTORS, INC.
D/B/A CASEY'S RECREATIONAL SALES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
------------------------------------ ----------------------
1995 1996 1997 1997 1998
---------- --------- ----------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income....................... $ 502,065 $ 714,626 $ 893,006 $ 872,375 $ 930,211
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation................... 7,299 9,189 13,493 10,120 12,202
Changes in operating assets and
liabilities:
Receivables................. (6,673) 6,138 (1,640) 1,732 (1,922)
Inventories................. (985,854) (664,782) (1,107,593) 66,238 549,950
Prepaid expenses and
other..................... (282) (3,124) (5,604) 1,169 (25,243)
Accounts payable............ 26,680 (65) 3,109 27,987 29,826
Accrued liabilities and
other..................... 86,968 (37,157) (54,779) (25,694) 141,818
Change in floor plan notes
payable................... 1,111,081 225,350 736,869 (213,165) (347,846)
---------- --------- ----------- --------- ----------
Net cash provided by operating
activities..................... 741,284 250,175 476,861 740,762 1,288,996
INVESTING ACTIVITIES
Purchase of property and
equipment...................... (5,679) (32,405) (13,786) -- (12,840)
Proceeds from sale of
equipment...................... -- -- -- 8,075 --
---------- --------- ----------- --------- ----------
Net cash (used in) provided by
investing activities........... (5,679) (32,405) (13,786) 8,075 (12,840)
FINANCING ACTIVITIES
Distributions to owner........... (246,242) (473,199) (674,268) (604,871) (573,554)
---------- --------- ----------- --------- ----------
Net cash used in financing
activities..................... (246,242) (473,199) (674,268) (604,871) (573,554)
---------- --------- ----------- --------- ----------
Net change in cash and cash
equivalents.................... 489,363 (255,429) (211,193) 143,966 702,602
Cash and cash equivalents at
beginning of year.............. 67,655 557,018 301,589 301,589 90,396
---------- --------- ----------- --------- ----------
Cash and cash equivalents at end
of year........................ $ 557,018 $ 301,589 $ 90,396 $ 445,555 $ 792,998
========== ========= =========== ========= ==========
</TABLE>
See accompanying notes.
F-52
<PAGE> 132
CASEY MOTORS, INC.
D/B/A CASEY'S RECREATIONAL SALES
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Casey Motors, Inc. D/B/A Casey's Recreational Sales (the "Company") was
incorporated in 1989 and operates a recreational vehicle ("RV") dealership in
the Denver, Colorado, area. In addition to new and used RV sales, the Company
offers complementary products and services including financing and insurance
contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles are stated at the lower of cost or
market. Cost is determined using the specific-identification method. New vehicle
cost includes the invoice price, delivery, and the cost of any special features
added to the vehicles. Used vehicle cost includes the purchase price plus
reconditioning and make-ready costs.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Leasehold improvements...................................... 40
Furniture and fixtures...................................... 7
Machinery, vehicles, and equipment.......................... 5
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered. Finance, insurance, and
warranty revenues are recognized at the time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees, insurance commissions,
and extended warranty contract income.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Insurance
income represents commissions earned on credit life, accident and disability
insurance sold on behalf of third-party insurance companies. Warranty income
represents revenues earned on extended warranty contracts sold on behalf of a
third party.
Income Taxes
The Company is an S corporation and, as such, no provision for income taxes
has been included in the accompanying financial statements as the Company's
taxable income is reported directly by the shareholder for tax purposes.
F-53
<PAGE> 133
CASEY MOTORS, INC.
D/B/A CASEY'S RECREATIONAL SALES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $164,989, $170,995, and $167,021 for 1995, 1996, and 1997,
respectively, and $155,000 and $199,677 for the nine months ended September 30,
1997 and 1998, respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits and other items which require subjective decisions during the
course of the year. These interim estimates are subject to adjustment based upon
the final year-end results.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
New vehicles.................................... $2,744,958 $3,437,089 $3,134,415
Used vehicles................................... 802,706 1,219,604 970,684
Parts and accessories........................... 2,677 1,241 2,885
---------- ---------- ----------
$3,550,341 $4,657,934 $4,107,984
========== ========== ==========
</TABLE>
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31
----------------- SEPTEMBER 30
1996 1997 1998
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Leasehold improvements............................... $ 6,105 $ 6,105 $ 7,821
Furniture and fixtures............................... 42,960 42,960 42,960
Machinery, vehicles, and equipment................... 35,969 49,755 51,892
------- ------- --------
85,034 98,820 102,673
Less accumulated depreciation........................ 34,719 48,212 51,427
------- ------- --------
$50,315 $50,608 $ 51,246
======= ======= ========
</TABLE>
F-54
<PAGE> 134
CASEY MOTORS, INC.
D/B/A CASEY'S RECREATIONAL SALES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. FLOOR PLAN NOTES PAYABLE AND LINE OF CREDIT
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Floor plan notes payable to finance companies, secured by
new and used vehicle inventories and contracts in
transit................................................... $3,088,645 $3,825,514
========== ==========
</TABLE>
Interest rates on the floor plan notes vary by product line and product
age. The Company obtains floor plan financing from several institutions and each
institution requires varying interest rates depending on the outstanding
balance. The average interest rate on floor plan notes was 13.3%, 11.0%, and
9.8% for the years ended December 31, 1995, 1996, and 1997, respectively. The
notes are due upon the sale of the related inventory.
Interest paid for the floor plan notes was $324,571, $312,311, and $337,527
for the years ended December 31, 1995, 1996, and 1997, respectively.
The Company maintains a $500,000 line of credit with a bank. This line is
specifically used to finance used inventory and the outstanding balance is
classified with floor plan payable. The amount drawn against the line of credit
was $183,975 and $423,000 at December 31, 1996 and 1997, respectively, and
$79,700 was drawn at September 30, 1998.
6. COMMITMENTS AND CONTINGENCIES
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability.
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
7. RELATED PARTY TRANSACTIONS
The Company leases operating facilities from the owner of the Company.
Payments for rent were $91,250, $126,941, and $153,986 for the years ended
December 31, 1995, 1996, and 1997, respectively.
8. RETIREMENT PLAN
The Company maintains a 401(k) retirement plan which became effective
September 1, 1997. Employees are eligible to participate in the plan if they
have been employed by the Company for one year, work at least 1,000 hours during
the year, and are at least 21 years of age. Participants are allowed to make
elective income deferrals to the plan per the plan specifications. The Company
can make discretionary contributions as authorized by the Board of Directors.
The Company made $3,352 in discretionary contributions during 1997.
F-55
<PAGE> 135
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholders
Stoltzfus Trailer Sales, Inc.
We have audited the accompanying balance sheets of Stoltzfus Trailer Sales,
Inc., as of October 31, 1997 and 1996, and the related statements of operations,
shareholders' equity, and cash flows for each of the two years in the period
ended October 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Stoltzfus Trailer Sales,
Inc., at October 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the two years in the period ended October 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
August 21, 1998
Houston, Texas
F-56
<PAGE> 136
STOLTZFUS TRAILER SALES, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31
----------------------- OCTOBER 31
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 208,410 $ 524,155 $ 197,598
Due from affiliate........................................ 216,613 166,613 60,402
Inventories, net.......................................... 4,094,634 4,337,354 4,039,888
Prepaid expenses and other................................ 143,195 74,876 45,023
Deferred tax asset (liability)............................ 51,819 (4,633) (6,645)
---------- ---------- ----------
Total current assets.............................. 4,714,671 5,098,365 4,336,266
Property and equipment, net................................. 333,408 349,560 397,041
Other assets................................................ 44,560 52,917 52,917
---------- ---------- ----------
Total assets...................................... $5,092,639 $5,500,842 $4,786,224
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable.................................. $2,540,519 $2,867,149 $2,804,874
Due to affiliates and shareholders........................ 1,065,309 911,856 855,646
Accounts payable.......................................... 629,725 789,327 111,893
Accrued liabilities, customer deposits, and other......... 287,858 281,687 276,119
---------- ---------- ----------
Total current liabilities......................... 4,523,411 4,850,019 4,048,532
Commitments and contingencies
Shareholders' equity:
Common -- $100 par value, 500 shares authorized, 400
shares issued.......................................... 40,000 40,000 40,000
Paid-in capital in excess of par.......................... 3,347 3,347 3,347
Retained earnings......................................... 589,246 670,841 757,710
---------- ---------- ----------
632,593 714,188 801,057
Treasury stock, 206 shares at cost........................ (63,365) (63,365) (63,365)
---------- ---------- ----------
Total shareholders' equity........................ 569,228 650,823 737,692
---------- ---------- ----------
Total liabilities and shareholders' equity........ $5,092,639 $5,500,842 $4,786,224
========== ========== ==========
</TABLE>
See accompanying notes.
F-57
<PAGE> 137
STOLTZFUS TRAILER SALES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 YEAR ENDED
------------------------- OCTOBER 31
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Vehicles............................................ $13,137,911 $13,218,654 $15,972,631
Parts and service................................... 2,511,838 2,185,296 2,179,837
Other, net.......................................... 279,915 317,111 462,391
----------- ----------- -----------
15,929,664 15,721,061 18,614,859
Cost of sales:
Vehicles............................................ 11,801,627 11,934,832 13,931,571
Parts and service................................... 1,370,445 1,110,799 1,180,047
----------- ----------- -----------
Gross profit.......................................... 2,757,592 2,675,430 3,503,241
Selling, general, and administrative expenses......... 2,663,225 2,245,685 3,072,307
Other income (expense):
Interest expense.................................... (280,065) (327,714) (331,990)
Other, net.......................................... 33,635 35,907 39,778
----------- ----------- -----------
(246,430) (291,807) (292,212)
----------- ----------- -----------
Income (loss) before income taxes..................... (152,063) 137,938 138,722
Income tax (benefit) expense.......................... (61,199) 56,143 51,853
----------- ----------- -----------
Net income (loss)..................................... $ (90,864) $ 81,795 $ 86,869
=========== =========== ===========
</TABLE>
See accompanying notes.
F-58
<PAGE> 138
STOLTZFUS TRAILER SALES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PAID-IN LESS
COMMON CAPITAL IN RETAINED TREASURY
STOCK EXCESS OF PAR EARNINGS STOCK TOTAL
------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at October 31, 1995............. $40,000 $3,347 $680,210 $63,365 $660,192
Distributions to shareholders......... -- -- (100) -- (100)
Net loss.............................. -- -- (90,864) -- (90,864)
------- ------ -------- ------- --------
Balance at October 31, 1996............. 40,000 3,347 589,246 63,365 569,228
Distributions to shareholders......... -- -- (200) -- (200)
Net income............................ -- -- 81,795 -- 81,795
------- ------ -------- ------- --------
Balance at October 31, 1997............. 40,000 3,347 670,841 63,365 650,823
Net income (unaudited)................ -- -- 86,869 -- 68,869
------- ------ -------- ------- --------
Balance at October 31, 1998
(unaudited)........................... $40,000 $3,347 $757,710 $63,365 $737,692
======= ====== ======== ======= ========
</TABLE>
See accompanying notes.
F-59
<PAGE> 139
STOLTZFUS TRAILER SALES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
---------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................................... $ (90,864) $ 81,795 $ 86,869
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation............................................ 85,669 99,967 82,610
Deferred income taxes................................... (51,819) 56,452 2,012
Gain on sale of assets.................................. (8,849) (106) (6,677)
Changes in operating assets and liabilities:
Accounts receivable.................................. 184,528 -- --
Due from affiliates and shareholders................. -- 50,000 106,211
Inventories.......................................... (831,630) (242,720) 297,466
Prepaid expenses and other........................... (106,337) 68,319 29,853
Other assets......................................... (8,107) (8,357) --
Change in floor plan notes payable................... 458,240 326,630 (62,275)
Accounts payable, accrued liabilities, customer
deposits, and other................................ 301,806 153,431 (683,002)
--------- --------- ---------
Net cash (used in) provided by operating activities....... (67,363) 585,411 (146,933)
INVESTING ACTIVITIES
Proceeds from sale of property and equipment.............. 55,032 87,912 52,054
Purchase of property and equipment........................ (185,009) (203,925) (175,468)
--------- --------- ---------
Net cash used in investing activities..................... (129,977) (116,013) (123,414)
FINANCING ACTIVITIES
Borrowings from affiliates and shareholders............... 213,866 -- 43,790
Payments to affiliates and shareholders................... -- (153,453) (100,000)
Distributions to shareholders............................. (100) (200) --
--------- --------- ---------
Net cash provided by (used in) financing activities....... 213,766 (153,653) (56,210)
--------- --------- ---------
Net change in cash and cash equivalents................... 16,426 315,745 (326,557)
Cash and cash equivalents at beginning of year............ 191,984 208,410 524,155
--------- --------- ---------
Cash and cash equivalents at end of year.................. $ 208,410 $ 524,155 $ 197,598
========= ========= =========
</TABLE>
See accompanying notes.
F-60
<PAGE> 140
STOLTZFUS TRAILER SALES, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Stoltzfus Trailer Sales, Inc. (the "Company") was incorporated in 1969 and
operates a recreational vehicle ("RV") dealership in the Philadelphia,
Pennsylvania area. In addition to new and used RV sales and boat sales, the
Company offers complementary products and services including parts, repair and
maintenance service, body shop services, and financing and insurance contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles and boats are stated at the lower of
cost or market. Cost is determined using the last-in, first-out ("LIFO") method.
New vehicle and boat costs include the invoice price, delivery, and the cost of
any special features added to the vehicles and boats. Used vehicle and boat
costs include the purchase price plus reconditioning and make-ready costs.
Parts, service, and other inventory costs are stated at the lower of cost or
market, cost being determined on the first-in, first-out ("FIFO") basis.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Leasehold improvements...................................... 31.5
Furniture and fixtures...................................... 5
Machinery, vehicles, and equipment.......................... 5-7
Rental units................................................ 5
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are sold. Finance, insurance, and warranty revenues are recognized at
the time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees, insurance commissions,
and extended warranty contract income.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Insurance
income represents commissions earned on credit life, accident, and disability
insurance sold in connection with the vehicle on behalf of third-party insurance
companies. Warranty income represents revenues earned on extended warranty
contracts sold on behalf of a third party.
Income Taxes
The Company follows the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. Accordingly, deferred income
taxes have been provided for the tax conse-
F-61
<PAGE> 141
STOLTZFUS TRAILER SALES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
quences in future years of differences between the tax basis of the Company's
assets and liabilities and enacted tax laws and statutory tax rates. Deferred
tax assets and/or liabilities are classified as current or noncurrent based on
the classification of the related asset or liability for financial reporting
purposes or based on the expected reversal date for deferred taxes that are not
related to an asset or liability. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be realized.
The provision for income taxes is the total of the tax payable or refundable for
the period and the change during the period in deferred tax assets and
liabilities.
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $152,056, $172,365, and $123,382 for 1996, 1997, and 1998,
respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. INVENTORIES
<TABLE>
<CAPTION>
OCTOBER 31
-------------------------------------
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
New vehicles and boats........................... $3,176,767 $3,290,407 $3,147,536
Used vehicles and boats.......................... 852,016 1,061,076 861,689
Parts and accessories............................ 381,291 305,627 331,233
---------- ---------- ----------
4,410,074 4,657,110 4,340,458
Excess of FIFO costs over LIFO costs............. (315,440) (319,756) (300,570)
---------- ---------- ----------
$4,094,634 $4,337,354 $4,039,888
========== ========== ==========
</TABLE>
F-62
<PAGE> 142
STOLTZFUS TRAILER SALES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
OCTOBER 31
---------------------------------
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Buildings and improvements.......................... $ 54,823 $ 66,369 $ 72,250
Furniture and fixtures.............................. 55,505 62,557 74,444
Machinery, vehicles, and equipment.................. 311,101 318,966 296,321
Rental units........................................ 188,345 192,436 207,231
-------- -------- --------
609,774 640,328 650,246
Less accumulated depreciation....................... 276,366 290,768 253,205
-------- -------- --------
$333,408 $349,560 $397,041
======== ======== ========
</TABLE>
5. FLOOR PLAN NOTES PAYABLE
<TABLE>
<CAPTION>
OCTOBER 31
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Floor plan notes payable to a finance company, secured by
new and used vehicle inventories and contracts in
transit................................................... $2,540,519 $2,867,149
========== ==========
</TABLE>
Interest rates on floor plan notes vary by product line and product age.
Interest rates on the floor plan are at prime for balances 90 days old and less
and at prime plus 1% for balances greater than 90 days at October 31, 1996 and
1997. The average interest rate on the floor plan notes was 8.8% and 8.2% for
the years ended October 31, 1996 and 1997, respectively. The notes are due upon
the sale of the related inventory.
Interest paid for the floor plan notes and other debt was $267,529 and
$317,053 for the years ended October 31, 1996 and 1997, respectively.
6. FEDERAL AND STATE INCOME TAXES
The Company accounts for income taxes under FASB Statements No. 109,
Accounting for Income Taxes (FASB 109). Deferred income tax assets and
liabilities are determined based upon differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
The components of the income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
1996 1997
-------- -------
<S> <C> <C>
Current..................................................... $ (9,380) $ (309)
Deferred.................................................... (51,819) 56,452
-------- -------
Total............................................. $(61,199) $56,143
======== =======
</TABLE>
F-63
<PAGE> 143
STOLTZFUS TRAILER SALES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred income taxes are as follows:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Deferred tax assets:
Contributions carryover................................... $ 2,598 $ 2,689
UNICAP.................................................... 4,643 8,365
Net operating loss carryforward........................... 3,062 3,162
Accrued liability......................................... 41,516 --
------- --------
Deferred tax assets......................................... 51,819 14,216
Less valuation allowance.................................... -- --
------- --------
Total deferred tax assets......................... 51,819 14,216
Deferred tax liabilities:
Fixed asset basis......................................... -- (18,849)
------- --------
Total deferred tax liabilities.................... -- (18,849)
------- --------
Total net deferred taxes.......................... $51,819 $ (4,633)
======= ========
</TABLE>
The provision for income taxes differs from amounts computed at the
statutory rates as follows:
<TABLE>
<CAPTION>
1996 1997
---------------- --------------
AMOUNT RATE AMOUNT RATE
-------- ----- ------- ----
<S> <C> <C> <C> <C>
Federal income taxes at statutory rate............ $(51,701) (34.0)% $46,899 34.0%
Permanent differences............................. 442 .3 126 .1
State income taxes, net of federal tax benefit.... (9,940) (15.3) 9,118 6.6
-------- ----- ------- ----
$(61,199) (49.0)% $56,143 40.7%
======== ===== ======= ====
</TABLE>
Taxes paid for the years ended October 31, 1996 and 1997 were $2,124 and
$-0-, respectively.
7. COMMITMENTS AND CONTINGENCIES
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability.
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
8. RELATED PARTY TRANSACTIONS
The Company has a receivable due from a related party of $216,613,
$166,613, and $60,403 as of October 31, 1996, 1997, and 1998.
F-64
<PAGE> 144
STOLTZFUS TRAILER SALES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company has notes payable with related parties. Interest is paid on
these notes at the rate of 10% per annum. The Company paid $72,991 in interest
during the current fiscal year. The balance due on these notes as of October 31,
1997 and 1998 was $842,674 and $786,464, respectively. The Company also has a
long-term note with a related party. The balance due at October 31, 1997 and
1998 was $69,182.
Operations of the Company are conducted on a site leased from a related
party. The lease is renewable annually. The rent was $14,000 per month effective
April 1, 1995 and the total rent expense of $168,000 was recorded in each of the
periods presented..
9. RETIREMENT PLAN
The Company maintains a retirement plan which became effective November 1,
1993. Employees are eligible to participate in the plan if they have been
employed by the Company for six months and are at least 20.5 years of age.
Participants are allowed to make elective income deferrals to the plan per the
plan specifications. The Company can make discretionary contributions as
authorized by the Board of Directors. The Company made discretionary
contributions of $55,493, $51,253 and $58,161 during 1996, 1997, and 1998,
respectively.
F-65
<PAGE> 145
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholders
Dusty's Camper World of Bartow, Inc.
We have audited the accompanying balance sheets of Dusty's Camper World of
Bartow, Inc., as of December 31, 1997 and 1996, and the related statements of
operations, shareholder's equity, and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dusty's Camper World of
Bartow, Inc., at December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
September 15, 1998
Houston, Texas
F-66
<PAGE> 146
DUSTY'S CAMPER WORLD OF BARTOW, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 113,461 $ 222,647 $ 348,474
Accounts receivable................................... 22,563 25,334 27,746
Inventories, net...................................... 3,966,630 4,123,777 4,254,966
Prepaid expenses and other............................ 35,041 38,827 39,200
---------- ---------- ----------
Total current assets.......................... 4,137,695 4,410,585 4,670,386
Property and equipment, net............................. 155,531 239,640 210,572
Other assets............................................ 12,017 -- 717
---------- ---------- ----------
Total assets.................................. $4,305,243 $4,650,225 $4,881,675
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable.............................. $3,486,496 $3,410,876 $3,450,663
Payable to shareholders............................... 100,000 -- --
Accounts payable...................................... 97,456 111,771 52,665
Accrued liabilities and other......................... 142,247 292,895 210,199
---------- ---------- ----------
Total current liabilities..................... 3,826,199 3,815,542 3,713,527
Deferred taxes.......................................... 74,930 165,709 165,709
---------- ---------- ----------
Total liabilities............................. 3,901,129 3,981,251 3,879,236
Commitments and contingencies
Shareholders' equity:
Common stock:
$1 par class A -- 2,000 shares authorized, issued,
and outstanding.................................. 2,000 2,000 2,000
$1 par nonvoting -- 15,000 shares authorized,
10,000 shares issued and outstanding............. 10,000 10,000 10,000
Additional paid-in capital............................ (9,792) (9,792) (9,792)
Retained earnings..................................... 401,906 666,766 1,000,231
---------- ---------- ----------
Total shareholders' equity.................... 404,114 668,974 1,002,439
---------- ---------- ----------
Total liabilities and shareholders' equity.... $4,305,243 $4,650,225 $4,881,675
========== ========== ==========
</TABLE>
See accompanying notes.
F-67
<PAGE> 147
DUSTY'S CAMPER WORLD OF BARTOW, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Vehicles.................. $18,157,456 $19,746,340 $18,930,143 $14,256,180 $16,354,009
Parts and service......... 942,639 1,128,452 1,227,871 933,390 1,118,975
Other, net................ 519,437 534,333 595,390 452,514 558,924
----------- ----------- ----------- ----------- -----------
19,619,532 21,409,125 20,753,404 15,642,084 18,031,908
Cost of sales:
Vehicles.................. 16,473,114 17,839,523 16,703,120 12,322,773 14,904,065
Parts and service......... 426,831 483,388 541,818 367,013 484,128
----------- ----------- ----------- ----------- -----------
Gross margin................ 2,719,587 3,086,214 3,508,466 2,952,298 2,643,715
Selling, general, and
administrative expenses... 2,407,813 2,758,298 2,844,591 2,058,394 1,946,110
Other income (expense):
Interest expense.......... (234,528) (232,592) (263,698) (208,659) (178,988)
Other, net................ 16,868 16,851 15,512 10,763 17,339
----------- ----------- ----------- ----------- -----------
(217,660) (215,741) (248,186) (197,896) (161,649)
----------- ----------- ----------- ----------- -----------
Income before income
taxes..................... 94,114 112,175 415,689 696,008 535,956
Income tax provision........ 35,827 42,973 150,829 262,719 202,491
----------- ----------- ----------- ----------- -----------
Net income.................. $ 58,287 $ 69,202 $ 264,860 $ 433,289 $ 333,465
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-68
<PAGE> 148
DUSTY'S CAMPER WORLD OF BARTOW, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994..................... $ 500 $ 1,708 $ 274,417 $ 276,625
Cancellation of common stock................... (500) -- -- (500)
Issuance of class A voting common stock........ 2,000 (1,917) -- 83
Issuance of nonvoting common stock............. 10,000 (9,583) -- 417
Net income..................................... -- -- 58,287 58,287
------- ------- ---------- ----------
Balance at December 31, 1995..................... 12,000 (9,792) 332,704 334,912
Net income..................................... -- -- 69,202 69,202
------- ------- ---------- ----------
Balance at December 31, 1996..................... 12,000 (9,792) 401,906 404,114
Net income..................................... -- -- 264,860 264,860
------- ------- ---------- ----------
Balance at December 31, 1997..................... 12,000 (9,792) 666,766 668,974
Net income (unaudited)......................... -- -- 333,465 333,465
------- ------- ---------- ----------
Balance at September 30, 1998 (unaudited)........ $12,000 $(9,792) $1,000,231 $1,002,439
======= ======= ========== ==========
</TABLE>
See accompanying notes.
F-69
<PAGE> 149
DUSTY'S CAMPER WORLD OF BARTOW, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------------- ---------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income......................... $ 58,287 $ 69,202 $ 264,860 $ 433,289 $ 333,465
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation..................... 48,396 27,174 32,107 21,737 31,970
Deferred taxes................... 54,788 22,174 90,779 -- --
Changes in operating assets and
liabilities:
Accounts receivable........... (51,413) 28,886 (2,771) (201,247) (2,412)
Inventories................... (484,660) (643,002) (157,147) 624,949 (131,189)
Prepaid expenses and other.... 60,086 (12,022) 8,231 8,231 (1,090)
Floor plan notes payable...... 482,714 418,472 (75,620) (974,518) 39,787
Accounts payable.............. (72,108) 68,070 14,315 57,049 (59,106)
Accrued liabilities and
other....................... (97,681) (65,764) 150,648 518,076 (82,696)
--------- --------- --------- --------- ---------
Net cash (used in) provided by
operating activities............. (1,591) (86,810) 325,402 487,566 128,729
INVESTING ACTIVITIES
Purchase of property and
equipment........................ (24,820) (301) (116,216) (43,498) (35,393)
Sale of property and equipment..... -- -- -- -- 32,491
--------- --------- --------- --------- ---------
Net cash used in investing
activities....................... (24,820) (301) (116,216) (43,498) (2,902)
FINANCING ACTIVITIES
Payments to shareholders........... -- (100,000) (100,000) (100,000) --
Borrowing from shareholders........ 166,562 -- -- -- --
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities............. 166,562 (100,000) (100,000) (100,000) --
--------- --------- --------- --------- ---------
Net change in cash and cash
equivalents...................... 140,151 (187,111) 109,186 344,068 125,827
Cash and cash equivalents at
beginning of year................ 160,421 300,572 113,461 113,461 222,647
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of
year............................. $ 300,572 $ 113,461 $ 222,647 $ 457,529 $ 348,474
========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
F-70
<PAGE> 150
DUSTY'S CAMPER WORLD OF BARTOW, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Dusty's Camper World of Bartow, Inc. (the "Company") was incorporated in
1985 and operates a recreational vehicle ("RV") dealership in Bartow, Florida.
In addition to new and used RV sales, the Company offers complementary products
and services including parts, repair and maintenance services, body shop
services, and financing and insurance contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles are stated at the lower of cost or
market. New vehicle cost is determined using the last-in, first-out ("LIFO")
method. New vehicle cost includes the invoice price, delivery, and the cost of
any special features added to the vehicles. Used vehicle cost is determined
using the specific-identification method. Used vehicle cost includes the
purchase price plus reconditioning and make-ready costs. Parts are stated at the
lower of cost or market, cost being determined on the first-in, first-out
("FIFO") basis.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 8
Furniture and fixtures...................................... 5
Machinery, vehicles, and equipment.......................... 5
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are sold. Finance, insurance, and warranty revenues are recognized at
the time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees, insurance commissions,
and extended warranty contract income.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Insurance
income represents commissions earned on credit life, accident, and disability
insurance sold in connection with the vehicle on behalf of third-party insurance
companies. Warranty income represents revenues earned on extended warranty
contracts sold on behalf of a third party.
Income Taxes
The Company follows the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. Accordingly, deferred income
taxes have been provided for the tax conse-
F-71
<PAGE> 151
DUSTY'S CAMPER WORLD OF BARTOW, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
quences in future years of differences between the tax basis of the Company's
assets and liabilities and enacted tax laws and statutory tax rates. Deferred
tax assets and/or liabilities are classified as current or noncurrent based on
the classification of the related asset or liability for financial reporting
purposes, or based on the expected reversal date for deferred taxes that are not
related to an asset or liability. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be realized.
The provision for income taxes is the total of the tax payable or refundable for
the period and the change during the period in deferred tax assets and
liabilities.
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expense totaled $153,031, $208,182, and $217,571 for 1995, 1996, and 1997,
respectively, and $149,572 and $142,729 for the nine months ended September 30,
1997 and 1998, respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits, income tax expense based upon estimates of annual effective tax
rates, LIFO reserves based upon anticipated year-end inventory balances and
inflation levels, and other items which require subjective decisions during the
course of the year. These interim estimates are subject to adjustment based upon
the final year-end results.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
New vehicles.................................... $3,122,241 $3,318,054 $3,569,454
Used vehicles................................... 920,695 891,674 820,417
Parts and accessories........................... 197,694 200,049 221,239
---------- ---------- ----------
4,240,630 4,409,777 4,611,110
Excess of FIFO costs over LIFO costs............ (274,000) (286,000) (356,144)
---------- ---------- ----------
$3,966,630 $4,123,777 $4,254,966
========== ========== ==========
</TABLE>
F-72
<PAGE> 152
DUSTY'S CAMPER WORLD OF BARTOW, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31
------------------- SEPTEMBER 30
1996 1997 1998
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Land............................................... $ -- $ 44,957 $ --
Buildings and improvements......................... 182,835 182,835 182,835
Furniture and fixtures............................. 17,858 17,858 17,858
Machinery, vehicles, and equipment................. 115,613 157,718 193,111
-------- -------- --------
316,306 403,368 393,804
Less accumulated depreciation...................... 160,775 163,728 183,232
-------- -------- --------
$155,531 $239,640 $210,572
======== ======== ========
</TABLE>
5. FLOOR PLAN NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Floor plan notes payable to finance companies, secured by
new and used vehicle inventory and contracts in transit... $3,486,496 $3,410,876
========== ==========
</TABLE>
Interest rates on floor plan notes vary by product line and product age.
Interest rates on the floor plan notes approximated prime during all periods
presented. The average interest rate on floor plan notes was 8.8%, 8.5%, and
8.3% for the years ended December 31, 1995, 1996, and 1997, respectively. The
notes are due upon the sale of the related inventory.
Interest paid for floor plan notes and all other debt was $224,239,
$233,866, and $267,039 for the years ended December 31, 1995, 1996, and 1997,
respectively.
6. INCOME TAXES
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- ------- --------
<S> <C> <C> <C>
Current:
Federal............................................. $(16,190) $17,759 $ 51,273
State............................................... (2,771) 3,040 8,777
-------- ------- --------
(18,961) 20,799 60,050
Deferred:
Federal............................................. 46,780 18,933 77,511
State............................................... 8,008 3,241 13,268
-------- ------- --------
Total....................................... $ 35,827 $42,973 $150,829
======== ======= ========
</TABLE>
F-73
<PAGE> 153
DUSTY'S CAMPER WORLD OF BARTOW, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax liabilities as of
December 31, 1996 and 1997 and September 30, 1998 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------ SEPTEMBER 30
1996 1997 1998
------- -------- ------------
<S> <C> <C> <C>
Deferred tax liabilities:
Inventory reserve................................. $51,001 $141,780 $141,780
Other............................................. 23,929 23,929 23,929
------- -------- --------
Deferred tax liabilities............................ $74,930 $165,709 $165,709
======= ======== ========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its facilities under operating leases from the owners of
the Company. Rent expense related to operating leases was $37,042, $47,170, and
$50,880 for 1995, 1996, and 1997, respectively. Future minimum lease payments
required under operating leases include:
<TABLE>
<S> <C>
1998..................................................... $ 66,420
1999..................................................... 51,000
--------
$117,420
========
</TABLE>
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability.
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
8. SIMPLIFIED EMPLOYEE PENSION PLAN ("SEPP")
The Company maintains an SEPP plan which became effective January 1, 1992.
Employees are eligible to participate in the plan if they have been employed by
the Company for three years and are at least 21 years of age. The Company can
make discretionary contributions as authorized by the Board of Directors of up
to 15% of an employee's salary. The Company made discretionary contributions of
$132,738, $138,274, and $167,077 during 1995, 1996, and 1997, respectively.
F-74
<PAGE> 154
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholders
Hall Enterprises, Inc.
We have audited the accompanying balance sheets of Hall Enterprises, Inc.,
as of December 31, 1997 and 1996, and the related statements of operations,
shareholders' deficit, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hall Enterprises, Inc., at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
September 19, 1998
Houston, Texas
F-75
<PAGE> 155
HALL ENTERPRISES, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------ SEPTEMBER 30
1996 1997 1998
----------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................ $ 252,410 $ 233,181 $ 397,619
Accounts receivable.................................. 114,784 269,154 90,295
Inventories, net..................................... 3,490,716 3,423,408 2,146,342
Prepaid expenses..................................... 10,077 13,127 21,856
----------- ---------- ----------
Total current assets......................... 3,867,987 3,938,870 2,656,112
Property and equipment, net............................ 186,015 1,058,954 1,051,354
Long-term notes receivable............................. 36,981 93,176 69,558
----------- ---------- ----------
Total assets................................. $ 4,090,983 $5,091,000 $3,777,024
=========== ========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Floor plan notes payable............................. $ 4,580,234 $4,370,964 $2,812,096
Payable to affiliate................................. 81,138 81,138 81,138
Accounts payable..................................... 77,248 312,391 82,305
Accrued liabilities and other........................ 171,698 181,220 177,132
----------- ---------- ----------
Total current liabilities.................... 4,910,318 4,945,713 3,152,671
Long-term notes payable................................ -- 601,278 562,259
Long-term notes payable to shareholder................. -- 140,000 140,000
Commitments and contingencies
Shareholders' deficit:
Common stock......................................... 200,000 331,000 331,000
Accumulated deficit.................................. (1,019,335) (926,991) (408,906)
----------- ---------- ----------
Total shareholders' deficit.................. (819,335) (595,991) (77,906)
----------- ---------- ----------
Total liabilities and shareholders'
deficit.................................... $ 4,090,983 $5,091,000 $3,777,024
=========== ========== ==========
</TABLE>
See accompanying notes.
F-76
<PAGE> 156
HALL ENTERPRISES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Vehicles.................. $13,763,258 $13,115,617 $15,674,467 $11,677,949 $11,114,676
Parts and service......... 549,345 589,882 670,348 533,208 507,673
Other, net................ 303,853 330,410 336,856 279,596 320,204
----------- ----------- ----------- ----------- -----------
14,616,456 14,035,909 16,681,671 12,490,753 11,942,553
Cost of sales:
Vehicles.................. 11,698,188 11,109,029 13,132,128 9,594,078 9,292,617
Parts and service......... 318,234 487,966 452,842 376,165 377,376
----------- ----------- ----------- ----------- -----------
Gross profit................ 2,600,034 2,438,914 3,096,701 2,520,510 2,272,560
Selling, general, and
administrative expenses... 2,260,005 2,176,904 2,639,682 2,092,485 1,392,335
Other income (expense):
Interest expense.......... (368,789) (379,047) (471,494) (327,681) (370,921)
Other, net................ 24,539 21,163 19,674 13,751 3,209
----------- ----------- ----------- ----------- -----------
(344,250) (357,884) (451,820) (313,930) (367,712)
----------- ----------- ----------- ----------- -----------
Net (loss) income........... $ (4,221) $ (95,874) $ 5,199 $ 114,095 $ 512,513
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-77
<PAGE> 157
HALL ENTERPRISES, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON ACCUMULATED
STOCK DEFICIT TOTAL
-------- ----------- ---------
<S> <C> <C> <C>
Balance at December 31, 1994............................ $200,000 $ (670,291) $(470,291)
Distributions to shareholders......................... -- (250,637) (250,637)
Net loss.............................................. -- (4,221) (4,221)
-------- ----------- ---------
Balance at December 31, 1995............................ 200,000 (925,149) (725,149)
Contributions to capital.............................. -- 1,688 1,688
Net loss.............................................. -- (95,874) (95,874)
-------- ----------- ---------
Balance at December 31, 1996............................ 200,000 (1,019,335) (819,335)
Contributions to capital.............................. -- 87,145 87,145
Issuance of stock..................................... 131,000 -- 131,000
Net income............................................ -- 5,199 5,199
-------- ----------- ---------
Balance at December 31, 1997............................ 331,000 (926,991) (595,991)
Contributions to capital (unaudited).................. -- 5,572 5,572
Net income (unaudited)................................ -- 512,513 512,513
-------- ----------- ---------
Balance at September 30, 1998 (unaudited)............... $331,000 $ (408,906) $ (77,906)
======== =========== =========
</TABLE>
See accompanying notes.
F-78
<PAGE> 158
HALL ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------------- -----------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income................. $ (4,221) $ (95,874) $ 5,199 $ 114,095 $ 512,513
Adjustments to reconcile net
(loss) income to net cash
provided by (used in) operating
activities:
Depreciation.................... 18,707 21,794 39,882 31,380 82,633
LIFO adjustment................. 108,378 235,095 (97,506) (44,759) (100,624)
Issuance of stock............... -- -- 131,000 131,000 --
Changes in operating assets and
liabilities:
Accounts receivable.......... (79,261) 10,477 (154,370) (216,213) 178,859
Inventories.................. (719,019) 158,261 164,814 403,206 1,377,690
Prepaid expenses and other... (3,235) 1,858 (3,050) (6,084) (8,729)
Long-term notes receivable... (66,682) (21,612) (56,195) (66,787) 23,618
Floor plan notes payable..... 905,562 (168,032) (209,270) (533,408) (1,558,868)
Accounts payable and accrued
liabilities................ 19,008 (143,124) 244,665 349,729 (234,174)
--------- --------- --------- --------- -----------
Net cash provided by (used in)
operating activities............ 179,237 (1,157) 65,169 162,159 272,918
INVESTING ACTIVITIES
Purchase of property and
equipment....................... (58,269) (81,722) (212,821) (111,514) (75,033)
--------- --------- --------- --------- -----------
Net cash used in investing
activities...................... (58,269) (81,722) (212,821) (111,514) (75,033)
FINANCING ACTIVITIES
Borrowings (repayments) on debt... -- -- 41,278 54,284 (39,019)
(Distributions) contributions of
capital......................... (250,637) 1,688 87,145 24,629 5,572
--------- --------- --------- --------- -----------
Net cash (used in) provided by
financing activities............ (250,637) 1,688 128,423 78,913 (33,447)
--------- --------- --------- --------- -----------
Net change in cash and cash
equivalents..................... (129,669) (81,191) (19,229) 129,558 164,438
Cash and cash equivalents at
beginning of year............... 463,270 333,601 252,410 252,410 233,181
--------- --------- --------- --------- -----------
Cash and cash equivalents at end
of year......................... $ 333,601 $ 252,410 $ 233,181 $ 381,968 $ 397,619
========= ========= ========= ========= ===========
</TABLE>
See accompanying notes.
F-79
<PAGE> 159
HALL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Hall Enterprises, Inc. (the "Company") was formed in 1965 and operated
three recreational vehicle ("RV") dealerships in the Lexington, Kentucky, area
until near the end of 1997, when the operations were consolidated into two
sites. In addition to new and used RV sales, the Company offers complementary
products and services including parts, repair and maintenance services, body
shop services, and financing and insurance contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles and parts inventory are stated at the
lower of cost or market. Cost is determined using the last-in, first-out
("LIFO") method. New vehicle cost includes the invoice price, delivery, and the
cost of any special features added to the vehicles. Used vehicle cost includes
the purchase price plus reconditioning and make-ready costs.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 7
Furniture and fixtures...................................... 5
Machinery, vehicles, and equipment.......................... 7
Rental units................................................ 5-7
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are sold. Finance, insurance, and warranty revenues are recognized at
the time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees, insurance and extended
warranty contract income, and rental fees.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. The
Company is charged back for a portion of these finance fees should the customer
terminate the finance contract prior to its scheduled maturity. The Company has
recorded an estimated allowance for these chargebacks based upon its historical
experience for prepayments or defaults on the finance contracts. The allowance
for chargebacks for December 31, 1996, December 31, 1997 and September 30, 1998
was $97,332, $113,532, and $114,000, respectively. Insurance income represents
commissions earned on credit life, accident, and disability insurance sold in
connection with the vehicle on behalf of third-party insurance companies.
Warranty income represents revenues earned on extended warranty contracts sold
on behalf of a third party.
F-80
<PAGE> 160
HALL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The Company is an S corporation and, as such, no provision for income taxes
has been included in the accompanying financial statements as the Company's
taxable income is reported directly by the shareholders for tax purposes.
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $270,236, $187,320, and $297,928 for 1995, 1996, and 1997,
respectively, and $232,783 and $113,817 for the nine months ended September 30,
1997 and 1998, respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits, LIFO reserves based upon anticipated year-end inventory balances
and inflation levels, and other items which require subjective decisions during
the course of the year. These interim estimates are subject to adjustment based
upon the final year-end results.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31
------------------------- SEPTEMBER 30
1996 1997 1998
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
New vehicles..................................... $ 3,464,172 $ 2,521,147 $ 2,271,439
Used vehicles.................................... 1,831,541 2,626,178 1,514,204
Parts and accessories............................ 167,578 151,152 138,768
----------- ----------- -----------
5,463,291 5,298,477 3,924,411
Excess of first-in, first-out costs over LIFO
costs.......................................... (1,972,575) (1,875,069) (1,778,069)
----------- ----------- -----------
$ 3,490,716 $ 3,423,408 $ 2,146,342
=========== =========== ===========
</TABLE>
The quantity in a LIFO inventory pool was reduced in 1997, resulting in
liquidation of LIFO layers carried at lower costs prevailing in prior years, as
compared with the cost of current year purchases. The effect of the liquidation
was to increase income by approximately $149,800 in 1997.
F-81
<PAGE> 161
HALL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31
--------------------- SEPTEMBER 30
1996 1997 1998
-------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Land.............................................. $ -- $ 748,800 $ 758,800
Buildings and improvements........................ 272,524 260,437 278,611
Furniture and fixtures............................ 102,027 104,049 93,770
Machinery, vehicles, and equipment................ 51,469 80,831 134,423
Rental units...................................... 75,284 220,008 223,554
-------- ---------- ----------
501,304 1,414,125 1,489,158
Less accumulated depreciation..................... 315,289 355,171 437,804
-------- ---------- ----------
$186,015 $1,058,954 $1,051,354
======== ========== ==========
</TABLE>
5. FLOOR PLAN NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Floor plan notes payable to finance companies, secured by
new and used vehicle inventory and contracts in transit... $4,580,234 $4,370,964
========== ==========
</TABLE>
Interest rates on floor plan notes vary by product line and product age.
Interest rates on the floor plan notes are approximately prime during the
periods presented. The average interest rate on floor plan notes was 8.8%, 8.3%,
and 8.4% for the years ended December 31, 1995, 1996, and 1997, respectively.
The notes are due upon the sale of the related inventory.
Interest paid for floor plan notes and all other debt (see Note 6) was
$368,412, $372,326, and $467,309 for the years ended December 31, 1995, 1996,
and 1997, respectively.
6. LONG-TERM NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
--------------- SEPTEMBER 30
1996 1997 1998
---- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Promissory note with a bank, payable in installments,
interest at prime (8.5% at December 31, 1997), due
September 10, 1999................................... $ -- $550,667 $522,667
Other.................................................. -- 50,611 39,592
---- -------- --------
$ -- $601,278 $562,259
==== ======== ========
</TABLE>
7. COMMON STOCK
Common stock has no par value. At December 31, 1995 and 1996, 1,000 shares
of common stock were authorized, issued, and outstanding. During 1997, 250
shares were issued in lieu of a bonus of $131,000, and at December 31, 1997,
1,250 shares of common stock were authorized, issued, and outstanding.
F-82
<PAGE> 162
HALL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its facilities under operating leases. Rent expenses
related to operating leases were $252,813, $242,614, and $233,913 for 1995,
1996, and 1997, respectively. Future minimum lease payments required under
operating leases include:
<TABLE>
<S> <C>
1998........................................................ $142,956
1999........................................................ 142,956
2000........................................................ 142,956
2001........................................................ 119,856
2002........................................................ 16,126
Thereafter.................................................. --
--------
$564,850
========
</TABLE>
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability.
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
9. RELATED PARTY TRANSACTIONS
In 1993, the Company borrowed $81,138 from a family member of the primary
shareholder which is payable on demand. The note bears an approximate interest
rate of 8.25% for 1996 and 8.5% for 1997. In 1997, the Company borrowed $140,000
from the primary shareholder with principal to be paid before September 10,
1999. The note bears an interest rate of 8.5%.
Included in the commitments and contingency footnote under the operating
lease disclosure is a lease from a shareholder. This lease bears payments of
$3,850 a month and expires on June 30, 2001.
10. RETIREMENT PLAN
The Company maintains a 401(k) retirement plan which became effective
January 1, 1992. Employees are eligible to participate in the plan if they have
been employed by the Company for one year and are at least 21 years of age.
Participants are allowed to make elective income deferrals to the plan per the
plan specifications. The Company can make discretionary contributions as
authorized by the Board of Directors in the total amount of the income deferral
to the plan per the plan specifications. The Company made discretionary
contributions of approximately $17,900, $18,300, and $16,100 during 1995, 1996,
and 1997, respectively.
11. NONCASH INVESTING AND FINANCING ACTIVITIES
In 1997, the Company borrowed $560,000 from a bank and $140,000 from the
primary shareholder (see Note 9) to purchase land. This noncash transaction has
been excluded from the statements of cash flows.
F-83
<PAGE> 163
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholder
Scott Motor Coach, Inc.
We have audited the accompanying balance sheets of Scott Motor Coach, Inc.,
as of December 31, 1997 and 1996, and the related statements of operations,
shareholder's equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Scott Motor Coach, Inc., at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
September 17, 1998
Houston, Texas
F-84
<PAGE> 164
SCOTT MOTOR COACH, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 343,675 $ 429,134 $ 974,200
Accounts receivable................................... 85,189 118,559 48,808
Inventories........................................... 3,547,077 3,752,943 3,945,152
Prepaid expenses and other............................ 27,502 38,841 50,424
---------- ---------- ----------
Total current assets.......................... 4,003,443 4,339,477 5,018,584
Property and equipment, net............................. 206,710 211,509 228,669
Other assets............................................ 9,452 15,586 9,652
---------- ---------- ----------
Total assets.................................. $4,219,605 $4,566,572 $5,256,905
========== ========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Floor plan notes payable.............................. $2,649,714 $2,919,746 $3,343,894
Accounts payable...................................... 169,338 73,875 250,206
Accrued liabilities................................... 149,218 320,642 404,577
Current maturities of affiliate notes payable......... 27,205 83,037 49,456
---------- ---------- ----------
Total current liabilities..................... 2,995,475 3,397,300 4,048,133
Affiliate notes payable, net of current maturities...... 427,539 398,068 237,083
Deferred income taxes................................... 126,618 93,414 67,128
Commitments and contingencies
Shareholder's equity:
Common stock -- $10 par value, 100 shares authorized,
issued, and outstanding............................ 1,000 1,000 1,000
Retained earnings..................................... 668,973 676,790 903,561
---------- ---------- ----------
Total shareholder's equity.................... 669,973 677,790 904,561
---------- ---------- ----------
Total liabilities and shareholder's equity.... $4,219,605 $4,566,572 $5,256,905
========== ========== ==========
</TABLE>
See accompanying notes.
F-85
<PAGE> 165
SCOTT MOTOR COACH, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
------------------------- -------------------------
1996 1997 1997 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Vehicles............................... $10,746,148 $12,548,945 $ 9,925,326 $10,355,474
Parts and service...................... 871,319 861,916 635,594 820,819
Other.................................. 523,082 574,753 517,353 572,099
----------- ----------- ----------- -----------
12,140,549 13,985,614 11,078,273 11,748,392
Cost of sales:
Vehicles............................... 9,181,263 10,693,101 8,391,898 8,899,333
Parts and service...................... 518,417 499,156 368,050 425,364
----------- ----------- ----------- -----------
Gross profit............................. 2,440,869 2,793,357 2,318,325 2,423,695
Selling, general, and administrative
expenses............................... 2,083,625 2,380,709 1,681,431 1,837,231
Other income (expense):
Interest expense....................... (299,759) (328,747) (245,512) (258,010)
Other, net............................. 44,676 (61,843) (111,308) 53,683
----------- ----------- ----------- -----------
(225,083) (390,590) (356,820) (204,327)
----------- ----------- ----------- -----------
Income before income taxes............... 102,161 22,058 280,074 382,137
Income tax expense....................... 44,230 14,241 120,179 155,366
----------- ----------- ----------- -----------
Net income............................... $ 57,931 $ 7,817 $ 159,895 $ 226,771
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-86
<PAGE> 166
SCOTT MOTOR COACH, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------ -------- --------
<S> <C> <C> <C>
Balance at December 31, 1995................................ $1,000 $611,042 $612,042
Net income................................................ -- 57,931 57,931
------ -------- --------
Balance at December 31, 1996................................ 1,000 668,973 669,973
Net income................................................ -- 7,817 7,817
------ -------- --------
Balance at December 31, 1997................................ 1,000 676,790 677,790
Net income (unaudited).................................... -- 226,771 226,771
------ -------- --------
Balance at September 30, 1998 (unaudited)................... $1,000 $903,561 $904,561
====== ======== ========
</TABLE>
See accompanying notes.
F-87
<PAGE> 167
SCOTT MOTOR COACH, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
----------------------- ---------------------
1996 1997 1997 1998
---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................................... $ 57,931 $ 7,817 $ 159,895 $ 226,771
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................. 90,704 125,960 94,470 85,298
Deferred income taxes........................ 41,304 (33,204) (24,903) (26,286)
Changes in operating assets and liabilities:
Accounts receivable....................... (19,796) (33,370) (49,762) 69,751
Inventories............................... (666,961) (205,866) 55,952 (252,709)
Prepaid expenses and other................ (14,172) (11,339) 2,710 (11,583)
Other assets.............................. (5,496) (6,134) (7,476) 5,934
Floor plan notes payable.................. 716,293 270,032 166,543 424,148
Accounts payable.......................... 73,638 (95,463) 67,950 176,331
Accrued liabilities....................... (14,890) 171,424 237,338 83,935
--------- --------- --------- ---------
Net cash provided by operating activities...... 258,555 189,857 702,717 781,590
INVESTING ACTIVITIES
Net purchases of property and equipment........ (96,923) (153,107) (124,461) (41,958)
Proceeds from sale of property and equipment... -- 22,349 -- --
--------- --------- --------- ---------
Net cash used in investing activities.......... (96,923) (130,758) (124,461) (41,958)
FINANCING ACTIVITIES
Net repayment of long-term debt................ (200,000) -- -- --
Net (repayments) borrowings to affiliates...... (6,554) 26,360 (29,622) (194,566)
--------- --------- --------- ---------
Net cash (used in) provided by financing
activities................................... (206,554) 26,360 (29,622) (194,566)
--------- --------- --------- ---------
Net change in cash and cash equivalents........ (44,922) 85,459 548,634 545,066
Cash and cash equivalents at beginning of
year......................................... 388,597 343,675 343,675 429,134
--------- --------- --------- ---------
Cash and cash equivalents at end of year....... $ 343,675 $ 429,134 $ 892,309 $ 974,200
========= ========= ========= =========
</TABLE>
See accompanying notes.
F-88
<PAGE> 168
SCOTT MOTOR COACH, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Scott Motor Coach, Inc. (the "Company") was incorporated in 1985 and
operates a recreational vehicle ("RV") dealership located in Lakewood, New
Jersey. In addition to new and used RV sales, the Company offers complementary
products and services including parts, repair and maintenance services, body
shop services, and financing and insurance contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For the purpose of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles are stated at the lower of cost or
market. Cost is determined using the specific-identification method. New vehicle
cost includes the invoice price, delivery, and the cost of any special features
added to the vehicles. Used vehicle cost includes the purchase price plus
reconditioning and make-ready costs. Parts are stated at the lower of cost or
market, cost being determined on the first-in, first-out basis.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes. Estimated useful lives of the assets are as
follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Furniture and fixtures...................................... 5-7
Leasehold improvements...................................... 5-10
Machinery, equipment, and vehicles.......................... 5
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are delivered. Finance and insurance revenues are recognized at the
time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees, insurance commissions,
and extended warranty contract income, and rental fees.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Insurance
income represents commissions earned on credit life, accident, and disability
insurance sold in connection with the vehicle on behalf of third-party insurance
companies. Warranty income represents revenues earned on extended warranty
contracts sold on behalf of a third party.
Income Taxes
The Company follows the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. Accordingly, deferred income
taxes have been provided for the tax consequences in future years of differences
between the tax basis of the Company's assets and liabilities and enacted
F-89
<PAGE> 169
SCOTT MOTOR COACH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
tax laws and statutory tax rates. Deferred tax assets and/or liabilities are
classified as current or noncurrent based on the classification of the related
asset or liability for financial reporting purposes or based on the expected
reversal date for deferred taxes that are not related to an asset or liability.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized. The provision for income taxes is
the total of the tax payable or refundable for the period and the change during
the period in deferred tax assets and liabilities.
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $229,376 and $223,402 for the years ended December 31, 1996 and
1997, respectively, and $177,956 and $212,457 for the nine months ended
September 30, 1997 and 1998, respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits, income tax expense based upon estimates of annual effective tax
rates and other items which require subjective decisions during the course of
the year. These interim estimates are subject to adjustment based upon the final
year-end results.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
New vehicles.................................... $2,625,540 $2,821,866 $2,799,915
Used vehicles................................... 802,083 811,943 983,965
Parts and accessories........................... 119,454 119,134 161,272
---------- ---------- ----------
$3,547,077 $3,752,943 $3,945,152
========== ========== ==========
</TABLE>
F-90
<PAGE> 170
SCOTT MOTOR COACH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31
------------------- SEPTEMBER 30
1996 1997 1998
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Buildings and improvements......................... $105,032 $113,896 $115,352
Furniture and fixtures............................. 209,645 238,393 257,279
Machinery, equipment, and vehicles................. 144,861 133,963 155,579
-------- -------- --------
459,538 486,252 528,210
Less accumulated depreciation...................... 252,828 274,743 299,541
-------- -------- --------
$206,710 $211,509 $228,669
======== ======== ========
</TABLE>
5. FLOOR PLAN NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Floor plan notes payable to finance company
secured by new vehicles....................... $2,343,732 $2,517,891 $3,053,730
Floor plan notes payable to finance company
secured by rental vehicles.................... 305,982 401,855 290,164
---------- ---------- ----------
$2,649,714 $2,919,746 $3,343,894
========== ========== ==========
</TABLE>
Interest rates on floor plan notes vary by product line and product age.
During 1996 and 1997, interest for new collateral is computed at a rate between
8.5% and 11.5% depending on who manufactured the inventory. For rental units,
interest is computed at 10.0% on the unpaid balance. The average interest rate
on floor plan notes was 11.1% and 10.2% for the years ended December 31, 1996
and 1997, respectively. The notes are due upon the sale of the related
inventory.
Interest paid for both floor plan notes and affiliated notes was $296,089
and $325,495 for the years ended December 31, 1996 and 1997, respectively.
6. RELATED PARTY TRANSACTIONS
The Company has an unsecured note payable to the Company's shareholder
dated December 31, 1996, with interest payable monthly at 8% per annum and
principal to be repaid January 31, 2000. The total amount of the notes payable
to stockholder was $366,143 and $419,709 at December 31, 1996 and 1997,
respectively.
The Company has an unsecured note payable to a relative of the shareholder
dated December 31, 1994, which is payable in 60 monthly installments of
principal and interest of $2,777, with interest at 8% per annum. The total
amount of these notes payable was $88,601 and $61,396 at December 31, 1996 and
1997, respectively.
The Company has a lease agreement for its land and facility, dated March
11, 1992, with a company owned by the shareholder and his spouse. The monthly
rental for this facility is $10,000 for a term of 15 years, with a ten-year
renewal option at $10,000 per month.
F-91
<PAGE> 171
SCOTT MOTOR COACH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The components of the income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1997
------- --------
<S> <C> <C>
Current..................................................... $ 2,926 $ 47,445
Deferred.................................................... 41,304 (33,204)
------- --------
$44,230 $ 14,241
======= ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Other..................................................... $ 797 $ 23,170
--------- ---------
Deferred tax assets......................................... 797 23,170
Less valuation allowance.................................... -- --
--------- ---------
Total deferred tax assets......................... 797 23,170
Deferred tax liabilities:
Depreciation.............................................. (3,763) (998)
Extended warranties....................................... (100,989) (115,586)
Other..................................................... (22,664) --
--------- ---------
Total deferred tax liabilities.................... (127,415) (116,584)
--------- ---------
Total net deferred taxes.......................... $(126,618) $ (93,414)
========= =========
</TABLE>
Taxes paid for the years ended December 31, 1996 and 1997 were $16,855 and
$8,500, respectively.
8. COMMITMENTS AND CONTINGENCIES
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability.
In 1998, a lawsuit was settled in which the Company was a defendant during
1997. The Company estimated the litigation settlement and all related costs and
recorded this liability of approximately $165,000 in other expenses in 1997.
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
F-92
<PAGE> 172
SCOTT MOTOR COACH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. RETIREMENT PLAN
The Company maintains a 401(k) retirement plan for eligible employees.
Employees are eligible to participate in the plan if they have been employed by
the Company for at least one year and work at least 20 hours per week.
Participants are allowed to defer up to 15% of their gross weekly salary to the
plan. The Company can also make discretionary matching contributions. The
Company did not make any contributions during 1996. The Company made
discretionary matching contributions of $10,000 for the year ended December 31,
1997.
F-93
<PAGE> 173
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholders
American RV Centers, Inc.
We have audited the accompanying combined balance sheets at December 31,
1997 and 1996, of the corporations listed in Note 1, and the related combined
statements of operations, shareholders' equity, and cash flows for the years
then ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position at December 31, 1997
and 1996, of the corporations listed in Note 1, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
August 7, 1998
Houston, Texas
F-94
<PAGE> 174
AMERICAN RV CENTERS, INC.
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 50,751 $ 57,762 $ 150,532
Accounts receivable................................... 54,781 109,624 79,706
Inventories........................................... 4,041,748 3,627,630 3,425,644
---------- ---------- ----------
Total current assets.......................... 4,147,280 3,795,016 3,655,882
Property and equipment, net............................. 70,625 53,031 67,166
Other assets............................................ 25,790 9,578 19,480
---------- ---------- ----------
Total assets.................................. $4,243,695 $3,857,625 $3,742,528
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable.............................. $3,445,311 $3,005,998 $2,696,285
Short-term notes payable.............................. 200,000 165,000 50,025
Accounts payable...................................... 18,693 10,637 27,359
Accrued liabilities and other......................... 180,780 92,672 362,594
Interest payable...................................... 37,563 22,255 44,222
---------- ---------- ----------
Total current liabilities..................... 3,882,347 3,296,562 3,180,485
Notes payable to shareholder............................ 331,600 325,600 300,300
Commitments and contingencies
Shareholders' equity:
Common stock -- no par value, 11,000 shares
authorized, 800 shares issued and outstanding...... 9,000 9,000 9,000
Retained earnings..................................... 20,748 226,463 252,743
---------- ---------- ----------
Total shareholders' equity.................... 29,748 235,463 261,743
---------- ---------- ----------
Total liabilities and shareholders' equity.... $4,243,695 $3,857,625 $3,742,528
========== ========== ==========
</TABLE>
See accompanying notes.
F-95
<PAGE> 175
AMERICAN RV CENTERS, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
------------------------- -------------------------
1996 1997 1997 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Vehicles................................ $13,440,789 $13,434,149 $11,383,878 $ 9,848,104
Parts and service....................... 929,331 1,044,291 848,227 733,745
Other, net.............................. 381,736 606,089 511,582 612,703
----------- ----------- ----------- -----------
14,751,856 15,084,529 12,743,687 11,194,552
Cost of sales:
Vehicles................................ 11,459,329 11,606,341 9,872,509 8,373,748
Parts and service....................... 440,230 519,612 441,004 436,463
----------- ----------- ----------- -----------
Gross profit.............................. 2,852,297 2,958,576 2,430,174 2,384,341
Selling, general, and administrative
expenses................................ 2,611,673 2,469,440 1,898,683 2,154,228
Other income (expense):
Interest expense........................ (392,165) (320,159) (257,769) (238,301)
Other, net.............................. 66,878 47,838 20,412 39,468
----------- ----------- ----------- -----------
(325,287) (272,321) (237,357) (198,833)
----------- ----------- ----------- -----------
Income (loss) before income taxes......... (84,663) 216,815 294,134 31,280
Income tax expense (benefit).............. (7,998) 11,100 4,000 5,000
----------- ----------- ----------- -----------
Net income (loss)......................... $ (76,665) $ 205,715 $ 290,134 $ 26,280
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-96
<PAGE> 176
AMERICAN RV CENTERS, INC.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
COMMON EARNINGS
STOCK (DEFICIT) TOTAL
------ --------- --------
<S> <C> <C> <C>
Balance at December 31, 1995................................ $9,000 $ 97,413 $106,413
Net loss.................................................. -- (76,665) (76,665)
------ -------- --------
Balance at December 31, 1996................................ 9,000 20,748 29,748
Net income................................................ -- 205,715 205,715
------ -------- --------
Balance at December 31, 1997................................ 9,000 226,463 235,463
Net income (unaudited).................................... -- 26,280 26,280
------ -------- --------
Balance at September 30, 1998 (unaudited)................... $9,000 $252,743 $261,743
====== ======== ========
</TABLE>
See accompanying notes.
F-97
<PAGE> 177
AMERICAN RV CENTERS, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
----------------------- -----------------------
1996 1997 1997 1998
---------- ---------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income................................ $ (76,665) $ 205,715 $ 290,134 $ 26,280
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating
activities:
Depreciation................................... 22,758 29,627 14,185 22,018
Changes in operating assets and liabilities:
Accounts receivable and other............... (9,935) (54,843) (28,958) 29,918
Inventories................................. (942,655) 414,118 1,089,695 201,986
Other assets................................ (22,562) 16,212 233 (9,902)
Accounts payable............................ 7,096 (8,056) 25,461 16,722
Accrued liabilities and other............... 84,968 (103,416) 142,088 291,889
Floor plan notes payable.................... 794,387 (439,313) (1,111,048) (309,713)
--------- --------- ----------- ---------
Net cash (used in) provided by operating
activities..................................... (142,608) 60,044 421,790 269,198
INVESTING ACTIVITIES
Purchase of property and equipment............... (74,969) (12,033) (7,448) (36,153)
--------- --------- ----------- ---------
Net cash used in investing activities............ (74,969) (12,033) (7,448) (36,153)
FINANCING ACTIVITIES
Borrowings on debt............................... 319,000 225,000 -- --
Repayments of debt............................... (124,400) (266,000) (266,000) (140,275)
--------- --------- ----------- ---------
Net cash provided by (used in) financing
activities..................................... 194,600 (41,000) (266,000) (140,275)
--------- --------- ----------- ---------
Net change in cash and cash equivalents.......... (22,977) 7,011 148,342 92,770
Cash and cash equivalents at beginning of year... 73,728 50,751 50,751 57,762
--------- --------- ----------- ---------
Cash and cash equivalents at end of year......... $ 50,751 $ 57,762 $ 199,093 $ 150,532
========= ========= =========== =========
</TABLE>
See accompanying notes.
F-98
<PAGE> 178
AMERICAN RV CENTERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
The combined financial statements consist of the financial statements of
American RV Centers, Inc. (a Tennessee corporation operating a recreational
vehicle ("RV") dealership in Memphis, Tennessee) and American RV Centers, Inc.
(a Mississippi corporation operating an RV dealership in Olive Branch,
Mississippi) (collectively, the "Company"), which were incorporated in 1990 (as
Brown RV Center, Inc.) and 1995 (as DeSoto RV Center, Inc.), respectively.
Although the dealerships operate separately, they are under common ownership
and, therefore, their financial statements have been combined and all material
intercompany transactions have been eliminated. In addition to new and used RV
sales, the Company offers complementary products and services including parts,
repair and maintenance services, body shop services, and financing and insurance
contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles are stated at the lower of cost or
market. Cost is determined using the specific-identification method. New vehicle
cost includes the invoice price, delivery, and the cost of any special features
added to the vehicles. Used vehicle cost includes the purchase price plus
reconditioning and make-ready costs. Parts are stated at the lower of cost or
market, cost being determined on the first-in, first-out basis.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Buildings and improvements.................................. 7-31.5
Furniture and fixtures...................................... 5-7
Machinery, vehicles, and equipment.......................... 5
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are sold. Finance, insurance and warranty revenues are recognized at
the time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees, insurance commissions and
extended warranty contract income.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Insurance
income represents commissions earned on credit life, accident, and disability
insurance sold in connection with the vehicle on behalf of third-party insurance
companies. Warranty income represents revenues earned on extended warranty
contracts sold on behalf of a third party.
F-99
<PAGE> 179
AMERICAN RV CENTERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
As of December 31, 1996, the Company had elected to treat the Tennessee
location as an S-Corporation while the Mississippi location was taxed as a
C-Corporation and accounted for its income taxes under the liability method.
Deferred income taxes have been provided in the accompanying financial
statements in 1996 for the net tax effects of temporary differences between the
carrying amount of the assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
Effective for the year ended December 31, 1997, and for subsequent years,
the shareholder has elected S-Corporation status for both the Tennessee location
and the Mississippi location. As an S-Corporation, no provision for federal
income taxes has been included in the accompanying financial statements since
the Company's taxable income is reported directly by the shareholder.
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $235,993 and $275,834 for 1996 and 1997, respectively, and
$230,361 and $267,039 for the nine months ended September 30, 1997 and 1998,
respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits, and other items which require subjective decisions during the
course of the year. These interim estimates are subject to adjustment based upon
the final year-end results.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
New vehicles.................................... $3,521,115 $2,979,073 $2,736,980
Used vehicles................................... 362,541 455,800 479,420
Parts and accessories........................... 158,092 192,757 209,244
---------- ---------- ----------
$4,041,748 $3,627,630 $3,425,644
========== ========== ==========
</TABLE>
F-100
<PAGE> 180
AMERICAN RV CENTERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31
------------------- SEPTEMBER 30
1996 1997 1998
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Buildings and improvements......................... $ 63,493 $ 63,493 $ 82,662
Furniture and fixtures............................. 82,619 93,522 93,825
Machinery, vehicles, and equipment................. 34,617 35,747 37,760
-------- -------- --------
180,729 192,762 214,247
Less accumulated depreciation...................... 110,104 139,731 147,081
-------- -------- --------
$ 70,625 $ 53,031 $ 67,166
======== ======== ========
</TABLE>
5. FLOOR PLAN NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Floor plan notes payable to finance companies, secured by
new and used vehicle inventories and contracts in
transit................................................... $3,445,311 $3,005,998
========== ==========
</TABLE>
Interest rates on floor plan notes vary by product line and product age.
Interest rates on the floor plan notes ranged from prime to prime plus 3% and
from prime to prime plus 2% for 1996 and 1997, respectively. The average
interest rate on floor plan notes was 10.6% and 8.9% for the years ended
December 31, 1996 and 1997, respectively. The notes are due upon the sale of the
related inventory.
Interest paid for both the floor plan notes, short-term notes payable, and
long-term debt was $380,645 and $298,564 for the years ended December 31, 1996
and 1997, respectively.
6. SHORT-TERM NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1996 1997
-------- --------
<S> <C> <C>
Unsecured $100,000 line of credit payable to a bank;
interest rate at prime plus 1%............................ $100,000 $ --
Unsecured $100,000 note payable to a bank; interest rate at
8.5%; principal and interest due January 2, 1998.......... 100,000 100,000
Unsecured $100,000 line of credit payable to a bank;
interest rate at 9%....................................... -- 65,000
-------- --------
$200,000 $165,000
======== ========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases one of its facilities from the shareholder under an
operating lease (see Note 8). Future minimum lease payments required under all
operating leases are as follows:
<TABLE>
<S> <C>
1998...................................................... $180,151
1999...................................................... 40,000
--------
$220,151
========
</TABLE>
F-101
<PAGE> 181
AMERICAN RV CENTERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability.
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
8. RELATED PARTY TRANSACTIONS
The Company has outstanding promissory notes payable to its shareholder
amounting to $331,600, $325,600, and $300,300 at December 31, 1996 and 1997 and
September 30, 1998, respectively. The promissory notes payable are unsecured and
are subordinate to certain floor plan notes payable. All outstanding notes
payable to shareholder are due upon demand and accrue interest at 8% per year.
Interest paid on the promissory notes during 1996 and 1997 amounted to $18,690
and $40,514, respectively. Since these notes payable are subordinate to the
floor plan notes being paid off, they are classified as long-term.
The Company leases one of its facilities under a long-term operating lease
from the shareholder of the Company. Rent expense paid to the shareholder for
the years ended December 31, 1996 and 1997 and the nine months ended September
30, 1997 and 1998 amounted to $97,870 and $97,389 and $71,600 and $72,000,
respectively.
The Company pays fees to a former owner of the Company's business under a
non-competition agreement that amounts to $6,000 per month through July 31,
1998. The Company also provides management services to an affiliate in return
for management fees. Management fee income from the affiliate in 1996 and 1997
was $71,735 and $25,000, respectively, recorded in other income. The affiliate
was sold in March 1998.
F-102
<PAGE> 182
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Owner
Roy B. Padgett d/b/a Young's RV Center
We have audited the accompanying balance sheet of Roy B. Padgett d/b/a
Young's RV Center as of December 31, 1997, and the related statements of
operations, owner's equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Roy B. Padgett d/b/a Young's
RV Center at December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
August 20, 1998
Houston, Texas
F-103
<PAGE> 183
ROY B. PADGETT
D/B/A YOUNG'S RV CENTER
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 388,485 $ 646,127
Accounts receivable....................................... 80,899 74,247
Account receivable -- related party....................... 21,652 --
Inventories............................................... 3,892,095 3,237,895
Prepaid expenses and other................................ 11,974 48,466
---------- ----------
Total current assets.............................. 4,395,105 4,006,735
Property and equipment, net................................. 133,600 173,251
---------- ----------
Total assets...................................... $4,528,705 $4,179,986
========== ==========
LIABILITIES AND OWNER'S EQUITY
Current liabilities:
Floor plan notes payable.................................. $2,988,044 $2,254,697
Floor plan notes payable -- affiliate..................... 50,000 50,000
Accounts payable.......................................... 124,032 128,965
Accrued liabilities and other............................. 152,067 101,490
---------- ----------
Total current liabilities......................... 3,314,143 2,535,152
Commitments and contingencies
Owner's equity.............................................. 1,214,562 1,644,834
---------- ----------
Total liabilities and owner's equity.............. $4,528,705 $4,179,986
========== ==========
</TABLE>
See accompanying notes.
F-104
<PAGE> 184
ROY B. PADGETT
D/B/A YOUNG'S RV CENTER
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30
DECEMBER 31 -------------------------
1997 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Vehicles............................................ $11,340,340 $ 9,001,896 $ 8,583,036
Parts and services.................................. 2,515,255 1,878,116 2,043,648
Other, net.......................................... 424,135 359,494 354,467
----------- ----------- -----------
14,279,730 11,239,506 10,981,151
Cost of sales:
Vehicles............................................ 9,939,482 7,839,472 7,553,344
Parts and services.................................. 1,303,727 993,250 1,014,469
----------- ----------- -----------
Gross profit.......................................... 3,036,521 2,406,784 2,413,338
Selling, general, and administrative expenses......... 2,243,068 1,728,779 1,647,509
Other income (expense):
Interest expense.................................... (208,497) (148,525) (158,662)
----------- ----------- -----------
Net income............................................ $ 584,956 $ 529,480 $ 607,167
=========== =========== ===========
</TABLE>
See accompanying notes.
F-105
<PAGE> 185
ROY B. PADGETT
D/B/A YOUNG'S RV CENTER
STATEMENTS OF OWNER'S EQUITY
<TABLE>
<CAPTION>
OWNER'S
EQUITY
----------
<S> <C>
Balance at December 31, 1996................................ $1,204,226
Distributions to owner.................................... (574,620)
Net income................................................ 584,956
----------
Balance at December 31, 1997................................ 1,214,562
Distribution to owner (unaudited)......................... (97,907)
Net income (unaudited).................................... 607,167
----------
Balance at September 30, 1998 (unaudited)................... $1,644,834
==========
</TABLE>
See accompanying notes.
F-106
<PAGE> 186
ROY B. PADGETT
D/B/A YOUNG'S RV CENTER
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30
DECEMBER 31 ---------------------
1997 1997 1998
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 584,956 $ 529,480 $ 607,167
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 64,433 41,020 33,934
Changes in operating assets and liabilities:
Accounts receivable.................................... 134,050 147,593 (11,190)
Account receivable -- related party.................... (11,331) (11,331) --
Inventories............................................ (865,001) 156,347 654,200
Prepaid expenses and other............................. (9,319) (7,508) (36,492)
Floor plan notes payable............................... 620,557 (249,323) (772,841)
Accounts payable....................................... 83,379 155,624 4,933
Accrued liabilities and other.......................... 25,861 (47,129) (50,577)
--------- --------- ---------
Net cash provided by operating activities................... 627,585 714,773 429,134
INVESTING ACTIVITIES
Purchase of property and equipment.......................... (109,205) (95,631) (73,585)
--------- --------- ---------
Net cash used in investing activities....................... (109,205) (95,631) (73,585)
FINANCING ACTIVITIES
Distributions to owner...................................... (574,620) (496,740) (97,907)
--------- --------- ---------
Net cash used in financing activities....................... (574,620) (496,740) (97,907)
--------- --------- ---------
Net change in cash and cash equivalents..................... (56,240) 122,402 257,642
Cash and cash equivalents at beginning of year.............. 444,725 444,725 388,485
--------- --------- ---------
Cash and cash equivalents at end of year.................... $ 388,485 $ 567,127 $ 646,127
========= ========= =========
</TABLE>
See accompanying notes.
F-107
<PAGE> 187
ROY B. PADGETT
D/B/A YOUNG'S RV CENTER
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Roy B. Padgett d/b/a Young's RV Center (the "Company") was formed in 1988
and operates a recreational vehicle ("RV") dealership located in Lancaster,
California. The Company is a sole proprietorship and, therefore, all income
taxes are the responsibility of the Company's owner. In addition to new and used
RV sales, the Company offers complementary products and services including
parts, repair and maintenance services, body shop services, and financing
contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles are stated at the lower of cost or
market. Cost is determined using the specific-identification method. New vehicle
cost includes the invoice price, delivery, and the cost of any special features
added to the vehicles. Used vehicle cost includes the purchase price plus
reconditioning and make-ready costs. Parts are stated at the lower of cost or
market, cost being determined on the first-in, first-out basis.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Leasehold improvements...................................... 15
Furniture and fixtures...................................... 5
Machinery, vehicles, and equipment.......................... 5
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are sold. Finance and warranty contract revenues are recognized at the
time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees and extended warranty
contract income.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Warranty
contract income represents revenues earned on extended warranty contracts sold
on behalf of a third party.
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $90,649 for 1997, and $74,327 and $91,865 for the nine months
ended September 30, 1997 and 1998, respectively.
F-108
<PAGE> 188
ROY B. PADGETT
D/B/A YOUNG'S RV CENTER
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits and other items which require subjective decisions during the
course of the year. These interim estimates are subject to adjustment based upon
the final year-end results.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
New vehicles................................................ $2,844,191 $2,540,185
Used vehicles............................................... 818,434 442,884
Parts and accessories....................................... 229,470 254,826
---------- ----------
$3,892,095 $3,237,895
========== ==========
</TABLE>
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Leasehold improvements...................................... $ 52,342 $107,343
Furniture and fixtures...................................... 258,568 277,152
Machinery, vehicles, and equipment.......................... 73,800 73,800
-------- --------
384,710 458,295
Less accumulated depreciation............................... 251,110 285,044
-------- --------
$133,600 $173,251
======== ========
</TABLE>
5. FLOOR PLAN NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
1997
-----------
<S> <C>
Floor plan notes payable to financing companies, secured by
new and used vehicle inventories and contracts in
transit................................................... $2,988,044
Floor plan notes payable to affiliates, secured by new and
used vehicle inventories and contracts in transit......... 50,000
----------
$3,038,044
==========
</TABLE>
F-109
<PAGE> 189
ROY B. PADGETT
D/B/A YOUNG'S RV CENTER
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Interest rates on floor plan notes vary by product line and product age.
Interest rates on the floor plan from financing companies ranged from 7.5% to
prime plus .5% at December 31, 1997. The average interest rate on floor plan
notes to financing companies was 8% for the year ended December 31, 1997.
Interest rate on the floor plan to affiliate was fixed at 9%. The notes are due
upon the sale of the related inventory.
Interest paid for floor plan notes was $208,497 for the year ended December
31, 1997.
6. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its facilities under operating leases. Rent expenses
related to operating leases were $248,167 for 1997, and $185,619 and $187,644
for the nine months ended September 30, 1997 and 1998, respectively. Future
minimum lease payments required under operating leases include:
<TABLE>
<S> <C>
1998........................................................ $250,191
1999........................................................ 250,191
2000........................................................ 130,191
2001........................................................ 70,191
2002........................................................ 70,191
Thereafter.................................................. $ 35,096
</TABLE>
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability.
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
F-110
<PAGE> 190
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholders
RV's Northwest, Inc.
We have audited the accompanying balance sheet of RV's Northwest, Inc., as
of December 31, 1997, and the related statements of operations, shareholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RV's Northwest, Inc., at
December 31, 1997, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
September 19, 1998
Houston, Texas
F-111
<PAGE> 191
RV'S NORTHWEST, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 26,955 $ 31,070
Accounts receivable....................................... 11,102 64,926
Inventories............................................... 2,040,084 3,756,628
Cash surrender value of life insurance policy............. 52,443 54,266
Deferred tax asset........................................ 51,238 --
---------- ----------
Total current assets.............................. 2,181,822 3,906,890
Property and equipment, net................................. 72,178 76,287
---------- ----------
Total assets...................................... $2,254,000 $3,983,177
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable.................................. $1,836,241 $2,923,408
Floor plan notes payable -- affiliates.................... -- 209,920
Accounts payable.......................................... 168,220 177,006
Accrued liabilities and other............................. 35,578 207,602
Taxes payable............................................. 11,392 55,491
---------- ----------
Total current liabilities......................... 2,051,431 3,573,427
Commitments and contingencies
Shareholders' equity:
Common stock -- $1 par value, 50,000 shares authorized,
50,000 shares issued and outstanding................... 50,000 50,000
Retained earnings......................................... 152,569 359,750
---------- ----------
Total shareholders' equity........................ 202,569 409,750
---------- ----------
Total liabilities and shareholders' equity........ $2,254,000 $3,983,177
========== ==========
</TABLE>
See accompanying notes.
F-112
<PAGE> 192
RV'S NORTHWEST, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30
DECEMBER 31 ------------------------
1997 1997 1998
----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Vehicles............................................. $ 9,848,962 $8,346,953 $ 9,328,421
Parts and service.................................... 694,212 566,934 710,353
Other, net........................................... 175,610 109,816 140,780
----------- ---------- -----------
10,718,784 9,023,703 10,179,554
Cost of sales:
Vehicles............................................. 8,523,058 7,070,246 7,942,132
Parts and service.................................... 393,569 316,643 443,374
----------- ---------- -----------
Gross profit........................................... 1,802,157 1,636,814 1,794,048
Selling, general, and administrative expenses.......... 1,558,292 1,257,124 1,286,597
Other income (expense):
Interest expense..................................... (176,680) (143,311) (194,791)
Other, net........................................... 1,292 3,636 1,250
----------- ---------- -----------
(175,388) (139,675) (193,541)
----------- ---------- -----------
Income before income taxes............................. 68,477 240,015 313,910
Income tax expense..................................... 14,017 11,392 106,729
----------- ---------- -----------
Net income............................................. $ 54,460 $ 228,623 $ 207,181
=========== ========== ===========
</TABLE>
See accompanying notes.
F-113
<PAGE> 193
RV'S NORTHWEST, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------- -------- --------
<S> <C> <C> <C>
Balance at December 31, 1996................................ $50,000 $ 98,109 $148,109
Net income................................................ -- 54,460 54,460
------- -------- --------
Balance at December 31, 1997................................ 50,000 152,569 202,569
Net income (unaudited).................................... -- 207,181 207,181
------- -------- --------
Balance at September 30, 1998 (unaudited)................... $50,000 $359,750 $409,750
======= ======== ========
</TABLE>
See accompanying notes.
F-114
<PAGE> 194
RV'S NORTHWEST, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30
DECEMBER 31 -----------------------
1997 1997 1998
----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................................. $ 54,460 $ 228,623 $ 207,181
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation.......................................... 30,550 25,077 29,419
Changes in operating assets and liabilities:
Accounts receivable................................ (7,371) (57,422) (53,824)
Inventories........................................ (366,290) 27,814 (1,716,544)
Prepaid expenses and other......................... 15,142 15,142 --
Deferred tax asset................................. -- -- 51,238
Floor plan payable................................. 364,765 (103,238) 1,297,087
Accounts payable................................... (78,919) (77,656) 8,786
Accrued liabilities and other...................... (15,032) 48,036 172,024
Taxes payable...................................... 11,392 11,392 44,099
--------- --------- -----------
Net cash provided by operating activities............... 8,697 117,768 39,466
INVESTING ACTIVITIES
Increase in value of life insurance policy.............. (9,837) (7,378) (1,823)
Purchase of property and equipment...................... (28,332) (2,306) (33,528)
--------- --------- -----------
Net cash used in investing activities................... (38,169) (9,684) (35,351)
FINANCING ACTIVITIES
Payments to affiliates.................................. (45,000) (45,000) --
--------- --------- -----------
Net cash used in financing activities................... (45,000) (45,000) --
--------- --------- -----------
Net change in cash and cash equivalents................. (74,472) 63,084 4,115
Cash and cash equivalents at beginning of year.......... 101,427 101,427 26,955
--------- --------- -----------
Cash and cash equivalents at end of year................ $ 26,955 $ 164,511 $ 31,070
========= ========= ===========
</TABLE>
See accompanying notes.
F-115
<PAGE> 195
RV'S NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
RV's Northwest, Inc. (the "Company"), was incorporated in 1985 and operates
a recreational vehicle ("RV") dealership in the Spokane, Washington area. In
July 1998, the Company purchased the assets of another dealer located in the
same area for approximately $130,000 in cash and assumed approximately $1.6
million in debt for the inventory. In addition to new and used RV sales, the
Company offers complementary products and services including parts, repair and
maintenance services, body shop services, and financing and insurance contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles are stated at the lower of cost or
market. Cost is determined using the specific-identification method. New vehicle
cost includes the invoice price, delivery, and the cost of any special features
added to the vehicles. Used vehicle cost includes the purchase price plus
reconditioning and make-ready costs. Parts are stated at the lower of cost or
market, cost being determined on the first-in, first-out basis.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Furniture and fixtures...................................... 5-7
Machinery, vehicles, and equipment.......................... 5-7
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are sold. Finance, insurance, and warranty revenues are recognized at
the time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees and insurance and warranty
contract commissions.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Insurance
income represents commissions earned on credit life, accident, and disability
insurance sold in connection with the vehicle on behalf of third-party insurance
companies. Warranty income represents revenues earned on extended warranty
contracts sold on behalf of a third party.
Income Taxes
The Company follows the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. Accordingly, deferred income
taxes have been provided for the tax consequences in future years of differences
between the tax basis of the Company's assets and liabilities and enacted
F-116
<PAGE> 196
RV'S NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
tax laws and statutory tax rates. Deferred tax assets and/or liabilities are
classified as current or noncurrent based on the classification of the related
asset or liability for financial reporting purposes or based on the expected
reversal date for deferred taxes that are not related to an asset or liability.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized. The provision for income taxes is
the total of the tax payable or refundable for the period and the change during
the period in deferred tax assets and liabilities, except for a $51,238 deferred
tax asset at December 31, 1997. This deferred tax asset is the result of an
accrual of a litigation claim in 1996 (see Note 7). This deferred tax asset was
realized in 1998 when the claim was settled.
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $99,341 for 1997, and $74,744 and $115,321 for the nine months
ended September 30, 1997 and 1998, respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits, income tax expense based upon estimates of annual effective tax
rates, and other items which require subjective decisions during the course of
the year. These interim estimates are subject to adjustment based upon the final
year-end results.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
New vehicles................................................ $1,346,448 $2,771,837
Used vehicles............................................... 594,761 835,129
Parts and accessories....................................... 98,875 149,662
---------- ----------
$2,040,084 $3,756,628
========== ==========
</TABLE>
F-117
<PAGE> 197
RV'S NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Furniture and fixtures...................................... $ 56,277 $ 60,573
Machinery and equipment..................................... 141,508 178,989
-------- --------
197,785 239,562
Less accumulated depreciation............................... 125,607 163,275
-------- --------
$ 72,178 $ 76,287
======== ========
</TABLE>
5. FLOOR PLAN PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
1997
-----------
<S> <C>
Floor plan payable to finance companies, secured by new and
used vehicle inventories and contracts in transit......... $1,836,241
==========
</TABLE>
Interest rates on the floor plan notes vary by product line and product
age. The average interest rate on floor plan notes was 9.2% for the year ended
December 31, 1997. The notes are due upon the sale of the related inventory.
Interest paid for both the floor plan notes was $167,973 for the year ended
December 31, 1997.
6. FEDERAL INCOME TAXES
Taxes paid for the year ended December 31, 1997 were $2,625.
7. COMMITMENTS AND CONTINGENCIES
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability. The Company was involved in
litigation regarding a warranty claim on a vehicle purchased in 1994 because the
manufacturer responsible for this claim was liquidated in bankruptcy. The
Company settled the claim in 1998 and incurred a total loss of $150,700
(including legal costs), which approximated the amount accrued in previous
years' results.
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
F-118
<PAGE> 198
RV'S NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. RELATED PARTY TRANSACTIONS
The Company leases its facility from the owner under an operating lease.
Rent expense related to the lease was $96,000 in 1997. Future minimum lease
payments required under the lease include:
<TABLE>
<S> <C>
1998........................................................ $ 133,200
1999........................................................ 153,250
2000........................................................ 160,050
2001........................................................ 163,350
2002........................................................ 141,650
Thereafter.................................................. 790,500
----------
$1,542,000
==========
</TABLE>
9. RETIREMENT PLAN
The Company maintains a retirement plan which became effective July 1,
1986. Employees are eligible to participate in the plan if they have been
employed by the Company for one year, work 1,000 hours during the year, and are
at least 21 years of age. Participants are allowed to make elective income
deferrals to the plan per the plan specifications. The Company's contributions
to the plan are at the discretion of the Company. The Company made discretionary
contributions of $15,000 to the plan during 1997.
F-119
<PAGE> 199
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholders
Little Valley Auto & RV Sales, Inc.
We have audited the accompanying balance sheets of Little Valley Auto & RV
Sales, Inc., as of December 31, 1997 and 1996, and the related statements of
operations, shareholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Little Valley Auto & RV
Sales, Inc., at December 31, 1997 and 1996, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
October 20, 1998
Houston, Texas
F-120
<PAGE> 200
LITTLE VALLEY AUTO & RV SALES, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 10,008 $ 123,834 $ 78,118
Accounts receivable, net of allowances of $44,081 and
$88,408 in 1996 and 1997, respectively............. 219,971 198,593 227,087
Inventories........................................... 2,527,027 3,278,303 3,180,210
Prepaid expenses and other............................ 3,688 5,175 11,984
---------- ---------- ----------
Total current assets.......................... 2,760,694 3,605,905 3,497,399
Property and equipment, net............................. 179,087 199,087 270,285
Other assets:
Restricted cash and cash equivalents.................. 633,681 142,400 370,574
Restricted securities................................. 207,053 606,183 652,640
---------- ---------- ----------
Total assets.................................. $3,780,515 $4,553,575 $4,790,898
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable.............................. $2,087,231 $2,443,499 $2,218,862
Long-term debt, current portion....................... 235,534 183,563 90,593
Accounts payable and accrued expenses................. 535,854 597,926 843,403
Customer deposits..................................... 10,200 4,413 30,295
---------- ---------- ----------
Total current liabilities..................... 2,868,819 3,229,401 3,183,153
Long-term debt, net of current portion.................. 213,741 169,672 108,209
---------- ---------- ----------
Total liabilities............................. 3,082,560 3,399,073 3,291,362
Commitments and contingencies
Shareholders' equity:
Common stock -- $5 par value, 1,000 shares authorized,
1,000 shares issued and outstanding................ 5,000 5,000 5,000
Retained earnings..................................... 846,799 1,271,595 1,600,695
Net unrealized gain on securities available for
sale............................................... 1,156 32,907 48,841
Less cost of treasury stock, 500 shares............... (155,000) (155,000) (155,000)
---------- ---------- ----------
697,955 1,154,502 1,499,536
---------- ---------- ----------
Total liabilities and shareholders' equity.... $3,780,515 $4,553,575 $4,790,898
========== ========== ==========
</TABLE>
See accompanying notes.
F-121
<PAGE> 201
LITTLE VALLEY AUTO & RV SALES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
------------------------- -----------------------
1996 1997 1997 1998
----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Vehicles and boats....................... $10,517,578 $11,011,743 $9,174,283 $8,412,098
Parts and service........................ 313,986 417,679 323,957 359,656
Other, net............................... 331,840 355,510 282,707 181,512
----------- ----------- ---------- ----------
11,163,404 11,784,932 9,780,947 8,953,266
Cost of sales:
Vehicles and boats....................... 9,188,821 9,281,712 7,622,568 7,103,588
Parts and service........................ 274,681 230,653 164,359 258,256
----------- ----------- ---------- ----------
Gross profit............................... 1,699,902 2,272,567 1,994,020 1,591,422
Selling, general, and administrative
expenses................................. 1,105,650 1,294,156 911,687 806,256
Other income (expenses):
Interest expense......................... (180,160) (172,630) (132,393) (126,585)
Other, net............................... (10) 5,922 (81) 1,462
----------- ----------- ---------- ----------
(180,170) (166,708) (132,474) (125,123)
----------- ----------- ---------- ----------
Net income................................. $ 414,082 $ 811,703 $ 949,859 $ 660,043
=========== =========== ========== ==========
</TABLE>
See accompanying notes.
F-122
<PAGE> 202
LITTLE VALLEY AUTO & RV SALES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN ON
SECURITIES
COMMON RETAINED AVAILABLE TREASURY
STOCK EARNINGS FOR SALE STOCK TOTAL
------ ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995.......... $5,000 $ 686,315 $ -- $(155,000) $ 536,315
Distributions to shareholders....... -- (253,598) -- -- (253,598)
Net income.......................... -- 414,082 -- -- 414,082
Change in unrealized gain on
securities available for sale.... -- -- 1,156 -- 1,156
------ ---------- ------- --------- ----------
Balance at December 31, 1996.......... 5,000 846,799 1,156 (155,000) 697,955
Distributions to shareholders....... -- (386,907) -- -- (386,907)
Net income.......................... -- 811,703 -- -- 811,703
Change in unrealized gain on
securities available for sale.... -- -- 31,751 -- 31,751
------ ---------- ------- --------- ----------
Balance at December 31, 1997.......... 5,000 1,271,595 32,907 (155,000) 1,154,502
Distributions to shareholders
(unaudited)...................... -- (330,943) -- -- (330,943)
Net income (unaudited).............. -- 660,043 -- -- 660,043
Change in unrealized gain on
securities available for sale
(unaudited)...................... -- -- 15,934 -- 15,934
------ ---------- ------- --------- ----------
Balance at September 30, 1998
(unaudited)......................... $5,000 $1,600,695 $48,841 $(155,000) $1,499,536
====== ========== ======= ========= ==========
</TABLE>
See accompanying notes.
F-123
<PAGE> 203
LITTLE VALLEY AUTO & RV SALES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
----------------------- ---------------------
1996 1997 1997 1998
---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................................... $ 414,082 $ 811,703 $ 949,859 $ 660,043
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................. 28,977 27,810 19,611 26,465
Gain on sale of property and equipment....... -- (14,057) -- --
Changes in operating assets and liabilities:
Accounts receivable....................... (69,001) 21,378 (26,525) (28,494)
Inventories............................... (141,513) (751,276) (443,694) 98,093
Prepaid expenses and other................ 436 (1,487) (2,539) (6,809)
Accounts payable and accrued expenses..... 119,567 62,072 35,623 245,477
Customer deposits......................... 9,450 (5,787) 44,223 25,882
Floor plan notes payable.................. (4,347) 356,268 (105,853) (224,637)
--------- --------- --------- ---------
Net cash provided by operating activities...... 357,651 506,624 470,705 796,020
INVESTING ACTIVITIES
Purchases of investments....................... (205,897) (367,379) (327,390) (30,523)
Purchases of equipment......................... (80,628) (72,541) (40,274) (97,663)
Disposals of equipment......................... -- 38,788 -- --
--------- --------- --------- ---------
Net cash used in investing activities.......... (286,525) (401,132) (367,664) (128,186)
FINANCING ACTIVITIES
Net (increase) decrease in restricted cash..... (123,752) 491,282 199,533 (228,174)
Proceeds from long-term borrowings............. 390,123 277,012 105,925 --
Payments on long-term borrowings............... (333,033) (373,053) -- (154,433)
Distribution to stockholder.................... (253,598) (386,907) (324,114) (330,943)
--------- --------- --------- ---------
Net cash (used in) provided by financing
activities................................... (320,260) 8,334 (18,656) (713,550)
--------- --------- --------- ---------
Net (decrease) increase in cash and cash
equivalents.................................. (249,134) 113,826 84,385 (45,716)
Cash and cash equivalents at beginning of
year......................................... 259,142 10,008 10,008 123,834
--------- --------- --------- ---------
Cash and cash equivalents at end of year....... $ 10,008 $ 123,834 $ 94,393 $ 78,118
========= ========= ========= =========
</TABLE>
See accompanying notes.
F-124
<PAGE> 204
LITTLE VALLEY AUTO & RV SALES, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Little Valley Auto & RV Sales, Inc. (the "Company") was incorporated in
1984 and operates a dealership in West Virginia. In addition to new and used RV
sales and boat sales, the Company offers complementary products and services
including parts, repair and maintenance services, body shop services, and
financing and insurance contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Securities Available for Sale
Securities available for sale are those marketable equity and debt
securities that the Company intends to hold for an indefinite period of time,
but not necessarily to maturity. Any decision to sell a security classified as
available for sale would be based on various factors, including significant
movements in interest rates, changes in the mix of the Company's assets and
liabilities, liquidity needs, and other similar factors. Securities available
for sale are carried at fair value. Unrealized gains or losses are reported as
increases or decreases in shareholders' equity. Realized gains and losses are
determined on the basis of the specific securities sold.
Inventories
Inventories of new and used vehicles and boats are stated at the lower of
cost or market. Cost is determined using the specific-identification method. New
vehicle and boat costs include the invoice price, delivery, and the cost of any
special features added to the vehicles and boats. Used vehicle and boat costs
include the purchase price plus reconditioning and make-ready costs. Parts are
stated at the lower of cost or market, cost being determined on the first-in,
first-out basis.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are primarily as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 7-10
Furniture and fixtures...................................... 7-10
Machinery, vehicles, and equipment.......................... 5-10
Rental units................................................ 5
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are sold. Finance, insurance, and warranty revenues are recognized at
the time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees, insurance commissions,
extended warranty contract and rental fees income.
F-125
<PAGE> 205
LITTLE VALLEY AUTO & RV SALES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. The
Company is charged back for a portion of these finance fees should the customer
terminate the finance contract prior to its scheduled maturity. The Company has
recorded an estimated allowance for these chargebacks based upon its historical
experience for prepayments or defaults on the finance contracts. The allowance
for chargebacks for December 31, 1996 and December 31, 1997 was $77,000 and
$71,000, respectively. Insurance income represents commissions earned on credit
life, accident, and disability insurance sold in connection with the vehicle on
behalf of third-party insurance companies. Extended warranty income represents
revenues earned on extended warranty contracts sold on behalf of a third party.
Income Taxes
The Company is an S corporation and, as such, no provision for income taxes
has been included in the accompanying financial statements as the Company's
taxable income is reported directly by the shareholders for tax purposes.
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $54,735 and $56,258 for 1996 and 1997, respectively, and
$43,344 and $46,146 for the nine months ended September 30, 1997 and 1998,
respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits and other items which require subjective decisions during the
course of the year. These interim estimates are subject to adjustment based upon
the final year-end results.
F-126
<PAGE> 206
LITTLE VALLEY AUTO & RV SALES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. SECURITIES
Cost and value of marketable debt and equity securities at December 31,
1996 and 1997 are as follows:
<TABLE>
<CAPTION>
NET NET
UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1996
185,612 units in trust for government cash reserves
with varying maturities over the next five
years............................................ $185,612 $ -- $ -- $185,612
617 shares at Horizon, Bancorp, Inc................ 13,071 -- (333) 12,738
330 shares at Huntington Bankshares................ 7,214 1,489 -- 8,703
-------- ------- ----- --------
$205,897 $ 1,489 $(333) $207,053
======== ======= ===== ========
1997
520,639 units in trust for government cash reserves
with varying maturities over the next five
years............................................ $520,639 $ 1,344 $ -- $521,983
2,172 shares at Horizon, Bancorp, Inc.............. 45,423 25,709 -- 71,132
363 shares at Huntington Bankshares................ 7,214 5,854 -- 13,068
-------- ------- ----- --------
$573,276 $32,907 $ -- $606,183
======== ======= ===== ========
</TABLE>
4. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- SEPTEMBER 30
1996 1997 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
New vehicles.................................... $1,569,899 $1,823,675 $1,667,007
Used vehicles................................... 671,548 1,247,201 1,375,831
Parts and accessories........................... 285,580 207,427 137,372
---------- ---------- ----------
$2,527,027 $3,278,303 $3,180,210
========== ========== ==========
</TABLE>
5. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31
------------------- SEPTEMBER 30
1996 1997 1998
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Buildings and improvements......................... $101,121 $ 94,521 $121,227
Furniture and fixtures............................. 20,478 20,659 25,809
Machinery, vehicles, and equipment................. 139,830 138,429 182,934
Rental units....................................... 65,611 49,599 100,134
Construction in progress........................... -- 20,307 --
-------- -------- --------
327,040 323,515 430,104
Less accumulated depreciation...................... 147,953 124,428 159,819
-------- -------- --------
$179,087 $199,087 $270,285
======== ======== ========
</TABLE>
F-127
<PAGE> 207
LITTLE VALLEY AUTO & RV SALES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. FLOOR PLAN NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Floor plan notes payable to finance companies, secured by
new and used vehicle inventories and contracts in
transit................................................... $2,087,231 $2,443,499
========== ==========
</TABLE>
Interest rates on floor plan notes vary by product line and product age.
Interest rates on the floor plan notes are fixed and range from 8.125% to 9.5%
during the periods presented. The average interest rate on floor plan notes was
8.7% and 9.2% for the years ended December 31, 1996 and 1997, respectively. The
notes are due upon the sale of the related inventory.
Interest paid for both the floor plan notes and long-term debt (see Note 7)
was $232,154 and $232,593 for the years ended December 31, 1996 and 1997,
respectively.
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1996 1997
-------- --------
<S> <C> <C>
Promissory note to a former shareholder, payable in monthly
installments of $2,981, including interest at 10%,
maturing June 2000........................................ $102,282 $ 78,841
Term notes with various banks, payable in installments,
including interest ranging from 5.99% to 10.75% at
December 31, 1996 and 7.99% to 10% at December 31, 1997,
maturing at varying dates................................. 346,993 274,394
-------- --------
449,275 353,235
Less current maturities..................................... 235,534 183,563
-------- --------
$213,741 $169,672
======== ========
</TABLE>
Future maturities of long-term debt as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................................ $183,563
1999........................................................ 99,676
2000........................................................ 69,996
--------
$353,235
========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability.
Customer Installment Contracts
The Company has sold customer installment contracts to local financing
institutions with full recourse. The Company recognizes the revenue on the sale
as described in Note 2 and records an accrual to match estimated losses, the
balance of which was $358,000, $335,000, and $414,000 at December 31, 1996 and
1997 and September 30, 1998, respectively. The financing institutions require
the Company to keep restricted cash and marketable accounts which are released
to the Company as the customers make monthly payments. The balance of the
restricted cash and marketable securities accounts at December 31, 1997 and 1996
was
F-128
<PAGE> 208
LITTLE VALLEY AUTO & RV SALES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
$840,734 and $748,583, respectively. In the event of default, the Company pays
the financing institution the amount in default and repossesses and sells the
secured vehicle. Customer installment contracts with full recourse to the
Company at December 31, 1997 and September 30, 1998 totaled approximately
$3,355,000 and $4,144,600, respectively.
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
9. RELATED PARTY TRANSACTIONS
The Company leases certain facilities under an operating lease from the
shareholder for the location of the dealership. Rent expense paid to the
shareholder for the years ended December 31, 1996 and 1997 amounted to $85,700
and $114,000, respectively.
10. RETIREMENT PLAN
The Company maintains a discretionary contribution retirement plan which
became effective January 1, 1997. Employees are eligible to participate in the
plan if they have earned more than $5,000 in the previous year and expect to
earn more than $5,000 in the current year. Participants are allowed to make
elective income deferrals to the plan per the plan specifications. The Company
can make discretionary contributions as authorized by management, matching
contributions of eligible employees up to 3% of their salaries, or fixed
contributions up to 2% of their salaries. The Company made discretionary
contributions of $10,886 during 1997.
F-129
<PAGE> 209
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholder
Growth Ventures, Inc.
(d.b.a. Marshall's Traveland)
We have audited the accompanying balance sheet of Growth Ventures, Inc.
(d.b.a. Marshall's Traveland), as of December 31, 1997, and the related
statements of operations, shareholder's equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Growth Ventures, Inc.
(d.b.a. Marshall's Traveland) at December 31, 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
September 17, 1998
Houston, Texas
F-130
<PAGE> 210
GROWTH VENTURES, INC.
(D.B.A. MARSHALL'S TRAVELAND)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 164,091 $ 269,288
Accounts receivable....................................... 22,597 68,147
Inventories............................................... 2,020,892 2,080,507
Prepaid expenses and other................................ 12,289 22,173
---------- ----------
Total current assets.............................. 2,219,869 2,440,115
Property and equipment, net................................. 78,773 79,453
Other assets................................................ 22,823 50
---------- ----------
Total assets...................................... $2,321,465 $2,519,618
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Floor plan notes payable.................................. $1,661,588 $1,530,142
Accounts payable.......................................... 240,743 425,660
Current maturities of long-term debt...................... 24,624 24,624
---------- ----------
Total current liabilities......................... 1,926,955 1,980,426
Long-term debt.............................................. 51,356 32,653
Commitments and contingencies
Shareholder's equity:
Common stock -- no par value, 1,000,000 shares authorized,
358,761 shares issued and outstanding.................. 26,376 26,376
Retained earnings......................................... 316,778 480,163
---------- ----------
Shareholder's equity........................................ 343,154 506,539
---------- ----------
Total liabilities and shareholder's equity........ $2,321,465 $2,519,618
========== ==========
</TABLE>
See accompanying notes.
F-131
<PAGE> 211
GROWTH VENTURES, INC.
(D.B.A. MARSHALL'S TRAVELAND)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30
DECEMBER 31 -----------------------
1997 1997 1998
----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Vehicles.............................................. $ 8,774,242 $6,492,699 $6,865,482
Parts and service..................................... 963,399 742,789 797,094
Other, net............................................ 266,445 151,429 205,261
----------- ---------- ----------
10,004,086 7,386,917 7,867,837
Cost of sales:
Vehicles.............................................. 7,671,058 5,692,350 5,936,390
Parts and service..................................... 699,860 547,965 537,419
----------- ---------- ----------
Gross profit............................................ 1,633,168 1,146,602 1,394,028
Selling, general, and administrative expenses........... 1,505,934 1,011,463 1,121,294
Other income (expense):
Interest expense...................................... (137,647) (99,254) (126,417)
Other, net............................................ 3,658 2,840 17,068
----------- ---------- ----------
(133,989) (96,414) (109,349)
----------- ---------- ----------
Net (loss) income....................................... $ (6,755) $ 38,725 $ 163,385
=========== ========== ==========
</TABLE>
See accompanying notes.
F-132
<PAGE> 212
GROWTH VENTURES, INC.
(D.B.A. MARSHALL'S TRAVELAND)
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------- -------- --------
<S> <C> <C> <C>
Balance at December 31, 1996................................ $26,376 $323,533 $349,909
Net loss.................................................. -- (6,755) (6,755)
------- -------- --------
Balance at December 31, 1997................................ 26,376 316,778 343,154
Net income (unaudited).................................... -- 163,385 163,385
------- -------- --------
Balance at September 30, 1998 (unaudited)................... $26,376 $480,163 $506,539
======= ======== ========
</TABLE>
See accompanying notes.
F-133
<PAGE> 213
GROWTH VENTURES, INC.
(D.B.A. MARSHALL'S TRAVELAND)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30
DECEMBER 31 --------------------
1997 1997 1998
----------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income.......................................... $ (6,755) $ 38,725 $ 163,385
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation............................................. 25,149 18,862 27,519
Changes in operating assets and liabilities:
Accounts receivable................................... 58,332 (15,375) (45,550)
Inventories........................................... 398,902 228,196 (59,615)
Prepaid expenses and other............................ 15,941 3,096 (9,884)
Floor plan notes payable.............................. (253,973) (95,510) (131,446)
Accounts payable...................................... (115,554) 31,625 184,917
--------- -------- ---------
Net cash provided by operating activities.................. 122,042 209,619 129,326
INVESTING ACTIVITIES
Collections on notes receivable............................ 47,385 12,155 22,773
Disposal of property and equipment......................... 26,523 -- --
Purchase of property and equipment......................... (92,421) (2,000) (28,199)
--------- -------- ---------
Net cash (used in) provided by investing activities........ (18,513) 10,155 (5,426)
FINANCING ACTIVITIES
Repayments on debt......................................... (19,208) (19,977) (18,703)
--------- -------- ---------
Net cash (used in) provided by financing activities........ (19,208) (19,977) (18,703)
--------- -------- ---------
Net change in cash and cash equivalents.................... 84,321 199,797 105,197
Cash and cash equivalents at beginning of year............. 79,770 79,770 164,091
--------- -------- ---------
Cash and cash equivalents at end of year................... $ 164,091 $279,567 $ 269,288
========= ======== =========
</TABLE>
See accompanying notes.
F-134
<PAGE> 214
GROWTH VENTURES, INC.
(D.B.A. MARSHALL'S TRAVELAND)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Growth Ventures, Inc. (d.b.a. Marshall's Traveland) (the "Company") was
incorporated in 1975 and operates a recreational vehicle ("RV") dealership in
Austin, Texas. In addition to new and used RV sales, the Company offers
complementary products and services including parts, repair and maintenance
service, body shop services, and financing and insurance contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles are stated at the lower of cost or
market. Cost is determined using the specific-identification method. New vehicle
cost includes the invoice price, delivery, and the cost of any special features
added to the vehicles. Used vehicle cost includes the purchase price plus
reconditioning and make-ready costs. Parts are stated at the lower of cost or
market, cost being determined on the first-in, first-out ("FIFO") basis.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Leasehold improvements...................................... 5-7
Furniture and fixtures...................................... 5-7
Machinery, vehicles, and equipment.......................... 5-7
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are sold. Finance, warranty, and insurance revenues are recognized at
the time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees, insurance commissions,
and extended warranty contract income.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Insurance
income represents commissions earned on credit life, accident, and disability
insurance sold in connection with the vehicle on behalf of third-party insurance
companies. Warranty income represents revenues earned on extended warranty
contracts sold on behalf of a third party.
F-135
<PAGE> 215
GROWTH VENTURES, INC.
(D.B.A. MARSHALL'S TRAVELAND)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The Company is an S corporation and, as such, no provision for income taxes
has been included in the accompanying financial statements since the Company's
taxable income is reported directly by the shareholders for tax purposes.
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $115,807 for 1997, and $62,976 and $71,286 for the nine months
ended September 30, 1997 and 1998, respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits, income tax expense based upon estimates of annual effective tax
rates, and other items which require subjective decisions during the course of
the year. These interim estimates are subject to adjustment based upon the final
year-end results.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
New vehicles................................................ $1,661,627 $1,577,690
Used vehicles............................................... 287,100 356,921
Parts and accessories....................................... 72,165 145,896
---------- ----------
$2,020,892 $2,080,507
========== ==========
</TABLE>
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Leasehold improvements...................................... $ 14,960 $ 15,610
Furniture and fixtures...................................... 45,322 113,574
Machinery, vehicles, and equipment.......................... 164,866 124,163
-------- --------
225,148 253,347
Less accumulated depreciation............................... 146,375 173,894
-------- --------
$ 78,773 $ 79,453
======== ========
</TABLE>
F-136
<PAGE> 216
GROWTH VENTURES, INC.
(D.B.A. MARSHALL'S TRAVELAND)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. FLOOR PLAN NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
1997
-----------
<S> <C>
Floor plan notes payable to a finance company secured by new
and used vehicle inventories and contracts in transit..... $1,661,588
==========
</TABLE>
Interest rates on floor plan notes vary by product line and product age.
Interest rates on the floor plan notes vary from 7% to 10% at December 31, 1997.
The average interest rate on floor plan notes was 7.3% for the year ended
December 31, 1997. The notes are due upon the sale of the related inventory.
Interest paid for the floor plan notes was $137,647 for the year ended
December 31, 1997.
6. LONG-TERM NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31
1997
-----------
<S> <C>
Note payable with an individual, payable in monthly
installments, interest at 10% per annum, due 2000......... $75,980
Less current maturities..................................... 24,624
-------
$51,356
=======
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its facility under an operating lease. Rent expense
related to the facility was $60,000 in 1997. Future minimum lease payments under
the lease include $60,000 in 1998, $60,000 in 1999, and $32,384 in 2000.
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability.
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
8. RELATED PARTY TRANSACTIONS
The Company leases land from a shareholder and payments related to this
lease were $99,300 in 1997.
F-137
<PAGE> 217
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholders
Ace Fogdall, Inc.
We have audited the accompanying balance sheet of Ace Fogdall, Inc., as of
December 31, 1997, and the related statements of operations, shareholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ace Fogdall, Inc., at
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
September 25, 1998
Houston, Texas
F-138
<PAGE> 218
ACE FOGDALL, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 215,394 $1,074,152
Accounts receivable....................................... 334,545 322,341
Inventories............................................... 1,659,205 1,411,993
---------- ----------
Total current assets.............................. 2,209,144 2,808,486
Property and equipment, net................................. 61,820 55,440
Cash surrender value of life insurance policy............... 157,428 157,428
---------- ----------
Total assets...................................... $2,428,392 $3,021,354
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,779 $ 3,010
---------- ----------
Total current liabilities......................... 1,779 3,010
Commitments and contingencies
Shareholders' equity:
Common stock:
Class A -- voting, $100 par value, 2,000 shares
authorized, 450 issued and outstanding................ 45,000 45,000
Class B -- nonvoting, $100 par value, 4,000 shares
authorized, 900 issued and outstanding................ 90,000 90,000
Retained earnings...................................... 2,291,613 2,883,344
---------- ----------
Total shareholders' equity........................ 2,426,613 3,018,344
---------- ----------
Total liabilities and shareholders' equity........ $2,428,392 $3,021,354
========== ==========
</TABLE>
See accompanying notes.
F-139
<PAGE> 219
ACE FOGDALL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
DECEMBER 31 -----------------------
1997 1997 1998
----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Vehicles............................................... $5,772,012 $4,630,094 $6,016,289
Parts and service...................................... 692,713 567,033 645,881
Other, net............................................. 88,804 76,764 76,170
---------- ---------- ----------
6,553,529 5,273,891 6,738,340
Cost of sales:
Vehicles............................................... 4,472,230 3,503,996 4,685,080
Parts and service...................................... 303,212 269,808 276,051
---------- ---------- ----------
Gross profit............................................. 1,778,087 1,500,087 1,777,209
Selling, general, and administrative expenses............ 1,333,585 866,167 964,513
Other income:
Other, net............................................. 52,095 38,179 26,990
---------- ---------- ----------
Net income............................................... $ 496,597 $ 672,099 $ 839,686
========== ========== ==========
</TABLE>
See accompanying notes.
F-140
<PAGE> 220
ACE FOGDALL, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
-------- ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1996.............................. $135,000 $2,159,118 $2,294,118
Distribution to shareholders............................ -- (364,102) (364,102)
Net income.............................................. -- 496,597 496,597
-------- ---------- ----------
Balance at December 31, 1997.............................. 135,000 2,291,613 2,426,613
Distribution to shareholders (unaudited)................ -- (247,955) (247,955)
Net income (unaudited).................................. -- 839,686 839,686
-------- ---------- ----------
Balance at September 30, 1998 (unaudited)................. $135,000 $2,883,344 $3,018,344
======== ========== ==========
</TABLE>
See accompanying notes.
F-141
<PAGE> 221
ACE FOGDALL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
DECEMBER 31 ----------------------
1997 1997 1998
----------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................... $ 496,597 $ 672,099 $ 839,686
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 9,298 6,974 6,381
Changes in operating assets and liabilities:
Accounts receivable................................. (176,012) 106,973 12,204
Inventories......................................... (81,264) (19,545) 247,212
Accounts payable.................................... 1,426 45,726 1,230
Floor plan payable.................................. (33,283) (33,283) --
--------- --------- ----------
Net cash provided by operating activities................ 216,762 778,944 1,106,713
FINANCING ACTIVITIES
Net repayments to shareholders........................... (12,807) (3,058) --
Distributions to shareholders............................ (364,102) (347,529) (247,955)
--------- --------- ----------
Net cash used in financing activities.................... (376,909) (350,587) (247,955)
--------- --------- ----------
Net change in cash and cash equivalents.................. (160,147) 428,357 858,758
Cash and cash equivalents at beginning of year
375,541 375,541 215,394
--------- --------- ----------
Cash and cash equivalents at end of year................. $ 215,394 $ 803,898 $1,074,152
========= ========= ==========
</TABLE>
See accompanying notes.
F-142
<PAGE> 222
ACE FOGDALL, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Ace Fogdall, Inc. (the "Company") was incorporated in 1958 and operates a
recreational vehicle ("RV") dealership in Iowa. In addition to new and used RV
sales, the Company offers complementary products and services including parts,
repair and maintenance services, body shop services, and financing and insurance
contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories of new and used vehicles are stated at the lower of cost or
market. Cost is determined using the specific-identification method. New vehicle
cost includes the invoice price, delivery, and the cost of any special features
added to the vehicles. Used vehicle cost includes the purchase price plus
reconditioning and make-ready costs. Parts are stated at the lower of cost or
market, cost being determined on the first-in, first-out basis.
Property and Equipment
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Building and improvements................................... 31.5
Furniture and fixtures...................................... 7
Machinery, vehicles, and equipment.......................... 7
</TABLE>
Revenue Recognition
Revenue is recognized when vehicles are delivered, service is performed,
and parts are sold. Finance, insurance, and warranty revenues are recognized at
the time the contracts are sold.
Other Revenue
Other revenue consists primarily of finance fees, insurance commissions and
extended warranty contract income.
Finance fees represent revenues earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Insurance
income represents commissions earned on credit life, accident, and disability
insurance sold in connection with the vehicle on behalf of third-party insurance
companies. Warranty income represents revenues earned on extended warranty
contracts sold on behalf of a third party.
Income Taxes
The Company is an S corporation and, as such, no provision for income taxes
has been included in the accompanying financial statements as the Company's
taxable income is reported directly by the shareholders for tax purposes.
F-143
<PAGE> 223
ACE FOGDALL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses totaled $43,480 for 1997, and $35,091 and $58,274 for the nine months
ended September 30, 1997 and 1998, respectively.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair value of financial instruments approximates their
recorded values due to the short-term nature of the maturities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In addition, among other things, management makes interim estimates of
bonus compensation that may be due at the end of the year based upon estimated
annual profits, and other items which require subjective decisions during the
course of the year. These interim estimates are subject to adjustment based upon
the final year-end results.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
New vehicles................................................ $1,174,956 $ 892,231
Used vehicles............................................... 416,435 436,067
Parts and accessories....................................... 67,814 83,695
---------- ----------
$1,659,205 $1,411,993
========== ==========
</TABLE>
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Building and leasehold improvements......................... $312,586 $312,586
Furniture and fixtures...................................... 28,991 28,992
Machinery and equipment..................................... 12,065 12,068
-------- --------
353,642 353,646
Less accumulated depreciation............................... 291,822 298,206
-------- --------
$ 61,820 $ 55,440
======== ========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
Litigation
In the normal course of business, the Company is subject to involvement in
legal actions. However, in the opinion of management, there are no outstanding
matters that will result in a significant liability.
F-144
<PAGE> 224
ACE FOGDALL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Governmental Regulation
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
6. RELATED PARTY TRANSACTIONS
The Company leases land from an affiliate, and payments related to this
lease were $72,000 during 1997 and $54,000 during the nine months ended
September 30, 1998. In the past, the Company has borrowed from its shareholders.
During 1997, the Company repaid $12,807 to its shareholders and has had no
amounts outstanding since that time. In the fourth quarter of 1997, the Company
made a charitable contribution of $200,000 to the family foundation.
7. PROFIT SHARING PLAN
The Company maintains a profit sharing plan. Employees are eligible to
participate in the plan if they have been employed by the Company for one year,
work 1,000 hours during the year, and are at least 21 years of age. The
Company's contributions to the plan are at the discretion of the Company. The
Company made discretionary contributions of $59,050 in 1997.
F-145
<PAGE> 225
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO]
RV CENTERS, INC.
COMMON STOCK
----------------------
PROSPECTUS
----------------------
MERRILL LYNCH & CO.
J.C. BRADFORD & CO.
SANDERS MORRIS MUNDY
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 226
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below are expenses (other than underwriting discounts and
commissions) expected to be incurred in connection with the issuance and
distribution of the securities registered hereby. With the exception of the
Securities and Exchange Commission registration fee, the amounts set forth below
are estimates:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $15,638
NASD Filing Fee............................................. 6,969
Listing Fee................................................. *
Accounting Fees and Expenses................................ *
Legal Fees and Expenses..................................... *
Printing Expenses........................................... *
Transfer Agent's Fees....................................... *
Miscellaneous............................................... *
-------
TOTAL............................................. $ *
=======
</TABLE>
- ---------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of section 145 of the General Corporation Law of the State
of Delaware empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
made to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section 145
in the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification provided for by Section 145
shall not be deemed exclusive of any other rights to which the indemnified party
may be entitled; that indemnification provided for by Section 145 shall, unless
otherwise provided when
II-1
<PAGE> 227
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of such person's
heirs, executors and administrators; and empowers the corporation to purchase
and maintain insurance on behalf of a director or officer of the corporation
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such whether or not the corporation
would have the power to indemnify him against such liabilities under Section
145.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
Article Seven of RV Centers' First Amended and Restated Certificate of
Incorporation states that:
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by such director as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
DGCL is amended to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended. Any repeal or modification of this Section by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitations on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
RV Centers has entered into or intends to enter into indemnification
agreements with each of its executive officers and directors.
Under Section of the Underwriting Agreement filed as Exhibit 1.1 to
this Registration Statement, the Underwriters have agreed to indemnify, under
certain conditions, RV Centers, its officers and directors, and persons who
control RV Centers within the meaning of the Securities Act of 1933, as amended,
against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is certain information concerning all sales of securities
by RV Centers during the past three years that were not registered under the
Securities Act of 1933. The description presented below gives effect to RV
Centers' recent 1,339.157 for one stock split effected in February, 1999.
(a) On May 8, 1998 RV Centers issued 1,339,157 shares of its common
stock to Baker-Kreft Funding I, L.L.C. for an aggregate price of $1,000.00.
(b) On May 20, 1998, RV Centers issued 133,916 shares of its common
stock to an executive officer for an aggregate price of $1.00 to certain
executive officers.
(c) On October 27, 1998, RV Centers issued 462,010 shares of its
common stock to certain executive officers for an aggregate price of $3.45.
(d) On October 27, 1998, RV Centers issued 33,478 shares of its common
stock to two private investors.
(e) See "Certain Transactions" for a discussion of the issuance of
shares of common stock in connection with the Acquisitions.
These transactions were completed without registration under the Securities
Act of 1933 in reliance on the exemption provided by Section 4(2) of the
Securities Act of 1933.
II-2
<PAGE> 228
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
1.1* -- Form of Underwriting Agreement.
2.1* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Ace Fogdall, Inc. and all of
the Stockholders of Ace Fogdall, Inc.
2.2 -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., American RV Center, Inc.
(Mississippi) and all of the Stockholders of American RV
Center, Inc. (Mississippi).
2.3 -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., American RV Center, Inc.
(Tennessee) and all of the Stockholders of American RV
Center, Inc. (Tennessee).
2.4 -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Casey Motors, Inc. and all of
the Stockholders of Casey Motors, Inc.
2.5* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., County Line Select Cars, Inc.
and all of the Stockholders of County Line Select Cars,
Inc.
2.6* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Dusty's Camper World of
Bartow, Inc. and all of the Stockholders of Dusty's
Camper World of Bartow, Inc.
2.7* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Emerald Coast RV Center, Inc.
and all of the Stockholders of Emerald Coast RV Center,
Inc.
2.8* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Hall Enterprises, Inc. and
all of the Stockholders of Hall Enterprises, Inc.
2.9* -- Agreement, dated as of January 12, 1999 by and among RV
Centers, Inc., Little Valley Auto & RV Sales, Inc. and
all of the Stockholders of Little Valley Auto & RV Sales,
Inc.
2.10* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Growth Ventures, Inc. and all
of the Stockholders of Growth Ventures, Inc.
2.11* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., RV's Northwest, Inc. and all
of the Stockholders of RV's Northwest, Inc.
2.12* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Saddleback RVs, Inc. and all
of the Stockholders of Saddleback RVs, Inc.
2.13* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Scott Motor Coach, Inc. and
all of the Stockholders of Scott Motor Coach, Inc.
2.14* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Stoltzfus Trailer Sales, Inc.
and all of the Stockholders of Stoltzfus Trailer Sales,
Inc.
2.15 -- Asset Purchase Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Young's R.V. Center, Inc. and
Roy B. Padgett.
3.1* -- First Amended and Restated Certificate of Incorporation.
3.2* -- Amended and Restated Bylaws.
4.1* -- Specimen Common Stock Certificate.
</TABLE>
II-3
<PAGE> 229
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
5.1* -- Opinion of Andrews & Kurth L.L.P. as to the legality of
the securities being registered.
10.1* -- Form of Employment Agreement.
10.2* -- Form of Officer and Director Indemnification Agreement.
10.3* -- RV Centers, Inc. 1999 Stock Option Plan.
23.1* -- Consent of Andrews & Kurth L.L.P. (included in Exhibit
5.1).
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Powers of Attorney (included in signature page set forth
on page II-5).
27.1* -- Financial Data Schedule.
99.1 -- Consent of Peter A. Albano to be appointed director.
99.2 -- Consent of Armando Alonso to be appointed director.
99.3 -- Consent of Allen M. Binford to be appointed director.
99.4 -- Consent of James S. Fogdall to be appointed director.
99.5 -- Consent of Earl Stoltzfus to be appointed director.
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to
each purchaser.
II-4
<PAGE> 230
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on February 1, 1999.
RV CENTERS, INC.
By: /s/ CLAYTON K. TRIER
----------------------------------
Clayton K. Trier
Chairman, President and Chief
Executive
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Clayton K. Trier, J. Christian Baker, III
and A. John Kreft, and each of them, his true and lawful attorneys-in-fact and
agents with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and any subsequent
registration statements filed by the Registrant pursuant to Rule 462(b) of the
Securities Act of 1933, which relates to this Registration Statement, and to
file same, with all exhibits thereto, and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or his or their substitutes, may lawfully do or cause to be done by
virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED BELOW.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CLAYTON K. TRIER Chairman, President and February 1, 1999
- ----------------------------------------------------- Chief Executive Officer
Clayton K. Trier (Principal Executive
Officer and Principal
Financial Officer)
/s/ JOHN MANCINELLI Director February 1, 1999
- -----------------------------------------------------
John Mancinelli
/s/ A. JOHN KREFT Director February 1, 1999
- -----------------------------------------------------
A. John Kreft
/s/ J. CHRISTIAN BAKER, III Vice President, Secretary February 1, 1999
- ----------------------------------------------------- and Director
J. Christian Baker, III
</TABLE>
II-5
<PAGE> 231
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
1.1* -- Form of Underwriting Agreement.
2.1* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Ace Fogdall, Inc. and all of
the Stockholders of Ace Fogdall, Inc.
2.2 -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., American RV Center, Inc.
(Mississippi) and all of the Stockholders of American RV
Center, Inc. (Mississippi).
2.3 -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., American RV Center, Inc.
(Tennessee) and all of the Stockholders of American RV
Center, Inc. (Tennessee).
2.4 -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Casey Motors, Inc. and all of
the Stockholders of Casey Motors, Inc.
2.5* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., County Line Select Cars, Inc.
and all of the Stockholders of County Line Select Cars,
Inc.
2.6* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Dusty's Camper World of
Bartow, Inc. and all of the Stockholders of Dusty's
Camper World of Bartow, Inc.
2.7* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Emerald Coast RV Center, Inc.
and all of the Stockholders of Emerald Coast RV Center,
Inc.
2.8* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Hall Enterprises, Inc. and
all of the Stockholders of Hall Enterprises, Inc.
2.9* -- Agreement, dated as of January 12, 1999 by and among RV
Centers, Inc., Little Valley Auto & RV Sales, Inc. and
all of the Stockholders of Little Valley Auto & RV Sales,
Inc.
2.10* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Growth Ventures, Inc. and all
of the Stockholders of Growth Ventures, Inc.
2.11* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., RV's Northwest, Inc. and all
of the Stockholders of RV's Northwest, Inc.
2.12* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Saddleback RVs, Inc. and all
of the Stockholders of Saddleback RVs, Inc.
2.13* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Scott Motor Coach, Inc. and
all of the Stockholders of Scott Motor Coach, Inc.
2.14* -- Acquisition Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Stoltzfus Trailer Sales, Inc.
and all of the Stockholders of Stoltzfus Trailer Sales,
Inc.
2.15 -- Asset Purchase Agreement, dated as of January 12, 1999 by
and among RV Centers, Inc., Young's R.V. Center, Inc. and
Roy B. Padgett.
3.1* -- First Amended and Restated Certificate of Incorporation.
3.2* -- Amended and Restated Bylaws.
4.1* -- Specimen Common Stock Certificate.
5.1* -- Opinion of Andrews & Kurth L.L.P. as to the legality of
the securities being registered.
</TABLE>
<PAGE> 232
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
10.1* -- Form of Employment Agreement.
10.2* -- Form of Officer and Director Indemnification Agreement.
10.3* -- RV Centers, Inc. 1999 Stock Plan.
23.1* -- Consent of Andrews & Kurth L.L.P. (included in Exhibit
5.1).
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Powers of Attorney (included in signature page set forth
on page II-5).
27.1* -- Financial Data Schedule.
99.1 -- Consent of Peter A. Albano to be appointed director.
99.2 -- Consent of Armando Albano to be appointed director.
99.3 -- Consent of Allen M. Binford to be appointed director.
99.4 -- Consent of James S. Fogdall to be appointed director.
99.5 -- Consent of Earl Stoltzfus to be appointed director.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 2.2
================================================================================
ACQUISITION AGREEMENT
dated as of the 12th day of January, 1999
by and among
RV CENTERS, INC.
AMERICAN RV CENTERS, INC.
and all of
the STOCKHOLDERS of AMERICAN RV CENTERS, INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
RECITALS .......................................................................1
1. ACQUISITION OF STOCK ..................................................5
1.1 Acquisition .....................................................5
1.2 Consideration ...................................................5
1.3 Certain Information With Respect to the Capital Stock
of the Company and RV Centers ...................................6
2. DELIVERY OF CONSIDERATION .............................................6
2.1 Stockholders' Consideration .....................................6
2.2 Stockholders' Deliveries ........................................6
3. CLOSING ...............................................................6
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS ....................7
4.1 Due Organization ................................................7
4.2 Authorization ...................................................8
4.3 Capital Stock of the Company ....................................8
4.4 Transactions in Capital Stock; Organization Accounting ..........8
4.5 No Bonus Shares .................................................8
4.6 Subsidiaries; Ownership in Other Entities .......................9
4.7 Predecessor Status; etc .........................................9
4.8 Spin-off by the Company .........................................9
4.9 Financial Statements ............................................9
4.10 Liabilities and Obligations ....................................10
4.11 Accounts and Notes Receivable ..................................10
4.12 Permits and Intangibles ........................................11
4.13 Environmental Matters ..........................................11
4.14 Personal Property ..............................................13
4.15 Significant Customers and Suppliers;
Material Contracts and Commitments .............................13
4.16 Real Property ..................................................14
4.17 Insurance ......................................................15
4.18 Compensation; Employment Agreements; Labor Matters .............15
4.19 Employee Plans .................................................16
4.20 Compliance with ERISA ..........................................17
4.21 Conformity with Law; Litigation ................................18
4.22 Taxes ..........................................................18
4.23 No Violations; No Consent Required, Etc ........................19
4.24 Government Contracts ...........................................20
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
4.25 Absence of Changes .......................................................20
4.26 Deposit Accounts; Powers of Attorney .....................................22
4.27 Validity of Obligations ..................................................22
4.28 Relations with Governments ...............................................23
4.29 Disclosure ...............................................................23
4.30 Prohibited Activities ....................................................23
4.31 No Warranties or Insurance ...............................................24
4.32 Interest in Customers and Suppliers and Related Party Transactions .......24
4.33 Registration Statement ...................................................24
4.34 Inventory ................................................................24
4.35 Year 2000 ................................................................24
4.36 Authority; Ownership .....................................................25
4.37 Preemptive Rights ........................................................25
5. REPRESENTATIONS OF RV CENTERS ..................................................25
5.1 Due Organization .........................................................25
5.2 Authorization ............................................................26
5.3 Capital Stock of RV Centers ..............................................26
5.4 Transactions in Capital Stock; Organization Accounting ...................26
5.5 Subsidiaries .............................................................26
5.6 No Violations ............................................................27
5.7 Validity of Obligations ..................................................28
5.8 RV Centers Stock .........................................................28
5.9 Business; Real Property; Material Agreements .............................28
5.10 Investment Representations ...............................................28
5.11 Authorization of Other Agreements ........................................28
5.12 Financial Statements .....................................................29
5.13 Liabilities and Obligations ..............................................29
5.14 Conformity with Law; Litigation ..........................................29
5.15 No Side Agreements .......................................................29
5.16 Relations with Governments ...............................................30
5.17 Other Agreements .........................................................30
5.18 Registration Statement ...................................................30
5.19 Disclosure ...............................................................30
6. COVENANTS PRIOR TO CLOSING .....................................................31
6.1 Access and Cooperation; Due Diligence ....................................31
6.2 Conduct of Business Pending Closing ......................................31
6.3 Prohibited Activities ....................................................32
6.4 No Shop ..................................................................34
6.5 Agreements ...............................................................34
6.6 Notification of Certain Matters ..........................................34
6.7 Amendment of Schedules ...................................................35
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
6.8 Cooperation in Preparation of Registration Statement ...........35
6.9 Final Financial Statements .....................................36
6.10 Further Assurances .............................................36
6.11 Compliance with the Hart-Scott Act .............................36
6.12 Transfers of Permits and Intangibles ...........................37
6.13 Dividends ......................................................37
6.14 Authorized Capital .............................................37
6.15 Year 2000 Compliance Cost Estimates ............................37
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF
STOCKHOLDERS AND COMPANY .............................................37
7.1 Representations and Warranties; Performance of Obligations .....38
7.2 No Litigation ..................................................38
7.3 Opinions .......................................................38
7.4 Registration Statement; Minimum Value ..........................38
7.5 Consents and Approvals .........................................38
7.6 Good Standing Certificates .....................................39
7.7 No Material Adverse Change .....................................39
7.8 Closing of IPO .................................................39
7.9 Secretary's Certificate ........................................39
7.10 Employment Agreements ..........................................39
7.11 Other Founding Companies .......................................39
7.12 Management Lock-Up Agreements ..................................39
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RV CENTERS ....................40
8.1 Representations and Warranties; Performance of Obligations .....40
8.2 No Litigation ..................................................40
8.3 Secretary's Certificate ........................................40
8.4 No Material Adverse Effect .....................................40
8.5 Stockholders' Release ..........................................41
8.6 Termination of Related Party Agreements ........................41
8.7 Opinion of Counsel .............................................41
8.8 Consents and Approvals .........................................41
8.9 Good Standing Certificates .....................................41
8.10 Registration Statement .........................................42
8.11 Employment Agreements ..........................................42
8.12 Closing of IPO .................................................42
8.13 FIRPTA Certificate .............................................42
8.14 Resignations of Directors ......................................42
8.15 Lease Agreements ...............................................42
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
9. COVENANTS OF RV CENTERS AND
THE STOCKHOLDERS AFTER CLOSING ........................................42
9.1 Preservation of Tax and Accounting Treatment..................42
9.2 Preparation and Filing of Tax Returns.........................42
9.3 Directors.....................................................44
9.4 Release From Guarantees; Repayment of Certain Obligations.....44
9.5 Access to Records.............................................44
10. INDEMNIFICATION .......................................................44
10.1 Indemnification by the Stockholders...........................44
10.2 Indemnification by RV Centers.................................45
10.3 Third Person Claims...........................................46
10.4 Exclusive Remedy..............................................47
10.5 Limitations on Indemnification................................47
10.6 Tax Indemnification by the Stockholders.......................49
11. TERMINATION OF AGREEMENT ..............................................49
11.1 Termination...................................................49
11.2 Liabilities in Event of Termination...........................50
11.3 Return of Stock Certificates..................................50
12. NONCOMPETITION ........................................................50
12.1 Prohibited Activities.........................................50
12.2 Damages.......................................................51
12.3 Reasonable Restraint..........................................51
12.4 Severability; Reformation.....................................51
12.5 Independent Covenant..........................................51
12.6 Materiality...................................................52
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION .............................52
13.1 Stockholders..................................................52
13.2 RV Centers....................................................52
13.3 Damages.......................................................53
13.4 Survival......................................................53
14. TRANSFER RESTRICTIONS .................................................53
14.1 Transfer Restrictions.........................................53
15. FEDERAL SECURITIES ACT REPRESENTATIONS ................................54
15.1 Compliance with Law...........................................54
15.2 Economic Risk; Sophistication.................................55
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C> <C>
16. REGISTRATION RIGHTS ...................................................55
16.1 Piggyback Registration Rights. ...............................55
16.2 Registration Procedures. .....................................56
16.3 Indemnification. .............................................57
16.4 Underwriting Agreement. ......................................58
16.5 Rule 144 Reporting. ..........................................58
16.6 Availability of Rule 144. ....................................59
17. GENERAL ...............................................................59
17.1 Cooperation. .................................................59
17.2 Successors and Assigns. ......................................59
17.3 Entire Agreement. ............................................59
17.4 Counterparts. ................................................59
17.5 Brokers and Agents. ..........................................60
17.6 Expenses. ....................................................60
17.7 Notices. .....................................................60
17.8 Governing Law. ...............................................62
17.9 Exercise of Rights and Remedies. .............................62
17.10 Time. ........................................................62
17.11 Reformation and Severability. ................................62
17.12 Remedies Cumulative. .........................................62
17.13 Captions. ....................................................62
17.14 Amendments and Waivers. ......................................62
17.15 Dispute Resolution. ..........................................62
17.16 References, Gender, Number. ..................................63
17.17 Sole Stockholder. ............................................63
17.18 Schedules and Annexes. .......................................63
</TABLE>
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<PAGE> 7
ANNEXES
Annex I - Consideration to Be Paid to Stockholders
Annex II - Certificate of Incorporation and By-Laws of RV Centers
Annex III - Form of Opinion of Counsel to RV Centers
Annex IV - Form of Opinion of Counsel to Company and Stockholders
Annex V - Form of Founder Employment Agreement
Annex VI - Form of Lease Agreement
SCHEDULES
4.1 Due Organization
4.2 Authorization
4.3 Capital Stock of the Company
4.4 Transactions in Capital Stock; Organization Accounting
4.5 No Bonus Shares
4.6 Subsidiaries; Ownership in Other Entities
4.7 Predecessor Status; etc
4.8 Spin-off by the Company
4.9 Financial Statements
4.10(a) Liabilities and Obligations
4.10(b) Trade Account Payables etc. and Copies of Loan Agreements
4.11 Accounts and Notes Receivable
4.12 Permits and Intangibles
4.13 Environmental Matters
4.14 Personal Property
4.15(a) Significant Customers and Suppliers
4.15(b) Material Contracts and Commitments
4.16 Real Property
4.17 Insurance
4.18 Compensation; Employment Agreements; Labor Matters
4.19 Employee Plans
4.20 Compliance with ERISA
4.21 Conformity with Law; Litigation
4.22 Taxes
4.23(a) Defaults
4.23(b) Violations or Defaults Arising From This Agreement
-vi-
<PAGE> 8
4.23(c) Notices Required By Material Documents
4.23(e) Restrictions Imposed By Material Documents
4.24 Government Contracts
4.25 Absence of Changes
4.26 Deposit Accounts; Powers of Attorney
4.30 Prohibited Activities
4.31 No Warranties or Insurance
4.32 Interest in Customers and Suppliers and Related Party Transactions
4.34 Inventory in Interim Financial Statements
5.2 Authorization
5.3 Authorized Capital Stock of RV Centers
5.17 Unique Terms in Other Agreements
6.2 Conduct of Business Pending Closing
6.3 Prohibited Activities
6.5 Agreements
8.6 Termination of Related Party Agreements
8.11 Employment Agreements
9.4 Release From Guarantees; Repayment of Certain Obligations
12.1 Prohibited Activities
15.2 Non-accredited Investors
17.5 Brokers and Agents
-vii-
<PAGE> 9
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 12th day
of January, 1999, by and among RV Centers, Inc., a Delaware corporation ("RV
Centers"), American RV Centers, Inc., a Mississippi corporation (the "Company")
and the stockholders listed on the signature pages of this Agreement (the
"Stockholders"), who are all the stockholders of the Company.
RECITALS
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Consummation Date the Stockholders will own, all of the issued and outstanding
capital stock of the Company (the "Company Stock");
WHEREAS, RV Centers is entering into other separate agreements
substantially similar to this Agreement (the "Other Agreements") with each of
the Other Founding Companies (as defined herein) and their respective
stockholders in order to acquire additional recreational vehicle dealership
companies;
WHEREAS, this Agreement and the Other Agreements constitute the "RV
Centers Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of RV Centers and each of the Other Founding Companies that are
parties to the Other Agreements have approved and adopted the RV Centers Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the Other Founding Companies (as defined herein) will
transfer the capital stock of each of the Founding Companies to RV Centers and
the stockholders of each of the Founding Companies will acquire shares of RV
Centers Stock (as defined herein);
WHEREAS, it is the intent of the parties that the transfer to RV
Centers of stock of the Company by the Stockholders in consideration for stock
of RV Centers qualify as a tax-free transfer of property under Section 351 of
the Code (as hereinafter defined);
WHEREAS, the Board of Directors of the Company has approved this
Agreement as part of the RV Centers Plan of Organization in order to transfer
the capital stock of the Company to RV Centers;
WHEREAS, unless the context otherwise requires, capitalized terms used
in this Agreement or in any schedule attached hereto and not otherwise defined
shall have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
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"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the Company, any Subsidiary of the Company and
any member of a Relevant Group.
"Additional Consideration" has the meaning set forth in Section 1.2.
"Affiliate" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"Balance Sheet Date" means June 30, 1998.
"Charter" means the certificate of incorporation or articles of
incorporation of the Company, as the case may be.
"Charter Documents" has the meaning set forth in Section 4.1.
"Closing" has the meaning set forth in Section 3.
"Closing Date" has the meaning set forth in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the first recital of this
Agreement.
"Consummation Date" has the meaning set forth in Section 3.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Draft Registration Statement" means the draft of the Registration
Statement as included in the Private Placement Memorandum for RV Centers dated
January 5, 1999, and any corrections thereto and supplemental information
delivered by RV Centers to the Company for delivery to the Stockholders prior to
the time this Agreement is delivered by the Stockholders to RV Centers.
"Effective Time" means the effective time of the consummation of the
purchase and sale of the Company Stock, which shall occur on the Consummation
Date.
"Environmental Law" has the meaning set forth in Section 4.13(c).
"Expiration Date" has the meaning set forth in Section 4(A).
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"Founding Companies" means: Ace Fogdall, Inc., an Iowa corporation,
American RV Centers, Inc., a Tennessee corporation, American RV Centers, Inc., a
Mississippi corporation, Casey Motors, Inc., a Colorado corporation, County Line
Select Cars, Inc., a Florida corporation, Dusty's Camper World of Bartow, Inc.,
a Florida corporation, Emerald Coast RV Center, Inc., a Florida corporation,
Hall Enterprises, Inc., a Kentucky corporation, Little Valley Auto & RV Sales,
Inc., a West Virginia corporation, Growth Ventures, Inc., a Texas corporation,
RVs Northwest, Inc., a Washington corporation, Saddleback Recreational Vehicles,
Inc., a California corporation, Scott Motor Coach Sales, Inc., a New Jersey
corporation, Stoltzfus Trailer Sales, Inc., a Pennsylvania corporation, Roy B.
Padgett d/b/a Young's RV Center, a sole proprietorship operating in California.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 4.13(d).
"Information Technology" has the meaning set forth in section 4.35.
"IPO" means the initial public offering of RV Centers Stock pursuant to
the Registration Statement.
"known," "knowledge" or "best knowledge," when used in reference to a
statement regarding the existence or absence of facts in this Agreement, is
intended by the parties to mean that the only information to be attributed to
such person is information actually known to (a) the person in the case of an
individual or (b) in the case of a corporation or other entity, an officer,
director or member. With respect to the "knowledge" of the Stockholders who are
officers, directors, employees, consultants or agents of the Company, such term
is also intended to mean that such Stockholder has made inquiry of the officers
and directors of the Company and its Affiliates, and with respect to the
representations made in Section 4.13, the Company's management.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its Subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 4.23(a).
"Minimum Value" has the meaning set forth in Annex I.
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"Other Agreements" has the meaning set forth in the second recital of
this Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Person" means an individual, partnership, joint venture, corporation,
limited liability company, bank, trust, unincorporated organization or other
entity.
"Plans" has the meaning set forth in Section 4.19.
"Pricing" means the date of determination by RV Centers and the
Underwriters of the public offering price of the shares of RV Centers Stock in
the IPO.
"Qualified Plans" has the meaning set forth in Section 4.20.
"RV Centers" has the meaning set forth in the first paragraph of this
Agreement.
"RV Centers Charter Documents" has the meaning set forth in
Section 5.1.
"RV Centers Documents" has the meaning set forth in Section 5.6.
"RV Centers Plan of Organization" has the meaning set forth in the
fourth recital of this Agreement.
"RV Centers Stock" means the common stock, par value $.01 per share, of
RV Centers.
"Registration Statement" means that certain registration statement on
Form S-1 to be filed with the SEC covering the shares of RV Centers Stock to be
issued in the IPO, including the prospectus and all amendments and supplements
thereto.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto (as amended or
supplemented pursuant to Section 6.7), which shall reference the relevant
sections of this Agreement, on which parties hereto disclose information as part
of their respective representations, warranties and covenants.
"SEC" means the United States Securities and Exchange Commission.
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"State of Incorporation" means, as it relates to a referenced
corporation, the state of incorporation for such corporation.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiaries" means with respect to a Person, any corporation or other
entity in which such Person owns a 50% or greater ownership interest.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, payroll, excise, property, deed, stamp,
alternative or add-on minimum, or other taxes, assessments, duties, fees, levies
or other governmental charges, whether disputed or not, together with any
interest, penalties, additions to tax or additional amounts with respect
thereto.
"Tennessee Acquisition Agreement" means that agreement by and among RV
Centers, American RV Centers, Inc., a Tennessee corporation and the stockholders
listed on the signature pages of that Agreement.
"Underwriters" means the prospective underwriters identified in the
Draft Registration Statement and any additional or substitute underwriter
appointed by RV Centers as identified in writing to the Stockholders.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. ACQUISITION OF STOCK
1.1. ACQUISITION. Upon the terms and subject to the conditions
contained in this Agreement and in reliance upon the representations,
warranties, covenants and agreements contained in this Agreement, on the
Consummation Date, the Stockholders shall transfer to RV Centers and RV Centers
shall acquire from the Stockholders, all of the issued and outstanding shares of
capital stock of the Company as set forth in Annex I hereto.
1.2. CONSIDERATION. The consideration for the Company Stock shall be as
set forth on Annex I to this Agreement and that consideration, if any, as
provided in Section B of Annex I to the Acquisition Agreement (the "Tennessee
Acquisition Agreement") by and among RV Centers, American RV Centers, Inc., a
Tennessee corporation and the stockholders listed on the signature pages of that
Agreement (the "Additional Consideration").
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1.3. CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND RV CENTERS. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of the
Company and RV Centers as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding capital stock of the Company is as set forth on Schedule
4.3 hereto; and
(ii) immediately prior to the Closing Date and the
Consummation Date, the authorized capital stock of RV Centers will
consist of 20,000,000 shares of RV Centers Stock, of which the number
of issued and outstanding shares will be set forth in the Registration
Statement, and 5,000,000 shares of preferred stock, $.01 par value, of
which no shares will be issued and outstanding, all of which will be
issued and outstanding except as otherwise set forth in the
Registration Statement.
2. DELIVERY OF CONSIDERATION
2.1. STOCKHOLDERS' CONSIDERATION. On the Consummation Date, the
Stockholders, who are now and on the Consummation Date will be, the holders of
all of the outstanding capital stock of the Company, shall, upon surrender of
certificates evidencing that capital stock, receive from RV Centers the
respective number of shares of RV Centers Stock and the amount of cash described
on Annex I hereto, which shall be payable by certified check or wire transfer.
The number of shares of RV Centers Stock in Annex I has been adjusted for the
stock split provided for in the Draft Registration Statement and will not be
adjusted upon the occurrence of such split.
2.2. STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
3. CLOSING
At or prior to the Pricing and subject to the satisfaction or waiver of
the conditions in Sections 7 and 8, the parties shall take all actions necessary
to effect the delivery of shares referred to in Section 2 hereof; provided, that
such actions shall not include the actual completion of the purchase and sale of
the Company Stock or the delivery of the RV Centers Stock and cash referred to
in Section 2 hereof, each of which actions shall only be taken upon the
Consummation Date as herein provided. The delivery of the Company Stock, which
shall occur at or prior to the Pricing (the "Closing"), shall take place on the
closing date (the "Closing Date") at the offices of Andrews & Kurth L.L.P, 600
Travis, Suite 4200, Houston, Texas 77002. All Company Stock shall be
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<PAGE> 15
delivered at the Closing to Andrews & Kurth L.L.P., to be held in trust for the
Stockholders until the Consummation Date, and shall be returned immediately to
the Stockholders upon any termination of this Agreement prior to the
Consummation Date. Within 20 days after the Pricing (x) all transactions
contemplated by this Agreement, including the delivery of shares and cash which
the Stockholders are entitled to receive pursuant to Annex I hereof, shall be
completed, and (y) the closing with respect to the IPO shall occur and be
completed. The date on which the actions described in the preceding clauses (x)
and (y) occur shall be referred to as the "Consummation Date." During the period
from the Closing Date to the Consummation Date, this Agreement may only be
terminated by the Company if the underwriting agreement in respect of the IPO is
terminated pursuant to the terms of such underwriting agreement. This Agreement
shall in any event terminate if the Consummation Date does not occur within 20
days of the Pricing or the Closing Date, whichever occurs first. Time is of the
essence with respect to the performance hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
(A) Representations and Warranties of the Stockholders.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, each of the Stockholders, jointly and
severally, represents and warrants that all of the following representations and
warranties in this Section 4(A) are true at the date of this Agreement, and that
such representations and warranties shall survive the Consummation Date until
June 30, 2000 (the "Expiration Date"), except that the warranties and
representations set forth in Sections 4.3 and 4.22 hereof shall survive until
such time as the applicable limitations period has run, which shall be deemed to
be the Expiration Date for Sections 4.3 and 4.22. For purposes of this Section
4, the term "Company" shall mean and refer to the Company and all of its
Subsidiaries, if any.
4.1. DUE ORGANIZATION. The Company is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the State
of Incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified or
authorized to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or authorization necessary except where the failure to be so
qualified or authorized would not have a Material Adverse Effect on the Company.
Schedule 4.1 sets forth a list of all states in which the Company is authorized
or qualified to do business. True, complete and correct copies of (i) the
Charter and By-laws, each as amended, of the Company (the "Charter Documents"),
and (ii) the stock records of the Company, are all attached to Schedule 4.1. The
Company has delivered to RV Centers complete and correct copies of all minutes
of meetings, written consents and other evidence, if any, of deliberations of or
actions taken by the Company's Board of Directors, any committees of the Board
of Directors and stockholders during the last three years.
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4.2. AUTHORIZATION. (i) The officers or other representatives of the
Company executing this Agreement have the authority to enter into and bind the
Company to the terms of this Agreement and (ii) the Company has the full legal
right, power and authority to enter into this Agreement and consummate the
transactions contemplated herein. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions adopted
by the Stockholders, which approve this Agreement and the transactions
contemplated herein in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 4.2.
4.3. CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company is as set forth on Schedule 4.3. All of the issued and outstanding
shares of the capital stock of the Company are owned by the Stockholders in the
amounts set forth in Schedule 4.3, other than any treasury shares listed on
Schedule 4.3. Each Stockholder, severally, represents and warrants that except
as set forth on Schedule 4.3, the shares of capital stock of the Company owned
by such Stockholder are owned free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the issued and outstanding shares of the capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by the Stockholders and
further, such shares were offered, issued, sold and delivered by the Company in
compliance with all applicable state and Federal laws concerning the issuance of
securities. Further, none of such shares were issued in violation of any
preemptive rights of any past or present stockholder.
4.4. TRANSACTIONS IN CAPITAL STOCK; ORGANIZATION ACCOUNTING. Except as
set forth on Schedule 4.4, the Company has not acquired or redeemed any Company
Stock since January 1, 1995. Except as set forth on Schedule 4.4, (i) no option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Company to issue any of its authorized but unissued capital stock; (ii) the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof; and (iii) neither
the voting stock structure of the Company nor the relative ownership of shares
among any of its respective Stockholders has been altered or changed in
contemplation of the transactions contemplated herein and/or the RV Centers Plan
of Organization. There are no voting trusts, proxies or other agreements or
understandings to which the Company or any of the Stockholders is a party or is
bound with respect to the voting of any shares of capital stock of the Company.
Schedule 4.4 also includes complete and accurate copies of all stock option or
stock purchase plans, including a list of all outstanding options, warrants or
other rights to acquire shares of the Company's stock and the material terms of
such outstanding options, warrants or other rights.
4.5. NO BONUS SHARES. Except as set forth on Schedule 4.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the RV Centers Plan of Organization.
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<PAGE> 17
4.6. SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set forth on
Schedule 4.6, the Company has no Subsidiaries. Except as set forth in Schedule
4.6, the Company does not presently own, of record or beneficially, or control,
directly or indirectly, any capital stock, securities convertible into capital
stock or any other equity interest in any corporation, association or business
entity nor is the Company, directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity.
4.7. PREDECESSOR STATUS; ETC. Set forth on Schedule 4.7 is a listing
of all predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger or otherwise) or owned by the
Company or from whom the Company previously acquired assets which are material
to the Company, in any case, from the earliest date upon which any Stockholder
acquired his or her stock in any Company. Except as disclosed on Schedule 4.7,
the Company has not been, within such period of time, a subsidiary or division
of another corporation or a part of an acquisition which was later rescinded,
nor, within such period of time, has the Company had any substantial operations
that have been discontinued or any operating plants or facilities that have been
discontinued, sold or spun off.
4.8. SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 4.8,
there has not been any sale, spin-off or split-up of material assets of the
Company since January 1, 1995.
4.9. FINANCIAL STATEMENTS. Copies of the following financial
statements are attached hereto as Schedule 4.9:
(i) the combined balance sheets of the Company and
American RV Centers, Inc., a Tennessee corporation (the "Tennessee
Store") as of December 31, 1996 and 1997 and the related statements of
operations, stockholder's equity and cash flows for the two-year period
ended December 31, 1997, together with the related notes and schedules
(such balance sheets, the related statements of operations,
stockholder's equity and cash flows and the related notes and schedules
are referred to herein as the "Year-end Financial Statements"); and
(ii) the balance sheet of the Company and the Tennessee
Store as of the Balance Sheet Date and the related statements of
operations, stockholder's equity and cash flows for the six-month
period ended June 30, 1998 and on the Balance Sheet Date, together with
the related notes and schedules (such balance sheets, the related
statements of operations, stockholder's equity and cash flows and the
related notes and schedules are referred to herein as the "Interim
Financial Statements").
The Year-end Financial Statements and the Interim
Financial Statements are collectively referred to herein as the
"Financial Statements". The Financial Statements have been, and the
financial statements to be delivered pursuant to Section 6.9 will be,
prepared in accordance with GAAP applied on a consistent basis and
fairly present in all material respects the financial position of the
Company and the Tennessee Store as of the dates
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<PAGE> 18
thereof and the results of its operations and changes in financial
position for the periods then ended. The Company's books of account
have been kept accurately in all material respects, the transactions
entered therein represent bona fide transactions, and the revenues,
expenses, assets and liabilities of the Company have been properly
recorded in such books in all material respects.
4.10. LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule
4.10(a), as of the Balance Sheet Date, the Company has no liabilities or
obligations of any kind, character or description, whether accrued, absolute,
secured or unsecured, contingent or otherwise, which are not reflected in the
Company Interim Financial Statements at the Balance Sheet Date. In addition,
except as set forth on Schedule 4.10(a), since the Balance Sheet Date, the
Company has not incurred any material liabilities or obligations of any kind,
character or description whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business and consistent with past operating practices. For each contingent
liability or other liability for which the amount is not fixed or is contested,
the Company has included on Schedule 4.10(a) the following information:
(i) a summary description of the liability together with the
following:
(A) copies of the principal documentation in the possession
of the Company or its directors, officers, management,
stockholders or key employees relating thereto;
(B) amounts claimed and any other action or relief sought;
and
(C) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending; and
(iii) the date such claim, suit or proceeding was instituted.
Schedule 4.10(b) sets forth an accurate list of all trade
accounts payable, accrued liabilities, indebtedness and other liabilities of the
Company as reflected in the Company Interim Financial Statements as of the
Balance Sheet Date. Schedule 4.10(b) also includes copies of all loan
agreements, floor plan financing agreements, warranty, indemnity or guarantee
agreements, bonds, mortgages, pledges or other security agreements to which the
Company is a party or by which its properties may be bound.
4.11. ACCOUNTS AND NOTES RECEIVABLE. Schedule 4.11 sets forth an
accurate list of the accounts and notes receivable of the Company, as of the
Balance Sheet Date, including any such amounts which are not reflected in the
balance sheet as of the Balance Sheet Date, and including all receivables from
and advances to employees and the Stockholders, which are identified as such.
Schedule 4.11 also sets forth an accurate aging of all accounts and notes
receivable as of the Balance
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Sheet Date showing amounts due in 30-day aging categories. Except to the extent
reflected on Schedule 4.11, such accounts, notes and other receivables arose in
connection with bona fide transactions, the reserves reflected in the balance
sheet as of the Balance Sheet Date are adequate and such accounts, notes and
other receivables are, subject to the stated reserves, collectible.
4.12. PERMITS AND INTANGIBLES. The Company holds all licenses,
franchises, permits and other governmental authorizations ("Licenses") necessary
to conduct the business of the Company, and the Company has delivered to RV
Centers a list that is accurate and a summary description (which is set forth on
Schedule 4.12) of all such Licenses, including any trademarks, trade names,
patents, patent applications and copyrights owned or held by the Company or any
of its employees (including interests in software or other technology systems,
programs and intellectual property) the absence of which would have a Material
Adverse Effect on the Company. Except as set forth on Schedule 4.12, the
Licenses and other rights listed on Schedule 4.12 are valid, held by the Company
and the Company has not received any notice that any Person intends to cancel,
terminate or not renew any such License or other right. Except as set forth on
Schedule 4.12, the Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the Licenses and other rights listed on Schedule 4.12 and is not in violation
of any of the foregoing. Except as specifically provided in Schedule 4.12, the
consummation by the Company of the transactions contemplated in this Agreement
will not result in a default under or a breach or violation of, or adversely
affect the rights and benefits afforded to the Company by, any such Licenses or
other rights.
4.13. ENVIRONMENTAL MATTERS. (a) Except as specifically set forth in
Schedule 4.13 attached hereto, (i) the Company has conducted and is conducting
its businesses in compliance with all applicable Environmental Laws, including,
without limitation, having all environmental permits, licenses and other
approvals and authorizations required by Environmental Laws for the operation of
its business as presently conducted, (ii) none of the properties now or
previously owned or occupied by the Company contain any Hazardous Substance, the
existence of which imposes a requirement under Environmental Laws to remove,
remediate, reduce the levels of Hazardous Substances to levels below regulatory
action levels, or otherwise perform any response, corrective or preventive
measure or pay for any environmental response costs ("Environmental Response
Measures"), (iii) the Company has not received any written notices, demand
letters or requests for information from any Federal, state, local or foreign
governmental entity or third party indicating that the Company may be in
violation of, or liable for any Environmental Response Measures under, any
Environmental Law in connection with the ownership or operation of its business,
and has no reason to believe that any such written documentation may be
forthcoming, (iv) there have been and are no civil, criminal or administrative
actions, suits, demands, claims, hearings, consent orders, investigations or
proceedings pending or, to the knowledge of the Stockholders, threatened,
against the Company relating to any Environmental Law, (v) no reports have been
filed, or are required to be filed, by the Company concerning the release of any
Hazardous Substance or the threatened or actual violation of any Environmental
Law, (vi) no Hazardous Substance has been disposed of, released or transported
in violation of any applicable Environmental Law from any properties owned,
leased or operated by the Company as a result of any activity of the Company
during the
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time such properties were owned, leased or operated by the Company, (vii) there
have been and are no environmental investigations, studies, audits, tests,
reviews or other analyses regarding compliance or non-compliance with any
applicable Environmental Law conducted by or which are in the possession of the
Company relating to the activities of the Company prior to the date hereof,
(viii) there are no underground storage tanks on, in or under any properties
owned by the Company, there were no underground storage tanks owned or used by
the Company on properties formerly owned, leased or operated by the Company, and
no underground storage tanks have been closed or removed from any of such
properties during the time such properties were owned, leased or operated by the
Company, (ix) there is no asbestos or asbestos-containing material present in
any of the properties owned, leased or operated by the Company that is required
to be removed or otherwise abated under Environmental Laws, and no asbestos was
removed from any properties now or formerly owned, leased or operated during the
time such properties were owned, leased or operated by the Company, except in
compliance with Environmental Laws, (x) neither the Company nor any of its
respective properties are subject to any liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order, administrative order,
regulatory requirement, judgment or claim asserted or arising under any
Environmental Law, (xi) there are no environmental liabilities at sites not
owned, operated or leased by the Company, for which the Company could, in whole
or in part, be liable, and (xii) the Company has not been a contractee under any
tolling agreement, processing agreement or netback agreement with a third party.
(b) With respect to any past direct or indirect Subsidiaries or
Affiliates of the Company, the representations contained in Section 4.13(a)
shall apply to the assets and activities conducted by such entity while owned,
directly or indirectly, by the Company or affiliated therewith to the extent
that a failure of such representations to be true and correct could subject the
Company to liability.
(c) As used herein, "Environmental Law" means any federal, state, or
local, statute, ordinance, rule, regulation, code, license, permit,
authorization, order, judgment, decree, injunction, restriction or agreement
with any governmental entity, relating to (x) the protection, preservation or
restoration of the environment or to human health or safety or (y) the exposure
to, or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as in effect on the Closing Date. The
term Environmental Law includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Toxic Substances Control Act,
the Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970, and similar law, regulation or requirement of any
governmental authority or agency having jurisdiction over the Company or its
property, each as amended and as in effect on the Closing Date, and (ii) any
common law or equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
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(d) As used herein, "Hazardous Substance" means any substance regulated
under any Environmental Law or the exposure to which is regulated by any
Environmental Law, and shall include, without limitation, any industrial
substance, petroleum or any derivative or by-product thereof, radon, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead, fibers or
polychlorinated biphenyls.
4.14. PERSONAL PROPERTY. Schedule 4.14 sets forth an accurate list of
(x) all personal property material to the operations of the Company included in
"plant, property and equipment" on the balance sheet of the Company, (y) all
other personal property owned by the Company with an individual net book value
in excess of $5,000 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date and (z) all material leases and agreements in respect of
personal property, including, in the case of each of (x), (y) and (z), (1) true,
complete and correct copies of all such leases and agreements and (2) an
indication as to which assets are currently owned, or were formerly owned, by
Stockholders, relatives of Stockholders, or Affiliates of the Company. Except as
set forth on Schedule 4.14, (i) all personal property material to, and used by,
the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 4.14, (ii) all of the personal
property listed on Schedule 4.14 or replacement property thereof is in working
order and condition, ordinary wear and tear excepted and (iii) all leases and
agreements included on Schedule 4.14 are in full force and effect and constitute
valid and binding agreements of the Company and (to the knowledge of the
Stockholders) the other parties thereto (or their successors) in accordance with
their respective terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium, liquidation or
other similar laws and equity principles relating to creditors' rights
generally. For the purposes of this Section 4.14, "personal property" shall be
deemed to exclude personal property addressed by Sections 4.11 and 4.12 and
inventory of the Company.
4.15. SIGNIFICANT CUSTOMERS AND SUPPLIERS; MATERIAL CONTRACTS AND
COMMITMENTS
(a) Schedule 4.15(a) sets forth an accurate list of (i) all customers
(persons or entities) representing 5% or more of the Company's annual revenues
for fiscal year 1997, showing the approximate total sales to each such customer,
and (ii) all suppliers (persons or entities) representing 5% or more of the
Company's annual purchases of supplies for fiscal year 1997, showing the
approximate total purchases of supplies from each such supplier. Except to the
extent set forth on Schedule 4.15(a), none of such customers or suppliers has
canceled or substantially reduced or is currently attempting or threatening to
cancel a contract or substantially reduce utilization of the services provided
by the Company.
(b) The Company has listed on Schedule 4.15(b) all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties is bound (including, but not limited to, contracts
with significant customers or suppliers, joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land), other than agreements listed on Schedules 4.10, 4.14
or 4.16, (i) in existence as of the Balance Sheet Date and (ii) entered into
since the Balance Sheet Date, and in each case has
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delivered true, complete and correct copies of such agreements to RV Centers.
Except as set forth on Schedule 4.15(b), the Company has complied with all
commitments and obligations pertaining to it and is not in default in any
material respect under any contracts or agreements listed on Schedules 4.10,
4.14, 4.15(b) or 4.16 and has not received notice of a default under any such
contract or agreement. Where required prior to the execution of this Agreement
under such contracts or agreements, the Company has furnished notice of the
Agreement to third parties and has, where required prior to the execution of
this Agreement, obtained consent from third parties to enter into the
transactions contemplated in this Agreement. The Company has also indicated on
Schedule 4.15(b) a list of all plans or projects involving the opening of new
operations, expansion of existing operations, or the acquisition of any personal
property, business or assets requiring, in any event, the payment of more than
$25,000 by the Company.
(c) Except as set forth on Schedule 4.15(b), since January 1, 1997, the
Company has not experienced any difficulties in obtaining any inventory items
necessary to the operation of its business, and, to the knowledge of the
Stockholders, no such shortage of supply of inventory items is threatened or
pending. Except as set forth in Schedule 4.15(b), to the knowledge of the
Stockholders, no customer or supplier of the Company has indicated that it will
cease to do business with, or substantially reduce its purchases from or sales
to, the Company by reason of or after the consummation of the transactions
contemplated hereby.
(d) Except as set forth on Schedule 4.15(b), the Company is not
required to provide any bonding or other financial security arrangements in any
amount in connection with any contract listed on Schedule 4.15(b).
4.16. REAL PROPERTY. Schedule 4.16 includes a list of all real property
owned or leased by the Company at the date hereof and all other real property,
if any, used by the Company in the conduct of its business. The Company has good
title to any real property owned by it that is shown on Schedule 4.16, and all
real property so owned is subject to no mortgage, pledge, lien, conditional
sales agreement, encumbrance, lease, possessory rights of third parties or
charge, except for:
(i) liens reflected on Schedules 4.10 or 4.16 as securing
specified liabilities (with respect to which no material default
exists);
(ii) liens for current taxes not yet payable and assessments not
in default and other inchoate liens for amounts not yet payable and
assessments not in default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions
to title which do not adversely affect the current or contemplated use
of the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct, are attached to
Schedule 4.16, and an indication as to which
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such properties, if any, are currently owned, or were formerly owned, by
Stockholders or Affiliates of the Company is included in Schedule 4.16. Copies
of all title reports and title insurance policies with respect to such real
property owned by the Company and in its possession or reasonably accessible to
it are attached to Schedule 4.16. Except as set forth on Schedule 4.16, all of
such leases included on Schedule 4.16 are in full force and effect and
constitute valid and binding agreements of the Company and to the knowledge of
the Stockholders the other parties thereto in accordance with their respective
terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium, liquidation or other similar
laws and equity principles relating to creditors' rights generally.
4.17. INSURANCE. The Company has delivered to RV Centers (i) an
accurate list as of the Balance Sheet Date and as of the date hereof of all
insurance policies carried by the Company, (ii) an accurate list of all
insurance loss runs or workers compensation claims received by the Company for
the past three policy years and (iii) true, complete and correct copies of all
insurance policies currently in effect. Such insurance policies evidence all of
the insurance the Company is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws. Except as set forth on
Schedule 4.17, all of such insurance policies are currently in full force and
effect and shall remain in full force and effect through the Consummation Date.
Since January 1, 1996, no insurance carried by the Company has been canceled by
the insurer and the Company has not been denied coverage.
4.18. COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to RV Centers an accurate list (which is
set forth on Schedule 4.18) showing all officers, directors and key employees of
the Company, listing all employment, compensation, change in control and
severance agreements with such officers, directors and key employees (the
"Agreements") and the rate of compensation, and sales commissions, (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of (i) the Balance Sheet Date and (ii)
the date hereof. The Company has provided to RV Centers true, complete and
correct copies of all Agreements. Since the Balance Sheet Date, except as
disclosed on Schedule 4.18, there have been no increases in the compensation
payable or any special bonuses to any officer, director, key employee or other
employee, except ordinary salary increases implemented on a basis and in amounts
consistent with past practices.
(b) Except as set forth on Schedule 4.18, (i) the Company is not bound
by or subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no campaign to establish
such arrangement is in progress and (iii) to the knowledge of the Stockholders,
there is no pending or threatened labor dispute involving the Company and any
group of its employees nor has the Company experienced any labor interruptions
over the past three years. Except as set forth on Schedule 4.18, the
Stockholders believe that the Company's relationship with its employees is good.
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(c) Except as set forth in Schedule 4.18 attached hereto, (i) there are
no significant controversies pending or, to the knowledge of the Stockholders,
threatened between the Company and any of its employees, (ii) the Company has
complied in all material respects with all applicable laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (iii) the Company has not received notice from
any person asserting that the Company is liable for any arrears of wages or any
taxes or penalties for failure to comply with any of the foregoing.
4.19. EMPLOYEE PLANS. Schedule 4.19 lists all employee benefit plans
and compensation plans, programs or arrangements (the "Plans") which are
maintained by, contributed to or with respect to which there is or would be any
obligation or liability of the Company, including all employment agreements and
other agreements or arrangements containing "golden parachute" or other similar
provisions, incentive compensation agreements, and deferred compensation
agreements, together with true, complete and correct copies of such plans,
agreements and any trusts related thereto, and classifications of employees
covered thereby as of the Balance Sheet Date and as of the date of this
Agreement. Such Plans cover the Company and the Tennessee Store, as described in
Schedule 4.19. Except for the Plans, if any, described on Schedule 4.19, the
Company does not sponsor, maintain or contribute to any plan, program, fund or
arrangement that constitutes an "employee benefit plan," and the Company does
not have any obligation to contribute to or accrue or pay any benefits under any
deferred compensation or retirement arrangement on behalf of any current or
former employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")). For the purposes of this Agreement, the term "employee
benefit plan" shall have the same meaning as is given that term in Section 3(3)
of ERISA. The Company has not sponsored, maintained or contributed to any
employee benefit plan other than the Plans set forth on Schedule 4.19, and the
Company is not or could not be required to contribute to any Plan pursuant to
the provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the Company's employees.
Except as set forth on Schedule 4.19, the Company is not now, and will
not as a result of its past activities become, liable to the Pension Benefit
Guaranty Corporation or to any multiemployer employee pension benefit plan under
the provisions of Title IV of ERISA.
All Plans listed on Schedule 4.19 and the administration thereof are in
compliance in all material respects with their terms and all applicable
provisions of ERISA and the regulations issued thereunder, as well as with all
other applicable federal, state and local statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any Plan listed on Schedule 4.19 have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company included in the Interim Financial Statements. All accrued contribution
obligations of the Company since the Balance Sheet Date with respect to any Plan
listed on Schedule 4.19 have been fulfilled or will be fully reflected on the
balance sheets delivered pursuant to Section 6.9.
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4.20. COMPLIANCE WITH ERISA. All such Plans listed on Schedule 4.19
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code are, and have been from their inception, so qualified and are the subject
of a determination letter or notification letter issued by the Internal Revenue
Service, which letter covers the status of such Qualified Plans under the
provisions of the Tax Reform Act of 1986, and copies of such letters are
attached to Schedule 4.19. Except as disclosed on Schedule 4.20, all reports and
other documents required to be filed with any governmental agency or distributed
to plan participants or beneficiaries (including, but not limited to, actuarial
reports, audits or tax returns) have been timely filed or distributed. Neither
the Stockholders, any such Plan listed in Schedule 4.19, nor the Company or, to
the knowledge of the Stockholders, any other person has engaged in any
transaction with any Plan which is prohibited under the provisions of Section
4975 of the Code or Section 406 of ERISA, and to which no exemption under the
Code or ERISA applies. No such Plan listed in Schedule 4.19 has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(l) of ERISA, whether or not waived; and neither the Company nor, to
the knowledge of the Stockholders, any other person has incurred any liability
for excise tax or penalty due to the Internal Revenue Service or any liability
to the Pension Benefit Guaranty Corporation ("PBGC") with respect to any Plan or
breached any fiduciary duty with respect to any Plan. The Company further
represents that except as set forth on Schedule 4.20 hereto:
(i) With respect to any plan year for which the applicable
statutes of limitations has not expired, there have been no
terminations, partial terminations or discontinuations of
contributions to any Qualified Plan intended to qualify under Section
401(a) of the Code without notice to and approval by the Internal
Revenue Service;
(ii) no Plan listed in Schedule 4.19 is subject to the provisions
of Title IV of ERISA;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan listed in
Schedule 4.19;
(iv) the Company has not incurred liability under Section 4062 or
Section 4069 of ERISA;
(v) no circumstances exist pursuant to which the Company could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise
tax or penalty, or being subject to any statutory lien to secure
payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the
Company that is, or at any time was, a member of a "controlled group"
(as defined in Section 412(n)(6)(B) of the Code) that includes the
Company; and
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(vi) each Plan may be unilaterally terminated at any time by the
Company without material liability to the Company.
4.21. CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
on Schedule 4.21 or 4.13, the Company is not in violation of any law or
regulation or any order of any court or Federal, state, local or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it other than violations that would not have a Material
Adverse Effect on the Company and except to the extent set forth on Schedules
4.10, 4.13 or 4.21, there are no claims, actions, suits or proceedings, pending
or, to the knowledge of the Stockholders, threatened against, the Company, at
law or in equity, or before or by any Federal, state, local or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them and no written notice of any claim, action,
suit or proceeding, whether pending or threatened, has been received by the
Company. Except as set forth in Schedule 4.21, the Company has conducted and is
now conducting its business in compliance in all material respects with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, orders, approvals, variances,
rules and regulations.
4.22. TAXES.
(a) The Company has timely filed all requisite Federal, state, local
and other income and payroll tax returns or extension requests for all fiscal
periods ended on or before the Balance Sheet Date; and except as set forth on
Schedule 4.22, there are no examinations in progress or claims pending against
the Company for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for Taxes, whether pending or threatened, has
been received. All Taxes, including interest and penalties (whether or not shown
on any tax return), owed by the Company has been paid or reflected as accrued as
of the Balance Sheet Date. The amounts shown as accruals for Taxes on the
Company's Financial Statements are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date. Copies of (i) any tax examinations, (ii)
extensions of statutory limitations and (iii) the federal and local income tax
returns and franchise tax returns of Company for their last three (3) fiscal
years, or such shorter period of time as any of them shall have existed, are
attached hereto as Schedule 4.22 or have otherwise been delivered to RV Centers.
The Company has a taxable year ended as of the year end date in the Year-end
Financial Statements in Schedule 4.9. Except as set forth on Schedule 4.22, the
Company uses the accrual method of accounting for income tax purposes, and the
Company's methods of accounting have not changed in the past five years. The
Company is not an Investment Company as defined in Section 351(e)(1) of the
Code. Except as set forth on Schedule 4.22, the Company is not and has not been
a party to any tax sharing agreement or agreement of similar effect. Except as
set forth on Schedule 4.22, the Company is not and has not been a member of any
consolidated group. The Company has not received, been denied, or applied for
any private letter ruling during the last ten years.
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(b) The Company has timely filed all requisite Federal, state, local
and other income and payroll tax returns or extension requests for all fiscal
periods ended on or prior to the date hereof; and except as set forth on
Schedule 4.22, there are no examinations in progress or claims pending against
the Company for federal, state, local and other Taxes (including penalties and
interest) for any period or periods ended on or prior to the date hereof and no
notice of any claim for Taxes, whether pending or threatened, has been received.
All Taxes, including interest and penalties (whether or not shown on any tax
return), owed by the Company have been paid or reflected as accrued. The amounts
shown as accruals for Taxes on the Company's Financial Statements are sufficient
for the payment of all Taxes of the kinds indicated (including penalties and
interest) for all fiscal periods ended on or before that date.
(c) If the Company is an S corporation, the Company makes the
representations and warranties in this subsection 4.22(c). Except as set forth
in Schedule 4.22 or disclosed in the Year-end Financial Statements, the Company
has been a validly existing S corporation within the meaning of Sections 1361
and 1362 of the Code at all times during its existence and the Company will be
an S corporation up to and including the day before the Closing Date. The
Company would not be liable for any tax under Section 1374 of the Code if its
assets were sold for their fair market value as of the Closing Date. Neither the
Company nor any qualified subchapter S subsidiary of the Company has, in the
past 10 years, (A) acquired assets from another corporation in a transaction in
which the Company's tax basis in the acquired assets was determined, in whole or
part, by reference to the tax basis of the acquired assets in the hands of the
transferor or (B) acquired the stock of any corporation which is a qualified
subchapter S subsidiary. The Stockholders shall pay, and they hereby indemnify
RV Centers and the Company against, all income taxes payable with respect to the
Company's operations for all periods through and including the Consummation
Date.
4.23. NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document. Except as
set forth on Schedule 4.23(a), neither the Company nor, to the knowledge of the
Stockholders, any other party thereto, is in default under any lease,
instrument, agreement, license, or permit set forth on Schedule 4.10(b), 4.12,
4.14, 4.15(b) or 4.16 (the "Material Documents").
(b) Except as set forth on Schedule 4.23(b), the execution and delivery
of this Agreement by each of the Company and the Stockholders do not violate,
conflict with or result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company under any of the terms,
conditions or provisions of (i) the Charter Documents of the Company, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to the
Company or any of its properties or assets, or (iii) any Material Document to
which the Company or any of the Stockholders is now a party or by which any of
the Stockholders or the Company or any of its properties or assets may
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be bound or affected. The consummation by the Company and the Stockholders of
the transactions contemplated herein will not result in any material violation,
conflict, breach, right of termination or acceleration or creation of liens
under any of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the preceding sentence, subject, in the case of the
terms, conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Effective Time) such consents as may be required from
commercial lenders, lessors or other third parties.
(c) Except as set forth on Schedule 4.23(c) and except for requirements
under the Hart-Scott Act, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to the consummation by the Company and the Stockholders of any of the
transactions contemplated herein in order to remain in full force and effect,
and consummation by the Company and the Stockholders of the transactions
contemplated herein will not give rise to any right to termination, cancellation
or acceleration or loss of any right or benefit.
(d) Except for (i) the filing of the Registration Statement, (ii) the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities and (iii) any filing required under the Hart-Scott
Act in connection with the purchase and sale of the Company Stock, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Company and
the Stockholders or the consummation by the Company and the Stockholders of the
transactions contemplated herein.
(e) Except as set forth on Schedule 4.23(e), none of the Material
Documents prohibits the use or publication by the Company or RV Centers of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from providing services or selling
products to any other customer or potential customer of the Company, RV Centers
or any Other Founding Company.
4.24. GOVERNMENT CONTRACTS. Except as set forth on Schedule 4.24, the
Company is not a party to any governmental contract subject to price
redetermination or renegotiation.
4.25. ABSENCE OF CHANGES. Since June 30, 1998, except as set forth on
Schedule 4.25 or as otherwise contemplated herein, there has not been:
(i) any Material Adverse Change in the Company;
(ii) any material damage, destruction or loss to any property or
asset of the Company (whether or not covered by insurance) which has
caused a Material Adverse Effect on the Company;
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(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the
Company except for distributions that are described in Annex I;
(v) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by the Company to any of
its officers, directors, Stockholders, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases
for employees in accordance with past practice; notwithstanding the
foregoing, the Company has not paid or agreed to pay salary, bonus,
sales commissions, fees or any other form of compensation, directly or
indirectly, to the Stockholders or any members of their family in
excess of the aggregate monthly compensation provided for in Annex I
hereto.
(vi) any work interruptions, labor grievances or claims filed, or
any similar event or condition of any character which has caused a
Material Adverse Effect on the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any Person,
including, without limitation, the Stockholders and their Affiliates,
except inventory sold in the ordinary course of business;
(viii) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to the Company, including without limitation
any indebtedness or obligation of any Stockholders or any Affiliate
thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the material
assets, property or rights of the Company or requiring consent of any
party to the transfer and assignment of any such assets, property or
rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a
party;
(xiii) any transaction by the Company outside the ordinary course
of its business;
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(xiv) any cancellation or termination of a material contract with
a customer or client prior to the scheduled termination date other
than in the ordinary course of business of the Company and of which
notice has been given to RV Centers;
(xv) any other distribution of property or assets by the Company
other than in the ordinary course of business and other than
distributions of real estate and other assets as permitted by this
Agreement (including the Schedules hereto); or
(xvi) any occurrence that is reasonably likely to give rise to a
contingent liability which would have a Material Adverse Effect on the
Company excluding occurrences due to general economic conditions,
legislative or regulatory developments or occurrences affecting the
recreational vehicle industry generally.
4.26. DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered
to RV Centers an accurate schedule (which is set forth on Schedule 4.26) as of
the date of the Agreement of:
(i) the name of each financial institution in which the Company
has accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(vi) the name of each person authorized to draw thereon or have
access thereto.
All of the cash indicated on the Company's balance sheet as of June 30,
1998, was held in the accounts listed on Schedule 4.26, and as of the
Consummation Date, the Company will have no other accounts. Schedule 4.26 also
sets forth the name of each person, corporation, firm or other entity holding a
general or special power of attorney from the Company and a description of the
terms of such power.
4.27. VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance by the Company of the transactions
contemplated herein have been duly and validly authorized by the Board of
Directors and the Stockholders of the Company and this Agreement has been duly
and validly authorized by all necessary corporate action and is a valid and
binding obligation of the Company, subject to the effect of applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium,
liquidation or other similar laws and equity principles relating to creditors'
rights generally.
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4.28. RELATIONS WITH GOVERNMENTS. None of the Company, any of the
Stockholders, nor any Affiliate of any of them has given or offered anything of
value to any governmental official, political party or candidate for government
office nor has it or any of them otherwise taken any action which would in any
case cause the Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
4.29. DISCLOSURE. (a) The representations and warranties of the
Stockholders as set forth in this Agreement, including the Annexes and Schedules
hereto, to the extent such representations and warranties relate to the Company
and the Stockholders, and the completed Director and Officer Questionnaires,
with respect to any Stockholder who has completed such Questionnaires do not
contain an untrue statement of a material fact concerning the Company or the
Stockholders or omit to state a material fact concerning the Company or the
Stockholders necessary to make the statements herein and therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from any
of such documents made or omitted in reliance upon information furnished in
writing by the Other Founding Companies, RV Centers and its Affiliates or any
representatives or agents of RV Centers and its Affiliates.
(b) The Stockholders acknowledge and agree that (i) there exists no
firm commitment, binding agreement, or promise or other assurance of any kind,
whether express or implied, oral or written, that a Registration Statement will
become effective or that the IPO pursuant thereto will occur; (ii) neither RV
Centers nor Baker Kreft Funding I, L.L.C. or any of their officers, directors,
agents or representatives nor any Underwriter shall have any liability to the
Company, the Stockholders or any other person affiliated or associated with the
Company for any failure of the Registration Statement to become effective, the
IPO to occur at a particular price or within a particular range of prices or to
occur at all, the transactions contemplated by this Agreement to be successful
or the prospects for RV Centers described in the Registration Statement to be
realized; and (iii) the decision of Stockholders to enter into this Agreement,
or to vote in favor of or consent to the proposed purchase of RV Centers Stock
and sale of the Company Stock, has been or will be made independent of, and
without reliance upon, any statements, opinions or other communications, or due
diligence investigations which have been or will be made or performed by any
prospective Underwriter, relative to RV Centers or the prospective IPO.
(c) No Stockholder has any present plan, intention, commitment or
binding agreement or arrangement to dispose of any shares of RV Centers Stock to
be received by such Stockholder as a result of the transactions contemplated in
this Agreement, except for transfers permitted pursuant to Sections 14 and 15
hereof.
4.30. PROHIBITED ACTIVITIES. Except as set forth on Schedule 4.30, the
Company has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 6.3.
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4.31. NO WARRANTIES OR INSURANCE. Except as set forth on Schedule 4.31,
the Company has no liability to any person under any warranty relating to goods
sold or services provided by the Company and the Company does not offer or sell
insurance or consumer protection plans or other arrangements that could result
in the Company being required to make any payment to or perform any service for
any person.
4.32. INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 4.32, no Stockholder, officer,
director or Affiliate of the Company (i) possesses, directly or indirectly, any
financial interest in, or is a director, officer, employee or Affiliate of, any
corporation, firm, association or business organization that is a client,
supplier, customer, lessor, lessee or competitor of the Company, or (ii) is a
party to an agreement or relationship, that involves the receipt by such person
of compensation or property from the Company other than through a customary
employment relationship.
4.33. REGISTRATION STATEMENT. None of the information supplied by the
Company in writing for inclusion in the Registration Statement contains any
untrue statement of a material fact concerning the Company or the Stockholders
or has omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein concerning the Company or the
Stockholders, in light of the circumstances under which they are made, not
misleading. The Stockholders will have the right to review and approve in
advance any statements made about the Company in the Registration Statement.
4.34. INVENTORY. Except as provided in Schedule 4.34, all of the
Company's inventories at June 30, 1998 are reflected on the Interim Financial
Statements. The values at which inventories are carried on the Interim Financial
Statements reflect the normal inventory valuation policies of the Company in
conformity with GAAP consistently applied. The inventories reflected on the
Interim Financial Statements or arising since the date thereof are currently
marketable and substantially all of such inventories can reasonably be
anticipated to be sold at normal mark-ups within 180 days after the date hereof
in the ordinary course of business (subject to any reserve for obsolete,
off-grade or slow-moving items that is reflected in the Interim Financial
Statements) except for spare parts inventory which inventory is good and usable.
4.35. YEAR 2000. Except and to the extent described in Schedule 4.35,
the "Information Technology" (as defined below in this Section 4.35) of the
Company and its Subsidiaries is Year 2000 compliant. "Year 2000 compliant" means
that the Information Technology is designed to be used prior to, during and
after the calendar Year 2000 A.D. and the Information Technology used during
each such time period will accurately receive, provide and process date/time
data (including, but not limited to, calculating, comparing and sequencing)
from, into and between the 20th and 21st centuries, including the years 1999 and
2000, and leap-year calculations and will not malfunction, cease to function, or
provide invalid or incorrect results as a result of date/time data.
For purposes hereof, "Information Technology," means all computer
operated or micro processor controlled equipment, including, but not limited to
computer software, computer hardware
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and related software, all central processing units, terminals, disk drives, tape
drives, electronic memory units, printers, keyboards, screens, peripherals (and
other input/output devices), modems and other communication controllers, and any
and all parts and appurtenances thereto, together with all intellectual property
used in the operation of such computer equipment and hardware, and other similar
or related items of automated, computerized, or software system(s) that are used
or relied on by the Company or its Subsidiaries in the conduct of their
business.
(B) Individual Representations and Warranties of Stockholders.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement, and that the representations and warranties set forth in Section 4(B)
shall survive the Consummation Date.
4.36. AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement. Such Stockholder owns
beneficially and of record all of the shares of the Company Stock identified on
Schedule 4.3 hereto as being owned by such Stockholder, and such Company Stock
is owned free and clear of all liens, encumbrances and claims of every kind.
4.37. PREEMPTIVE RIGHTS. Stockholder does not have, or hereby waives,
any preemptive or other right to acquire shares of Company Stock that such
Stockholder has or may have had. Nothing herein, however, shall limit or
restrict the rights of any Stockholder to acquire RV Centers Stock pursuant to
(i) this Agreement or (ii) any outstanding option, warrant or other rights
granted by RV Centers.
5. REPRESENTATIONS OF RV CENTERS
Except as set forth in the disclosure schedules attached hereto and
except otherwise qualified below, RV Centers represents and warrants that all of
the following representations and warranties in this Section 5 are true at the
date of this Agreement, and that such representations and warranties, except for
those in Section 5.3, shall survive the Consummation Date until June 30, 2000
(the "Expiration Date"). The representations and warranties set forth in Section
5.3 shall survive until the date on which the applicable statute of limitations
expires, which date shall be the "Expiration Date" for purposes of Section 5.3.
5.1. DUE ORGANIZATION. RV Centers is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the State
of Delaware, and it has the requisite power and authority to carry on its
business as it is now being conducted and as contemplated in the RV Centers Plan
of Organization. RV Centers is duly qualified or authorized to do business and
is in good standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification or
authorization necessary, except where the failure to be so qualified or
authorized to do business would not have a Material Adverse Effect. True,
complete
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and correct copies of the Certificate of Incorporation and By-laws, as proposed
to be amended, of RV Centers (the "RV Centers Charter Documents") are attached
hereto as Annex II.
5.2. AUTHORIZATION. (i) The officers of RV Centers executing this
Agreement have the authority to enter into and bind RV Centers to the terms of
this Agreement and (ii) RV Centers has the full legal right, power and authority
to enter into and perform this Agreement and consummate the transactions
contemplated herein. All corporate acts and other proceedings required to have
been taken by RV Centers to authorize the execution, delivery and performance of
this Agreement and all the transactions contemplated hereby have been duly and
properly authorized. Copies of the most recent resolutions adopted by the Board
of Directors of RV Centers, which approve this Agreement and the transactions
contemplated herein in all respects, certified by the Secretary or an Assistant
Secretary of RV Centers, as the case may be, as being in full force and effect
on the date hereof, are attached hereto as Schedule 5.2.
5.3. CAPITAL STOCK OF RV CENTERS. As of the date of this Agreement,
the authorized capital stock of RV Centers is as set forth on Schedule 5.3.
Immediately prior to the Closing Date and the Consummation Date, all of the
issued and outstanding shares of the capital stock of RV Centers will be as set
forth in the Registration Statement, free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind other than any restrictions described in the Registration
Statement. All of the issued and outstanding shares of the capital stock of RV
Centers has been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by RV
Centers in compliance with all applicable state and Federal laws concerning the
issuance of securities. Further, none of such shares were issued in violation of
the preemptive rights of any past or present stockholder of RV Centers.
5.4. TRANSACTIONS IN CAPITAL STOCK; ORGANIZATION ACCOUNTING. Except
for the Other Agreements and except as set forth in the Draft Registration
Statement, (i) no option, warrant, call, conversion right or commitment of any
kind exists which obligates RV Centers to issue any of its authorized but
unissued capital stock; and (ii) RV Centers has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof. The outstanding options, warrants or other rights to acquire
shares of the stock of RV Centers will be as described in the Registration
Statement.
5.5. SUBSIDIARIES. RV Centers has no subsidiaries. RV Centers does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, and RV Centers,
directly or indirectly, is not a participant in any joint venture, partnership
or other non-corporate entity.
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5.6. NO VIOLATIONS. (a) RV Centers is not in violation of any RV
Centers Charter Document. Neither RV Centers nor, to the best knowledge of RV
Centers, any other party thereto, is in default under any lease, instrument,
agreement, license, or permit to which RV Centers is a party, or by which RV
Centers, or any of its properties, is bound (collectively, the "RV Centers
Documents").
(b) The execution and delivery of this Agreement by RV Centers does not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of RV Centers under any of the
terms, conditions or provisions of (i) the RV Centers Charter Documents, (ii)
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to RV Centers or any of its properties or assets, or (iii) any RV
Centers Document. The consummation by RV Centers of the transactions
contemplated herein will not result in any material violation, conflict, breach,
right of termination or acceleration or creation of liens under any of the
terms, conditions or provisions of the items described in clauses (i) through
(iii) of the preceding sentence, subject, in the case of the terms, conditions
or provisions of the items described in clause (iii) above, to obtaining (prior
to the Effective Time) such consents as may be required from commercial lenders,
lessors or other third parties.
(c) Except for (i) the filings with the SEC pursuant to the 1933 Act in
connection with the IPO and the purchase and sale of the Company Stock, (ii) the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities, and (iii) any filings required under the Hart-Scott
Act in connection with the transactions contemplated by the RV Centers Plan of
Organization, none of the RV Centers Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by RV Centers of any of the transactions
contemplated herein, and consummation by RV Centers of the transactions
contemplated herein will not give rise to any right to termination, cancellation
or acceleration or loss of any material right or benefit under any of the RV
Centers Documents.
(d) Except for (i) the filings with the SEC pursuant to the 1933 Act in
connection with the IPO and the purchase and sale of the Company Stock, (ii) the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities, and (iii) any filings required under the Hart-Scott
Act in connection with the transactions contemplated in the RV Centers Plan of
Organization, no declaration, filing or registration with, notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by RV
Centers or the consummation by RV Centers of the transactions contemplated
herein.
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5.7. VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by RV Centers and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of RV
Centers and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of RV Centers.
5.8. RV CENTERS STOCK. At the time of issuance thereof and delivery to
the Stockholders, the RV Centers Stock to be delivered to the Stockholders
pursuant to this Agreement will constitute valid, duly authorized and legally
issued shares of RV Centers, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 14 and 15 hereof,
will be identical in all substantive respects (which do not include the form of
certificate upon which it is printed or the presence or absence of a CUSIP
number on any such certificate) to the RV Centers Stock issued and outstanding
as of the date hereof by reason of the provisions of the Delaware GCL. The RV
Centers Stock issued and delivered to the Stockholders shall at the time of such
issuance and delivery be free and clear of any liens, claims or encumbrances of
any kind or character. The shares of RV Centers Stock to be issued to the
Stockholders pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 16 hereof.
5.9. BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. RV Centers was
formed in May, 1998 and has conducted only limited operations since that time.
RV Centers has not conducted any material business since the date of its
inception, except in connection with this Agreement, the Other Agreements and
the IPO. Except as described in the Draft Registration Statement, RV Centers
does not own and has not at any time owned any real property or any material
personal property and is not a party to any other material agreement other than
the Other Agreements, the agreements contemplated hereby and such agreements as
will be filed as Exhibits to the Registration Statement. Except as set forth in
the Registration Statement, RV Centers has not entered into any material
agreement with any of the Founding Companies or any of the stockholders of the
Founding Companies other than the Other Agreements and the agreements
contemplated in each of the Other Agreements and the Registration Statement,
including the employment agreements and leases referred to herein or entered
into in connection with the transactions contemplated herein and therein.
5.10. INVESTMENT REPRESENTATIONS. RV Centers represents that the
Company Stock is being acquired by RV Centers for its own account for investment
purposes only and not with a view to the distribution thereof within the meaning
of the 1933 Act.
5.11. AUTHORIZATION OF OTHER AGREEMENTS. The Other Agreements have been
duly authorized, executed and delivered by RV Centers and constitute the legal,
valid and binding obligation of RV Centers enforceable against RV Centers in
accordance with their respective terms, subject to the effect of applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium,
liquidation or other similar laws and equity principles relating to creditors'
rights generally.
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5.12. FINANCIAL STATEMENTS. The unaudited pro forma financial
statements of RV Centers included in the Draft Registration Statement comply as
to form in all material respects to the applicable accounting requirements of
the 1933 Act and the regulations promulgated under the 1933 Act. Management of
RV Centers believes that the assumptions underlying the pro forma adjustments
utilized in the preparation of such pro forma financial statements are
reasonable, and such pro forma adjustments have been properly applied to the
historical financial amounts in the compilation of the pro forma financial
statements. Based on the representations in Section 4.9 of this Agreement and in
Section 4.9 of each of the Other Agreements, to the knowledge of RV Centers, the
pro forma financial information of RV Centers fairly presents the pro forma
financial position, results of operations and other information purported to be
shown therein at the respective dates and for the respective periods specified.
5.13. LIABILITIES AND OBLIGATIONS. Except as set forth in the Draft
Registration Statement, as of the date of this Agreement, RV Centers has no
material liabilities or obligations of any kind, character or description,
whether accrued, absolute, secured or unsecured, contingent or otherwise, other
than liabilities incurred in the ordinary course of business and consistent with
past practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
5.14. CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
in the Draft Registration Statement, RV Centers is not in violation of any law
or regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of RV Centers,
threatened against or affecting, RV Centers, at law or in equity, or before or
by any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. RV Centers has conducted and is conducting its businesses in
compliance in all material respects with the requirements, standards, criteria
and conditions set forth in applicable Federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation, in any material respect, of any of the
foregoing.
5.15. NO SIDE AGREEMENTS. RV Centers has not entered into any agreement
with any of the Founding Companies or any of the Stockholders of the Founding
Companies other than the Other Agreements and the agreements referred to in the
Other Agreements or the Draft Registration Statement, including the employment
agreements and/or advisory agreements and leases referred to herein or entered
into in connection with the transactions contemplated hereby and thereby. RV
Centers has not entered into any agreements providing for rights to register
shares of RV Centers Stock under the 1933 Act except as provided in Section 16
of this Agreement, in Section 16 of the Other Agreements and the Exhibits to the
Draft Registration Statement.
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5.16. RELATIONS WITH GOVERNMENTS. Neither RV Centers nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor has
RV Centers, any of its directors, officers or Affiliates of any of them
otherwise taken any action, which would cause RV Centers to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.17. OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by RV Centers and constitute the legal, valid and binding
obligation of RV Centers enforceable against RV Centers in accordance with their
respective terms. Except as disclosed on Schedule 5.17 or the Draft Registration
Statement, the terms and conditions of the Other Agreements and the employment
agreements, advisory agreements and leases attached as annexes thereto
(excluding the terms relating to the consideration payable by RV Centers
thereunder) are identical in all material respects to the terms and conditions
in this Agreement and its comparable Annexes.
5.18. REGISTRATION STATEMENT. On the date of each filing of the
Registration Statement with the SEC the Registration Statement will comply, as
to form in all material respects with the requirements of the Form S-1
Registration Statement and applicable requirements under Federal laws and
regulations (except for the inclusion of all exhibits required to be filed
therewith with respect to the Draft Registration Statement and the Registration
Statement prior to its effective date), provided that the foregoing does not
apply to any information that the Company and the Stockholders have furnished to
RV Centers in writing specifically for inclusion in the Registration Statement.
5.19. DISCLOSURE. The Draft Registration Statement delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted in
reliance upon, and in conformity with, information furnished to RV Centers by
the Company or the Stockholders in writing specifically for inclusion in the
Registration Statement. The Registration Statement, when it becomes effective,
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and each prospectus included therein, on the date of
filing thereof with the SEC and at the Closing Date and the Consummation Date,
will not include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that the
foregoing shall not apply to statements in or omissions from any such document
in reliance upon, and in conformity with, information furnished to RV Centers by
the Company or the Stockholders in writing specifically for inclusion therein.
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6. COVENANTS PRIOR TO CLOSING
6.1. ACCESS AND COOPERATION; DUE DILIGENCE.
(a) Between the date of this Agreement and the Consummation Date, the
Company will afford to the officers and authorized representatives of RV Centers
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish RV Centers with such additional
financial and operating data and other information as to the business and
properties of the Company as RV Centers may from time to time reasonably
request. The Company will cooperate with RV Centers, its representatives,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by this
Agreement. RV Centers will treat all information obtained in connection with the
negotiation and performance of this Agreement or the due diligence
investigations conducted with respect to the Company as confidential in
accordance with the provisions of Section 13 hereof.
(b) Between the date of this Agreement and the Consummation Date, RV
Centers will afford to the officers and authorized representatives of the
Company and/or the Stockholder access to all of RV Centers's sites, properties,
books and records and will furnish the Company and/or the Stockholder with such
additional financial and operating data and other information as to the business
and properties of RV Centers as the Company and/or the Stockholder may from time
to time reasonably request. RV Centers will cooperate with the Company and/or
the Stockholder, their representatives, auditors and counsel in the preparation
of any documents or other material which may be required in connection with any
documents or materials required by this Agreement. The Company and/or the
Stockholder will cause all information obtained in connection with the
negotiation and performance of this Agreement (including information regarding
each of the Other Founding Companies) to be treated as confidential in
accordance with the provisions of Section 13 hereof.
6.2. CONDUCT OF BUSINESS PENDING CLOSING. Except as set forth on
Schedule 6.2, between the date of this Agreement and the Consummation Date, the
Company will:
(i) carry on its respective businesses in the ordinary course,
consistent with past practice, and not introduce any material new
method or changes in operation or accounting;
(ii) use all commercially reasonable efforts to maintain its
respective properties, equipment and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its obligations under agreements relating to
or affecting its assets, properties, equipment or rights, the
nonperformance of which could have a Material Adverse Effect on the
Company;
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(iv) use all reasonable efforts to keep in full force and effect
present insurance policies or other comparable insurance coverage;
(v) use reasonable efforts to maintain and preserve its business
organization intact, retain its respective key employees and maintain
its respective material relationships with suppliers, customers and
others having business relations with the Company;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities, the
noncompliance with which could have a Material Adverse Effect on the
Company;
(vii) maintain present debt and lease instruments in accordance
with their terms and not enter into new or amended debt or lease
instruments without the knowledge and written consent of RV Centers
(which consent shall not be unreasonably withheld) provided that debt
or lease instruments may be replaced without the consent of RV Centers
if the replacement instruments are on terms at least as favorable to
the Company as the instruments being replaced;
(viii) maintain or reduce present salaries and commission levels
for all officers, directors, employees and agents except for ordinary
and customary bonus and salary increases for employees in accordance
with past practices; notwithstanding the foregoing, the Company will
not pay or agree to pay salary, bonus, sales commissions, fees or any
other form of compensation, directly or indirectly, to the
Stockholders or any members of their family in excess of the aggregate
monthly compensation provided for in Annex I hereto; and
(ix) pay all of its obligations, including but not limited to
taxes, loans and manufacturers' invoices, as they become due and
payable and not prepay any of its obligations.
6.3. PROHIBITED ACTIVITIES. Except as set forth on Schedule 6.3 or on
Annex I to this Agreement, between the date hereof and the Consummation Date,
the Company will not, without prior written consent of RV Centers:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other
than in connection with the exercise of options or warrants listed in
Schedule 4.4;
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<PAGE> 41
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or
purchase, redeem or otherwise acquire or retire for value any shares
of its stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is
in the normal course of business (consistent with past practice) or
involves an amount per contract, commitment, liability or expenditure,
in the aggregate, not in excess of $100,000 except for purchases and
sales of recreational vehicles inventory in the ordinary course of
business;
(v) create or assume to exist any mortgage, pledge or other lien
or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment, (excluding
rolling stock inventory) with an aggregate cost, per item, not in
excess of $25,000 necessary or desirable for the conduct of the
businesses of the Company, (2) (A) liens for taxes either not yet due
or being contested in good faith and by appropriate proceedings (and
for which contested taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary
course of business (the liens set forth in clause (2) being referred
to herein as "Statutory Liens"), or (3) liens set forth on Schedule
4.10(b), 4.15(b) and/or 4.16 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment with a net book value in excess of $25,000
except in the normal course of business;
(vii) consummate or enter into any commitment for the acquisition
of any business or the start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(ix) waive any material rights or claims of the Company, provided
that the Company may negotiate and adjust bills and accounts in the
course of good faith disputes with customers in a manner consistent
with past practice, provided, further, that such adjustments shall not
be deemed to be included in Schedule 4.11 unless specifically listed
thereon;
(x) commit a material breach of or amend or terminate any
material agreement, permit, license or other right of the Company;
(xi) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder; or
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(xii) pay or agree to pay salary, bonus, sales commissions, fees
or any other form of compensation, directly or indirectly, to the
Stockholders or any members of their family in excess of the aggregate
monthly compensation provided for in Annex I hereto.
6.4. NO SHOP. None of the Stockholders or the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Consummation Date or the termination of this Agreement
in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than RV Centers
or its authorized agents relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation, share exchange or
business combination of the Company.
6.5. AGREEMENTS. Except as disclosed on Schedule 6.5, the Stockholders
and the Company shall terminate (i) any stockholders agreements, voting
agreements, voting trusts, options, warrants and employment agreements between
the Company and any employee listed on Schedule 8.11 hereto and (ii) except as
otherwise provided in this Agreement, any existing agreement between the Company
and any Stockholder, on or prior to the Consummation Date, provided that nothing
herein shall prohibit or prevent the Company from paying (either prior to or on
the Closing Date) notes or other obligations from the Company to the
Stockholders in accordance with the terms thereof, which terms have been
disclosed to RV Centers. Such termination agreements are listed on Schedule 6.5
and copies thereof are attached thereto.
6.6. NOTIFICATION OF CERTAIN MATTERS. The Stockholders and the Company
shall give prompt notice to RV Centers of the Company's or any Stockholder's
knowledge of (i) the occurrence or non-occurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
of the Company or the Stockholders contained herein to be untrue or inaccurate
in any material respect at or prior to the Closing and (ii) any material failure
of any Stockholder or the Company to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such person
hereunder. RV Centers shall give prompt notice to the Company of RV Centers's
knowledge of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of RV Centers contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing and (ii) any material failure of RV Centers
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder. The delivery of any notice pursuant to this
Section 6.6 shall not be deemed to (i) modify the representations or warranties
hereunder of
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the party delivering such notice, which modification may only be made pursuant
to Section 6.7, (ii) modify the conditions set forth in Sections 7 and 8, or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
6.7. AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until 24 hours prior
to the anticipated effectiveness of the Registration Statement to supplement or
amend promptly the Schedules hereto with respect to any matter hereafter arising
or discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or described in the Schedules or which may
have been omitted from the schedules previously provided by the Company;
provided however, that supplements and amendments to Schedules 4.10(b), 4.11,
4.14, 4.15(a), and 4.15(b) shall only have to be delivered at the Closing Date,
unless such Schedule is to be amended to reflect an event occurring other than
in the ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the Company that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect on
the Company may be made unless RV Centers consents to such amendment or
supplement; and provided further, that no amendment or supplement to a Schedule
prepared by RV Centers that constitutes or reflects an event or occurrence that
would have a Material Adverse Effect on RV Centers may be made unless a majority
of the Founding Companies consent to such amendment or supplement. For all
purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 7.1 and 8.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 6.7. In the event that the Company
seeks to amend or supplement a Schedule pursuant to this Section 6.7 to reflect
an item not known to the Company or the Stockholders at the time of entering
into this Agreement or an event occurring after the date of this Agreement, and
RV Centers does not consent, in its reasonable discretion, to such amendment or
supplement, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 11.1(i) hereof. In the event that RV Centers seeks to amend or
supplement a Schedule pursuant to this Section 6.7 and a majority of the
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
11.1(i) hereof. No party to this Agreement shall be liable to any other party if
this Agreement shall be terminated pursuant to the provisions of this Section
6.7 with respect to an attempt to supplement or amend a Schedule to reflect an
item not known to RV Centers or the Company or Stockholders, as applicable, at
the time of execution or occurring after the date of execution of this
Agreement. No amendment of or supplement to a Schedule shall be made later than
24 hours prior to the anticipated effectiveness of the Registration Statement,
subject to the proviso in the first sentence.
6.8. COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The Company
and the Stockholders shall furnish or use reasonable efforts to cause to be
furnished to RV Centers and the Underwriters all of the information concerning
the Company and the Stockholders and their Affiliates as RV Centers may
reasonably request required for inclusion in, and will cooperate with RV Centers
and the Underwriters in the preparation of, the Registration Statement and the
prospectus
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included therein (including audited and unaudited financial statements, prepared
in accordance with GAAP, in form suitable for inclusion in the Registration
Statement). The parties hereto agree that the disclosure of information with
respect to the Company and the Stockholders and their affiliates in the
Registration Statement and while marketing the securities of RV Centers in the
IPO shall not be a violation of any confidentiality agreement, including Article
13 of this Agreement, among the parties hereto or their officers or
stockholders. The Company and the Stockholders agree promptly to advise RV
Centers if at any time during the period in which a prospectus relating to the
offering is required to be delivered under the 1933 Act, any information
contained in the prospectus concerning the Company or the Stockholders or their
Affiliates becomes incorrect or incomplete in any material respect and to
provide the information needed to correct such inaccuracy. Subject to the
Company's right to review and approve such information in the Registration
Statement set forth in Section 4.33 above, only insofar as the information
relates solely to the Company or the Stockholders or their affiliates, the
Company represents and warrants as to such information with respect to itself,
and each Stockholder represents and warrants, as to such information with
respect to the Company and himself or herself, that the Registration Statement
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
6.9. FINAL FINANCIAL STATEMENTS. The Company shall provide at least
five (5) business days prior to the Consummation Date the consolidated balance
sheets of the Company, audited as of December 31, 1998 and unaudited as of the
end of all fiscal months following December 31, 1998 and ending at least 25 days
prior to the Consummation Date, and the consolidated statement of income, cash
flows and retained earnings of the Company, audited for the quarter ending
December 31, 1998 and unaudited for the same months as the balance sheets. Such
financial statements shall have been prepared in accordance with GAAP applied on
a consistent basis throughout the periods indicated (except as noted therein),
and will present fairly the financial position and results of operations of the
Company for the periods indicated therein.
6.10. FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated herein.
6.11. COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act, (ii) such compliance by
the Stockholders and the Company shall be deemed a condition precedent in
addition to the conditions precedent set forth in Section 8 of this Agreement,
and such compliance by RV Centers shall be deemed a condition precedent in
addition to the conditions precedent set forth in Section 7 of this Agreement,
and (iii) the parties agree to cooperate and use their best efforts to cause all
filings required under the Hart-Scott Act to be made. If filings under the
Hart-Scott Act are required, the costs and expenses thereof
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(including filing fees) shall be borne by RV Centers. The obligation of each
party to consummate the transactions contemplated in this Agreement is subject
to the expiration or termination of the waiting period under the Hart-Scott Act,
if applicable.
6.12. TRANSFERS OF PERMITS AND INTANGIBLES. The Stockholders shall use
commercially reasonable efforts to cause all trademarks, trade names, patents,
patent applications, copyrights and other intellectual property owned or held by
employees of the Company which are material to the operations of the business of
the Company to be assigned or licensed to the Company for no additional
consideration.
6.13. DIVIDENDS. The Company may, after the Balance Sheet Date and
before the Consummation Date, pay to the Stockholder only the dividends or
distributions expressly permitted by Annex I hereto.
6.14. AUTHORIZED CAPITAL. Prior to the Consummation Date, RV Centers
shall maintain its authorized capital stock as set forth in the Registration
Statement filed with the SEC except for stock splits, such changes in authorized
capital stock as are made to respond to comments made by the SEC or requirements
of any exchange or automated trading system for which application is made to
register the RV Centers Stock and any changes necessary or advisable in order to
permit the delivery of the opinion contemplated by Section 7.3 hereof.
6.15 YEAR 2000 COMPLIANCE COST ESTIMATES. Promptly upon execution
hereof, the Company and its Subsidiaries will undertake an investigation of all
Information Technology suppliers and vendors to determine whether all
Information Technology products purchased, leased, licensed or used by or in
connection with the Company or its Subsidiaries, or their respective Information
Technology, is Year 2000 compliant and, if not, the steps required to make it
Year 2000 compliant. Within thirty-five (35) days hereof, the Company shall
provide to RV Centers in writing an estimate of the total cost of, and the time
required, to make all the Company's Information Technology Year 2000 compliant.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions,
except Section 7.8. The obligations of the Stockholders and the Company with
respect to actions to be taken on the Consummation Date are subject to the
satisfaction or waiver on or prior to the Consummation Date of the conditions
set forth in Sections 7.1, 7.2, 7.3, 7.5, 7.6, 7.7 and 7.8. As of the Closing
Date or, with respect to the conditions set forth in Sections 7.1, 7.2, 7.3,
7.5, 7.6, 7.7 and 7.8, as of the Consummation Date, if any such conditions have
not been satisfied, the Stockholders (acting in unison) shall have the right to
terminate this Agreement, or in the alternative, waive any condition not so
satisfied. Any act or action of the Stockholders in consummating the Closing or
delivering the certificates representing Company Stock as of the
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Consummation Date shall constitute a waiver of any conditions not so satisfied.
However, no such waiver shall be deemed to affect the survival of the
representations and warranties of RV Centers contained in Section 5 hereof.
7.1. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of RV Centers contained in this Agreement shall
be true and correct in all material respects as of the Closing Date and the
Consummation Date as though such representations and warranties had been made as
of that time; all of the terms, covenants and conditions of this Agreement to be
complied with and performed by RV Centers on or before the Closing Date and the
Consummation Date shall have been duly complied with and performed in all
material respects; and certificates to the foregoing effect dated the Closing
Date and the Consummation Date, respectively, and signed by the President or any
Vice President of RV Centers shall have been delivered to the Stockholders.
7.2. NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the purchase and sale of the Company Stock or the IPO or
the consummation of the Other Agreements in a manner that would have a Material
Adverse Effect upon RV Centers or any of its stockholders or Subsidiaries.
7.3. OPINIONS. The Company shall have received (i) an opinion from
counsel for RV Centers, dated the Closing Date, in the form annexed hereto as
Annex III, and (ii) an opinion, from Ernst & Young LLP, dated the Closing Date,
that the RV Centers Plan of Organization will qualify as a tax-free transfer of
property under Section 351 of the Code and that the Stockholders will not
recognize gain to the extent the Stockholders exchange stock of the Company
Stock for RV Centers Stock (but not cash or other property) pursuant to the RV
Centers Plan of Organization.
7.4. REGISTRATION STATEMENT; MINIMUM VALUE. The Registration Statement
shall have been declared effective by the SEC and not subject to any stop order
proceedings and the underwriters named therein shall have agreed to acquire on a
firm commitment basis, subject to the conditions set forth in the underwriting
agreement, shares of RV Centers Stock on terms such that the aggregate value of
the cash and the shares of RV Centers Stock to be received by the Stockholders
is not less than the Minimum Value set forth on Annex I.
7.5. CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the transactions contemplated herein and no governmental agency or body shall
have taken any other action or made any request of the Company as a result of
which the Company deems it inadvisable to proceed with the transactions
hereunder. All consents and approvals of third parties listed on Schedule
4.23(c) shall have been obtained.
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7.6. GOOD STANDING CERTIFICATES. RV Centers shall have delivered to
the Company a certificate, dated as of a date no later than ten days prior to
the Closing Date, duly issued by the Delaware Secretary of State and in each
state in which RV Centers is authorized to do business, showing that RV Centers
is in good standing and authorized to do business and that all state franchise
and/or income tax returns and taxes for RV Centers for all periods prior to the
Closing have been filed and paid and RV Centers shall be in good standing in
such states on the Closing Date and the Consummation Date.
7.7. NO MATERIAL ADVERSE CHANGE. No event or circumstance or series of
events shall have occurred with respect to RV Centers which would constitute a
Material Adverse Effect and no change in the disclosures in the Draft
Registration Statement shall have been made which reflects a Material Adverse
Effect on RV Centers.
7.8. CLOSING OF IPO. The closing of the sale of the RV Centers Stock
to the Underwriters in the IPO shall have occurred on the Consummation Date.
7.9. SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of RV Centers, certifying the truth and correctness of attached copies of RV
Centers's Certificate of Incorporation (including amendments thereto), By-Laws
(including amendments thereto), and resolutions of the board of directors and,
if required, the stockholders of RV Centers approving RV Centers's entering into
this Agreement and the consummation of the transactions contemplated herein.
7.10. EMPLOYMENT AGREEMENTS. The Company shall have offered to enter
into an employment agreement, substantially in the form of Annex V, with each of
the persons listed in Schedule 8.11.
7.11. OTHER FOUNDING COMPANIES. A sufficient number of the transactions
contemplated by the Other Agreements with the Other Founding Companies are not
consummated for any reason and as a result (i) RV Centers is unable to list the
RV Centers Stock on the New York Stock Exchange, the American Exchange or The
Nasdaq National Stock Market, subject to official notice of issuance, on or
prior to the Closing Date or (ii) the combined revenue of the Founding Companies
for which the transactions contemplated by this Agreement and the Other
Agreements are consummated is less than $175 million based on the 12-month
period ended December 31, 1998.
7.12. MANAGEMENT LOCK-UP AGREEMENTS. The Chairman, Vice Chairman, other
senior management of RV Centers, J. Christian Baker, III and A. John Kreft shall
have entered into agreements with RV Centers imposing substantially the same
transfer restrictions as provided in Section 14.1 hereof, on seventy-five
percent (75%) of the shares of RV Centers Stock held by such individuals, their
spouses and children and trusts for the benefit of such individuals.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RV CENTERS
The obligations of RV Centers with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions, except Section 8.12. The
obligations of RV Centers with respect to actions to be taken on the
Consummation Date are subject to the satisfaction or waiver on or prior to the
Consummation Date of the conditions set forth in Sections 8.1, 8.2, 8.4 and
8.12. As of the Closing Date or, with respect to the conditions set forth in
Sections 8.1, 8.2, 8.4 and 8.12, as of the Consummation Date, if any such
conditions have not been satisfied, RV Centers shall have the right to terminate
this Agreement, or waive any such condition. Any act or action of RV Centers in
consummating the Closing or delivering the certificates representing RV Centers
Stock as of the Consummation Date shall constitute a waiver of any conditions
not so satisfied. However, no such waiver shall be deemed to affect the survival
of the representations and warranties contained in Section 4 hereof.
8.1. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
the representations and warranties of the Stockholders and the Company contained
in this Agreement shall be true and correct in all material respects as of the
Closing Date and the Consummation Date with the same effect as though such
representations and warranties had been made on and as of such date; all of the
terms, covenants and conditions of this Agreement to be complied with or
performed by the Stockholders and the Company on or before the Closing Date or
the Consummation Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the Stockholders shall have
delivered to RV Centers certificates dated the Closing Date and the Consummation
Date, respectively, and signed by them to such effect.
8.2. NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the purchase and sale of the Company Stock or the IPO.
8.3. SECRETARY'S CERTIFICATE. RV Centers shall have received a
certificate, dated the Closing Date and signed by the secretary of the Company,
certifying the truth and correctness of attached copies of the Company Charter
(including amendments thereto), By-Laws (including amendments thereto), and
resolutions of the board of directors and the Stockholders approving the
Company's entering into this Agreement and the consummation of the transactions
contemplated herein.
8.4. NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
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8.5. STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to
RV Centers an instrument dated the Closing Date, which shall be effective only
upon the occurrence of the Consummation Date, releasing the Company and RV
Centers from (i) any and all claims of the Stockholders against the Company and
RV Centers and (ii) obligations of the Company and RV Centers to the
Stockholders, except for (A) continuing obligations to Stockholders relating to
their employment by the Company pursuant to employment agreements entered into
as specified in Section 8.11 hereof, (B) obligations arising under this
Agreement or the transactions contemplated hereby and (C) claims of Stockholders
against the Company for unreimbursed business expenses incurred by the
Stockholders on behalf of the Company (other than expenses related to the
transactions contemplated by this Agreement) prior to the Consummation Date or
unreimbursed medical expenses of the Stockholders incurred prior to the
Consummation Date which are covered by the Company's existing health insurance
coverage. In the event that the Consummation Date does not occur, then the
release instrument referenced herein shall be void and of no further force or
effect.
8.6. TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 8.6, all existing agreements between the Company and the Stockholders
(and between the Company and entities controlled by the Stockholders) shall have
been canceled effective prior to or as of the Consummation Date.
8.7. OPINION OF COUNSEL. RV Centers and the Underwriters shall have
received an opinion from Counsel to the Company and the Stockholders, dated the
Closing Date, substantially in the form annexed hereto as Annex IV.
8.8. CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 4.23(c), other than
manufacturers of recreational vehicles, shall have been obtained; provided,
however, Company shall have used its best efforts, in cooperation with RV
Centers, to obtain the consent of the recreational vehicle manufacturers listed
in Schedule 4.23(c); and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the purchase and sale of the Company Stock
and no governmental agency or body shall have taken any other action or made any
request of RV Centers as a result of which RV Centers deems it inadvisable to
proceed with the transactions hereunder.
8.9. GOOD STANDING CERTIFICATES. The Company shall have delivered to
RV Centers a certificate, dated as of a date no earlier than ten days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
State of Incorporation and, unless waived by RV Centers, in each state in which
the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
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8.10. REGISTRATION STATEMENT. The Registration Statement shall
have been declared effective by the SEC.
8.11. EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule
8.11 shall have entered into an employment agreement substantially in the form
of Annex V hereto.
8.12. CLOSING OF IPO. The closing of the sale of the RV Centers Stock
to the Underwriters in the IPO shall have occurred simultaneously with the
Consummation Date hereunder and the Stockholders shall have delivered to the
Underwriters such customary closing documents as they may reasonably request.
8.13. FIRPTA CERTIFICATE. Each Stockholder (other than the
stockholders which are foreign entities or foreign residents) shall have
delivered to RV Centers a certificate to the effect that he is not a foreign
person pursuant to Section 1.1445-2(b) of the Treasury regulations.
8.14. RESIGNATIONS OF DIRECTORS. Any directors of the Company
shall have resigned as directors of the Company.
8.15. LEASE AGREEMENTS. If the Company leases property from any
Stockholder or Affiliate of a Stockholder, the Company and such Stockholder or
Affiliate shall have entered into a lease agreement, substantially in the form
attached as Annex VI hereto, and the Company shall be released from any
liability for loans used to purchase the property.
9. COVENANTS OF RV CENTERS AND THE STOCKHOLDERS AFTER CLOSING
9.1. PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement or the Registration Statement, after the
Consummation Date, RV Centers shall not and shall not permit any of its
Subsidiaries to undertake any act that would jeopardize the tax-free status of
the exchange of Company Stock for RV Centers Stock (but not cash or other
property), including without limitation the retirement or reacquisition,
directly or indirectly, of all or part of the RV Centers Stock issued in
connection with the transactions contemplated herein.
9.2. PREPARATION AND FILING OF TAX RETURNS.
(i) The Company, if possible, or otherwise the Stockholders shall
file or cause to be filed all tax returns (federal, state, local or
otherwise) of any Acquired Party for all taxable periods that end on
or before the Consummation Date, and shall permit RV Centers to review
all such tax returns prior to such filings except with respect to
information pertaining to members of a consolidated group other than
the Company. Unless the Company is a C corporation, the Stockholders
shall pay or cause to be paid all Tax liabilities (in excess of all
amounts already paid with respect thereto or properly accrued or
reserved with respect thereto on the Company's Financial Statements)
shown by such tax returns to be due or otherwise attributable to such
tax returns.
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(ii) If the Company is an S corporation, then upon filing the
final tax returns covering the Company's earnings for the year ended
December 31, 1998 and the period from January 1, 1999 to the
Consummation Date, Stockholders shall provide to RV Centers copies of
the Forms 1120S and Schedule K-1s and equivalent state income tax
forms so filed. If the amount of dividends or distributions made
pursuant to Annex I in anticipation of such taxes exceeds the
"Calculated Tax Amount," as defined below, for the applicable period,
then Stockholders shall repay any excess amount to the Company within
10 days of the filing of the Form 1120S, or equivalent and provide a
written calculation of the Calculated Tax Amount. If the amount of
dividends or distributions made pursuant to Annex I in anticipation of
such taxes is less than the Calculated Tax Amount for the applicable
period, then the Company shall reimburse Stockholders for the amount
of such deficiency within 10 days of receiving a copy of the filed
Form 1120S, Schedule K-1s or equivalent and a written calculation of
the Calculated Tax Amount. The Calculated Tax Amount shall mean the
amount of federal and state income taxes that was owed on each
Stockholder's income from the Company, for the periods from July 1,
1998 to December 31, 1998 and from January 1, 1999 to the Consummation
Date, assuming a federal tax rate of 39.6% and the applicable state
tax rate (net of federal benefits).
(iii) RV Centers shall file or cause to be filed all separate
Returns of, or that include, any Acquired Party for all taxable
periods ending after the Consummation Date.
(iv) Each party hereto shall, and shall cause its Subsidiaries
and Affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in
filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any
audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of all relevant portions of
relevant Returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning
the ownership and Tax basis of property, which such party may possess.
Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents
or information so provided. Subject to the preceding sentence, each
party required to file Returns pursuant to this Agreement shall bear
all costs of filing such Returns.
(v) Each of the Company, RV Centers and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the
transaction as a tax-free contribution under Section 351(a) of the
Code subject to gain, if any, recognized on the receipt of cash or
other property under Sections 351(b) or 357(c) of the Code.
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9.3. DIRECTORS. Upon execution of this Agreement by the Company and
Stockholders and execution of similar agreements by the Other Founding Companies
and their stockholders, each Founding Company shall vote for five
representatives to become Directors of RV Centers. No cumulative voting is
permitted. RV Centers shall appoint those five persons receiving the most votes
as directors promptly following the Consummation Date. The other six persons
identified in the Registration Statement shall also be appointed Directors at
the same time, if not presently on the RV Centers Board of Directors.
9.4. RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. RV
Centers shall use reasonable efforts to have the Stockholders released from any
and all guarantees of the Company's indebtedness, including bond obligations,
identified on Schedule 9.4. Prior to obtaining the release of such guarantees,
RV Centers shall, if requested, provide its guarantee of such indebtedness to
the lenders thereof. In the event that RV Centers cannot obtain such releases
from the lenders of any such guaranteed indebtedness identified on Schedule 9.4
on or prior to 180 days subsequent to the Consummation Date, RV Centers shall
promptly pay off or otherwise refinance or retire such indebtedness such that
the Stockholders' personal liability shall be released. RV Centers will
indemnify the Stockholders against any loss or damage suffered as a result of
the personal guarantees.
9.5. ACCESS TO RECORDS. RV Centers agrees (i) to hold all of the
books and records of the Company existing on the Consummation Date and not to
destroy or dispose of any such books and records for a period of 5 years from
the Consummation Date or such longer time as may be required by law, and (ii)
following the Consummation Date to afford Stockholders, their accountants and
counsel, during normal business hours, upon reasonable request, access to such
books, records and other data of the Company to the extent that such access may
be requested for a legitimate purpose at no cost to Stockholder (other than for
reasonable out-of-pocket expenses).
10. INDEMNIFICATION
The Stockholders and RV Centers each make the following covenants that
are applicable to them, respectively:
10.1. INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless RV Centers and the Company at all times, from and after the date
of this Agreement until the Expiration Date (provided that for purposes of
Section 10.1(iii) below, the Expiration Date shall be the date on which the
applicable statute of limitations expires), from and against all claims, damages
(including consequential, punitive or exemplary), actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees, consulting fees and expenses
of investigation and environmental response) incurred by RV Centers and the
Company as a result of or arising from (i) any breach of the representations and
warranties of the Stockholders or the Company set forth herein or on the
schedules or certificates
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delivered in connection herewith, (ii) any breach of any agreement on the part
of the Stockholders or, prior to the Consummation Date, the Company under this
Agreement, or (iii) any liability under the 1933 Act, the 1934 Act or other
Federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact relating to the Company or the Stockholders which was based upon and in
conformity with information provided in writing to RV Centers or its counsel by
the Company or the Stockholders expressly for use in the Registration Statement
or any prospectus forming a part thereof and is contained in the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating to the Company or the
Stockholders required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not misleading
to the extent such omission or alleged omission is based upon the failure of the
Company or the Stockholders to provide to RV Centers the information containing
that fact in any Schedule hereto or otherwise to provide the information to RV
Centers in writing, but such indemnity shall not apply to the extent that such
untrue statement (or alleged untrue statement) was made in, or omission (or
alleged omission) occurred in, any preliminary prospectus and the Stockholders
provided, in writing, corrected information to RV Centers counsel and to RV
Centers for inclusion in the final prospectus, and such information was not so
included or properly delivered, and provided further, that no Stockholder shall
be liable for any indemnification obligation pursuant to this Section 10.1 to
the extent solely attributable to a breach of any representation, warranty or
agreement made herein individually by any other Stockholder.
RV Centers acknowledges and agrees that other than the representations
and warranties of the Company or the Stockholders specifically contained in this
Agreement, there are no representations or warranties of the Company or the
Stockholders, either express or implied, with respect to the transactions
contemplated by this Agreement, the Company or its assets, liabilities and
business.
RV Centers and the Company further acknowledge and agree that their
sole and exclusive remedy with respect to any and all claims for breach of this
Agreement and the transactions contemplated in this Agreement, shall be pursuant
to the indemnification provisions set forth in this Section 10. RV Centers and
the Company hereby waive to the fullest extent permitted under applicable law,
any and all other rights, claims and causes of action they or any indemnified
person may have against the Company or any Stockholder relating to this
Agreement or the transactions arising under or based upon any federal, state,
local or foreign statute, law, rule, regulation or otherwise.
10.2. INDEMNIFICATION BY RV CENTERS. RV Centers covenants and agrees
that it will indemnify, defend, protect and hold harmless the Stockholders at
all times from and after the date of this Agreement until the Expiration Date
(provided that for purposes of Section 10.2(iii) below, the Expiration Date
shall be the date on which the applicable statute of limitations expires), from
and against all claims, damages (including consequential, punitive or
exemplary), actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but
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without limitation, reasonable attorneys' fees, consulting fees and expenses of
investigation and environmental response) incurred by the Stockholders as a
result of or arising from (i) any breach by RV Centers of their representations
and warranties set forth herein or on the schedules or certificates delivered in
connection herewith, (ii) any breach of any agreement on the part of RV Centers
under this Agreement; or (iii) any liability under the 1933 Act, the 1934 Act or
other Federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to RV Centers or any of the Founding Companies contained
in any preliminary prospectus, the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact relating to RV Centers, any of the Founding Companies or their
respective stockholders, required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading, except to the extent such statement or omission is based upon an
untrue statement or alleged untrue statement, or omission or alleged omission,
made therein in reliance upon, and in conformity with, the representations and
warranties of the Company or the Stockholders specifically contained in this
Agreement or other information furnished to RV Centers by the Company or the
Stockholders in writing specifically for inclusion therein.
10.3. THIRD PERSON CLAIMS. Promptly after any party hereto
(hereinafter the "Indemnified Party") has received notice of or has knowledge of
any claim by a person not a party to this Agreement ("Third Person"), or the
commencement of any action or proceeding by a Third Person, the Indemnified
Party shall, as a condition precedent to a claim with respect thereto being made
against any party obligated to provide indemnification pursuant to Section 10.1,
10.2, or 10.6 hereof (hereinafter the "Indemnifying Party"), give the
Indemnifying Party written notice of such claim or the commencement of such
action or proceeding. Such notice shall state the nature and the basis of such
claim and a reasonable estimate of the amount thereof. The Indemnifying Party
shall have the right to defend and settle, at its own expense and by its own
counsel, any such matter so long as the Indemnifying Party pursues the same in
good faith and diligently, provided that the Indemnifying Party shall not settle
any such proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by Indemnifying Party,
provided that if counsel to the Indemnifying Party shall have a conflict of
interest that prevents counsel for the Indemnifying Party from representing
Indemnified Party, Indemnified Party shall have the right to participate in such
matter through counsel of its own choosing and Indemnifying Party will reimburse
the Indemnified Party for the reasonable expenses of its counsel.
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After the Indemnifying Party has notified the Indemnified
Party of its intention to undertake to defend or settle any such asserted
liability, and for so long as the Indemnifying Party diligently pursues such
defense, the Indemnifying Party shall not be liable for any additional legal
expenses incurred by the Indemnified Party in connection with any defense or
settlement of such asserted liability, except (i) as set forth in the preceding
sentence and (ii) to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses.
If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim involving only the payment of
money and the Indemnified Party refuses to consent to such settlement, then the
Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person. Upon agreement as to such settlement between said Third Person and
the Indemnifying Party, the Indemnifying Party shall, in exchange for a complete
release from the Indemnified Party, promptly pay to the Indemnified Party the
amount agreed to in such settlement and the Indemnified Party shall, from that
moment on, bear full responsibility for any additional costs of defense which it
subsequently incurs with respect to such claim and all additional costs of
settlement or judgment. If the Indemnifying Party does not undertake to defend
such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnified Party may settle such matter, and
the Indemnifying Party shall reimburse the Indemnified Party for the settlement
and any other liabilities or expenses incurred by the Indemnified Party in
connection therewith, provided, however, that under no circumstances shall the
Indemnified Party settle any Third Person claim without the written consent of
the Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. All settlements hereunder shall effect a complete release of the
Indemnified Party, unless the Indemnified Party otherwise agrees in writing.
10.4. EXCLUSIVE REMEDY. The indemnification provided for in this
Section 10 shall (except as prohibited by ERISA) be the exclusive remedy in any
action seeking damages or any other form of monetary relief brought by any party
to this Agreement against another party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
10.5. LIMITATIONS ON INDEMNIFICATION. (a) RV Centers and the other
persons or entities indemnified pursuant to Section 10.1 or any other indemnity
hereunder, shall not assert any claim for indemnification pursuant to Section
10.1 against the Stockholders until such time as the aggregate of all claims
which such persons may have against such Stockholders shall exceed an amount
(the "Threshold Amount") equal to one percent of the sum of (x) the cash paid to
the Stockholders on the Consummation Date pursuant to Section 2.1 and (y) the
value of the RV Centers Stock delivered to the Stockholders on the Consummation
Date pursuant to Section 2.1 valued at the initial public offering price as set
forth in the Registration Statement, and then only to the extent of claims in
excess of such sum. Stockholders shall not assert any claim for indemnification
hereunder against RV Centers until such time as the aggregate of all claims
which Stockholders may
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have against RV Centers shall exceed the Threshold Amount. The Threshold Amount
shall increase to equal one percent of the sum of (x) plus (y) plus the
Additional Consideration, if any, described on Part B of Annex I to the
Tennessee Acquisition Agreement, upon the payment to the Stockholder of the
Additional Consideration, exclusive of any interest earned on the Additional
Cash (as such terms are defined in Annex I to the Tennessee Acquisition
Agreement).
(b) No person shall be entitled to indemnification under this Section
10 if and to the extent that such person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement.
(c) Notwithstanding any other term of this Agreement, no Stockholder
shall be liable under this Section 10 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds (including cash and RV Centers Stock)
actually received by such Stockholder (valued as of the Consummation Date) in
connection with the purchase and sale of the Company Stock, exclusive of
interest earned on the Additional Cash. For purposes of this paragraph, the RV
Centers Stock shall be valued at the initial public offering price to the public
as set forth in the final prospectus deemed by Rule 430A of the 1933 Act
Regulations to constitute a part of the Registration Statement.
(d) A Stockholder may pay any indemnification obligation under Section
10 by means of the payment of cash or a combination of the payment of cash and
the delivery to RV Centers of shares of RV Centers Stock; provided that the
percentage of the indemnification obligation satisfied by means of the delivery
of shares of RV Centers Stock does not exceed the percentage of RV Centers Stock
comprising the total consideration paid to such Stockholder by RV Centers to
such Stockholder pursuant to Annex I and the Additional Consideration, if any.
For the purpose of crediting Stockholders for payments made to RV Centers by
means of delivery of shares of RV Centers Stock, the RV Centers Stock shall be
valued at the average closing price as reported on the New York Stock Exchange
(or other national exchange or quotation system) on the five trading days
immediately preceding delivery of the shares pursuant to this section.
(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds actually realized by such party
(or, in the case of RV Centers, by RV Centers, the Company or any Subsidiary of
RV Centers or the Company) and such correlative insurance proceeds or other
third party indemnity or reimbursement proceeds shall be net of any insurance
premium or other incremental cost or expense owed or payable to any third party
which becomes due as a result of such claim. RV Centers shall use commercially
reasonable efforts to pursue any available insurance coverage or other rights of
indemnity or reimbursement from third parties with respect to any such loss,
liability or expense.
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(f) The limitations on liability set forth in this Section 10.5 shall
not apply to breaches of representations, warranties or covenants set forth in
Sections 4.3, 4.22 and 4.29(c).
10.6. TAX INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders
covenant and agree that they, jointly and severally, will indemnify, defend,
protect and hold harmless RV Centers and the Company from and against the
entirety of any adverse consequences the Company or RV Centers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by any
liability of the Company and its subsidiaries for the unpaid Taxes of any past,
current or future member of the consolidated tax group of which the Company is
or was a member on or prior to the Consummation Date pursuant to Reg.
ss.1.1502-6 (or any similar provision of state, local, or foreign law), for any
periods prior to the Closing Date, as a transferee or successor, by contract, or
otherwise.
11. TERMINATION OF AGREEMENT
11.1. TERMINATION. This Agreement may be terminated at any time
prior to the Consummation Date solely:
(i) by mutual consent of the boards of directors of RV Centers
and the Company;
(ii) by the Stockholders or the Company (acting through its board
of directors), on the one hand, or by RV Centers (acting through its
board of directors), on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall not
have been consummated by July 31, 1999 unless the failure of such
transactions to be consummated is due to the willful failure of the
party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be
performed by it prior to or on the Consummation Date;
(iii) by the Stockholders or the Company, on the one hand, or by
RV Centers, on the other hand, if a material breach or default shall
be made by the other party in the observance or in the due and timely
performance of any of the covenants or agreements contained herein,
and the curing of such default shall not have been made on or before
the Consummation Date or by the Stockholders or the Company, if the
conditions set forth in Section 7 hereof have not been satisfied or
waived as of the Closing Date or the Consummation Date, as applicable,
or by RV Centers, if the conditions set forth in Section 8 hereof have
not been satisfied or waived as of the Closing Date or the
Consummation Date, as applicable; or
(iv) pursuant to Section 3 hereof.
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11.2. LIABILITIES IN EVENT OF TERMINATION. Except as provided in
Section 6.7, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
11.3. RETURN OF STOCK CERTIFICATES. If at the time of termination
Stockholders have delivered their Company stock certificates, such certificates
will be promptly returned upon termination.
12. NONCOMPETITION
12.1. PROHIBITED ACTIVITIES. Except for the activities of the
Stockholders and their Affiliates as set forth in Schedule 12.1 (which shall be
deemed to be permitted activities under this Section 12.1), the Stockholders
will not, without the prior written consent of RV Centers, for a period of five
(5) years following the Consummation Date, for any reason whatsoever, directly
or indirectly, for themselves or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business or operation selling any products or
services in direct competition with any products or services sold by
RV Centers or any Subsidiary thereof, within one hundred (100) miles
of where RV Centers or any Other Founding Company conducted business
prior to the Effective Time (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of RV Centers or any Subsidiary thereof in a
sales or service representative or managerial capacity for the purpose
or with the intent of enticing such employee away from or out of the
employ of RV Centers or any Subsidiary thereof;
(iii) call upon any Person or entity which is, at that time, or
which has been, within one (1) year prior to the Consummation Date, a
customer of RV Centers or any Subsidiary thereof, of the Company or of
any of the Other Founding Companies within the Territory for the
purpose of soliciting or selling products or services in direct
competition with any products or services sold by RV Centers or any
Subsidiary thereof within the Territory;
(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor which
candidate was, to the actual knowledge of such Stockholder after
reasonable inquiry, either called upon by RV Centers or any Subsidiary
thereof or for which RV Centers or any Subsidiary thereof made an
acquisition analysis, for the purpose of acquiring such entity; or
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(v) disclose customers, whether in existence or proposed, of the
Company to any person, firm, partnership, corporation or business for
any reason or purpose whatsoever except to the extent that the Company
has in the past disclosed such information to the public for valid
business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than three percent (3%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or on an
over-the-counter or similar market, or (ii) not more than five percent (5%) of
the capital stock of a competing business whose stock is not publicly traded.
12.2. DAMAGES. Because of the difficulty of measuring economic losses
to RV Centers as a result of a breach of the covenant set forth in Section 12.1,
and because of the immediate and irreparable damage that could be caused to RV
Centers for which it would have no other adequate remedy, each Stockholder
agrees that the covenant set forth in Section 12.1 may be enforced by RV
Centers, in the event of breach by such Stockholder, by injunctions and
restraining orders.
12.3. REASONABLE RESTRAINT. It is agreed by the parties hereto that
the foregoing covenants in this Section 12 impose a reasonable restraint on the
Stockholders in light of the activities and business of RV Centers and the
Subsidiaries thereof on the date of the execution of this Agreement and the
current plans of RV Centers; but it is also the intent of RV Centers and the
Stockholders that such covenants be construed and enforced in accordance with
the changing activities, business and locations of RV Centers and its
subsidiaries throughout the term of this covenant, including, with respect to
subparagraph 12.1(i), any new locations in which RV Centers or its subsidiaries
conducts business during the term of this covenant.
12.4. SEVERABILITY; REFORMATION. The covenants in this Section 12 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
12.5. INDEPENDENT COVENANT. All of the covenants in this Section 12
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against RV Centers or any Subsidiary thereof, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by RV
Centers of such covenants. It is specifically agreed that the period of five (5)
years stated at the beginning of this Section 12, during which the agreements
and covenants of each Stockholder made in this Section 12 shall be effective,
shall be computed by excluding from such computation any time during which such
Stockholder is in violation of any provision of this Section 12. The covenants
contained in Section 12 shall not be affected by any breach of any other
provision hereof by any party hereto and shall have no effect if the
transactions contemplated in this Agreement are not consummated.
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12.6. MATERIALITY. The Company and the Stockholders hereby agree
that this covenant is a material and substantial part of this transaction.
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
13.1. STOCKHOLDERS. The Stockholders recognize and acknowledge that
they had in the past, currently have, and in the future may possibly have,
access to certain confidential information of the Company, the Other Founding
Companies, and/or RV Centers, such as operational policies, customer lists, and
pricing and cost policies that are valuable, special and unique assets of the
Company's, the Other Founding Companies' and/or RV Centers's respective
businesses. The Stockholders agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of RV
Centers, provided that such representatives agree to the confidentiality
provisions of this Section 13.1, (b) following the Closing, such information may
be disclosed by the Stockholders as is required in the course of performing
their duties for RV Centers or the Company and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 13.1, unless (i) such information
becomes known to the public generally through no fault of the Stockholders, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, that prior to disclosing any information pursuant to
this clause (ii), the Stockholders shall, if possible, give prior written notice
thereof to RV Centers and provide RV Centers with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any of the
Stockholders of the provisions of this Section, RV Centers shall be entitled to
an injunction restraining such Stockholders from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting RV Centers from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages. In the event the
transactions contemplated in this Agreement are not consummated, Stockholders
shall have none of the above-mentioned restrictions on their ability to
disseminate confidential information with respect to the Company.
13.2. RV CENTERS. RV Centers recognizes and acknowledges that it had
in the past and currently has access to certain confidential information of the
Company and the Stockholders, such as operational policies, and pricing and cost
policies that are valuable, special and unique assets of the Company's business.
RV Centers agrees that, prior to the Closing, or if the transactions
contemplated in this Agreement are not consummated, it will not disclose such
confidential information to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except (a) to authorized
representatives of the Company, provided that such representatives agree to the
confidentiality provisions of this Section 13.2, (b) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 13.2, (c) to the Other Founding
Companies and their representatives pursuant to Section 6.1(a), unless (i) such
information becomes known to the public generally through no fault
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of RV Centers, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), RV Centers shall, if possible,
give prior written notice thereof to the Company and the Stockholders and
provide the Company and the Stockholders with the opportunity to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, and (d) to the public to the extent necessary or advisable in
connection with the filing of the Registration Statement and the IPO and the
securities laws applicable thereto. In the event of a breach or threatened
breach by RV Centers of the provisions of this Section, the Company and the
Stockholders shall be entitled to an injunction restraining RV Centers from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the Company and the Stockholders from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
13.3. DAMAGES. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants in Section 13.1 and 13.2,
and because of the immediate and irreparable damage that would be caused for
which they would have no other adequate remedy, the parties hereto agree that,
in the event of a breach by any of them of the foregoing covenants, the covenant
may be enforced against the other parties by injunctions and restraining orders.
13.4. SURVIVAL. The obligations of the parties under this
Article 13 shall survive the termination of this Agreement.
14. TRANSFER RESTRICTIONS
14.1. TRANSFER RESTRICTIONS. For a period of two years from the
Closing Date, with respect to 80% of the shares of RV Centers Stock received by
such Stockholder pursuant to this Agreement, and for a period of one year from
the Closing Date, with respect to the remaining 20% of such shares, no
Stockholder shall (i) sell, assign, exchange, transfer, pledge, or otherwise
dispose of any such shares of RV Centers Stock or any securities convertible
into, exchangeable or exercisable for any such shares of RV Centers Stock, (ii)
grant any option to purchase, or otherwise enter into any contract or
arrangement to sell, assign, transfer, pledge or otherwise dispose of, any such
shares of RV Centers Stock, or (iii) enter into any swap, collar, short sale or
any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequences of ownership of the RV Centers
Stock, whether any such swap, collar, short sale, agreement or transaction is to
be settled by delivery of shares of RV Centers Stock or other securities, by the
delivery or payment of cash or otherwise. Provided, however, Stockholder may
pledge such shares as security, subject to the foregoing restrictions, for a
loan by a lender who acknowledges and agrees to such restrictions in writing.
The foregoing restrictions shall not apply, however, to (a) the sale of shares
of RV Centers Stock, and entering into agreements relating to the sale of shares
of RV Centers Stock, pursuant to Section 16 hereof, or (b) transfers to (I)
immediate family members of such Stockholder who agree to be bound by the
restrictions set forth in this Section 14.1, (II) trusts, limited partnerships
or other estate planning entities for the benefit of such Stockholder or family
members of such Stockholder which have agreed, through action taken by the
trustees, partners or
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other persons having authority to bind the trust, limited partnership or other
estate planning entity, to be bound by such restrictions and to be liable for
the transferring Stockholder's indemnification obligations hereunder, (III) any
charitable organization that qualifies for receipt of charitable contributions
under Section 170(c) of the Code which agrees to be bound by such restrictions
and to be liable for the transferring Stockholder's indemnification obligations
hereunder, or (c) for transfers of RV Centers Stock to RV Centers pursuant to
Section 10.5(d).
The certificates evidencing the RV Centers Stock delivered to the
Stockholders pursuant to Section 3 of this Agreement will bear a legend
substantially in the form set forth below and containing such other information
as RV Centers may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF WITHOUT THE WRITTEN
CONSENT OF THE ISSUER OR PURSUANT TO CERTAIN LIMITED EXCEPTIONS CONTAINED IN
SECTION 14.1 TO THAT CERTAIN ACQUISITION AGREEMENT BETWEEN RV CENTERS, INC. AND
AMERICAN RV CENTERS, INC. DATED JANUARY 12, 1999, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO _______ [INSERT THE
ACTUAL SECOND ANNIVERSARY OF CLOSING DATE] EXCEPT FOR THE ABOVE-REFERENCED
LIMITED EXCEPTIONS. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE,
THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED
WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15. FEDERAL SECURITIES ACT REPRESENTATIONS
15.1. COMPLIANCE WITH LAW. The Stockholders acknowledge that the
shares of RV Centers Stock to be delivered to the Stockholders pursuant to this
Agreement have not been and will not be registered under the 1933 Act (except as
provided in Section 16 hereof) and therefore may not be resold without
compliance with the 1933 Act. The RV Centers Stock to be acquired by such
Stockholders pursuant to this Agreement is being acquired solely for their own
respective accounts, for investment purposes only, and with no present intention
of distributing, selling or otherwise disposing of it in connection with a
distribution. The Stockholders covenant, warrant and represent that none of the
shares of RV Centers Stock issued to such Stockholders will be offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of except
after full compliance with all of the applicable provisions of the 1933 Act and
the rules and regulations of the SEC or pursuant to exceptions therefrom. All
the RV Centers Stock shall bear the following legend in addition to the legend
required under Section 14 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND
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APPLICABLE SECURITIES LAW OR SUCH SHARES ARE SOLD OR TRANSFERRED PURSUANT TO AN
EXEMPTION THEREFROM.
15.2. ECONOMIC RISK; SOPHISTICATION. The Stockholders represent and
warrant that they are able to bear the economic risk of an investment in the RV
Centers Stock to be acquired pursuant to this Agreement and can afford to
sustain a total loss of such investment. Each Stockholder has substantial
knowledge and experience in making investment decisions of this type (or is
relying on qualified purchaser representatives with such knowledge and
experience in making this decision), and is capable, either individually or with
such purchaser representatives, of evaluating the merits and risks of this
investment. The Stockholders who are parties hereto have had an adequate
opportunity to ask questions and receive answers from the officers of RV Centers
concerning any and all matters relating to the transactions described herein
including, without limitation, the background and experience of the current and
proposed officers and directors of RV Centers, the plans for the operations of
the business of RV Centers, the business, operations and financial condition of
the Founding Companies other than the Company, and any plans for additional
acquisitions and the like. The Stockholders have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction. Except as set forth on Schedule 15.2, each
Stockholder is an "accredited investor" as defined in Rule 501 of the 1933 Act.
16. REGISTRATION RIGHTS
16.1. PIGGYBACK REGISTRATION RIGHTS. At any time following the
Consummation Date, whenever RV Centers proposes to register any RV Centers Stock
for its own or others' accounts under the 1933 Act for a public offering, other
than (i) any shelf or other registration of shares to be used as consideration
for acquisitions of additional businesses by RV Centers and (ii) registrations
relating to employee benefit plans, RV Centers shall promptly give each of the
Stockholders written notice of its intent to do so. Upon the written request of
any of the Stockholders given within 10 days after receipt of such notice, RV
Centers shall cause to be included in such registration all of the RV Centers
Stock issued to such Stockholders pursuant to this Agreement (including any
stock issued as or issuable upon the conversion or exchange of any convertible
security, warrant, right or other security which is issued by RV Centers as a
stock split, dividend or other distribution with respect to, or in exchange for,
or in replacement of such RV Centers Stock) which any such Stockholder requests,
other than shares of RV Centers Stock which may be sold under Rule 144(k) (or
any similar or successor provision) promulgated under the 1933 Act, and other
than shares of RV Centers Stock that have been theretofore sold by the
Stockholder in accordance with the 1933 Act, provided that RV Centers shall have
the right to reduce pro rata the number of shares of each selling stockholder
included in such registration to the extent that inclusion of such shares could,
in the written opinion of tax counsel to RV Centers or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as a tax-free organization under Section 351 of the Code.
In addition, if RV Centers is advised in writing in good faith by any managing
underwriter of an underwritten offering of the securities being offered pursuant
to any registration statement under this Section 16.1 that the number of shares
to be sold by persons other
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than RV Centers is greater than the number of such shares which can be offered
without adversely affecting the success of the offering, RV Centers may reduce
pro rata (among the Stockholders and all other selling security holders in the
offering) the number of shares offered for the accounts of such persons (based
upon the number of shares held by such person) to a number deemed satisfactory
by such managing underwriter.
The right to cause RV Centers to register shares of RV
Centers Stock under this Agreement may be assigned to any transferee or assignee
of any Stockholder permitted under Section 14.1.
16.2. REGISTRATION PROCEDURES. Whenever RV Centers is required to
register shares of RV Centers Stock pursuant to Section 16.1, RV Centers will,
as expeditiously as possible:
(i) Prepare and file with the SEC a registration statement
with respect to such shares and use commercially reasonable efforts to
cause such registration statement to become effective (provided that
before filing a registration statement or prospectus or any amendments
or supplements or term sheets thereto, RV Centers will furnish a
representative of the Stockholders with copies of all such documents
proposed to be filed and provide the Stockholders an opportunity to
comment on the information therein relating to the Stockholders) as
promptly as practical;
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and the prospectus correct for a period of not less
than 120 days;
(iii) Furnish to each Stockholder who so requests such number
of copies of such registration statement, each amendment and supplement
thereto and the prospectus included in such registration statement
(including each preliminary prospectus and any term sheet associated
therewith), and such other documents as such Stockholder may reasonably
request in order to facilitate the disposition of the relevant shares;
(iv) Use commercially reasonable efforts to register or
qualify the securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as shall
be reasonably requested by the Stockholders, and to keep such
registration or qualification effective during the period such
registration statement is required to be kept effective, provided that
RV Centers shall not be required to become subject to taxation, to
qualify to do business or to file a general consent to service of
process in any such states or jurisdictions;
(v) Cause all such shares of RV Centers Stock to be listed or
included on any securities exchanges or trading systems on which
similar securities issued by RV Centers are then listed or included;
and
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<PAGE> 65
(vi) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that RV Centers is required to keep the registration
statement effective of the happening of any event as a result of which
the prospectus included in such registration statement (as then in
effect), together with any associated term sheet, contains an untrue
statement of a material fact or omits any fact not misleading, and, at
the request of such Stockholder, RV Centers will prepare a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of the covered shares, such prospectus will not contain an
untrue statement of material fact or omit to state any fact not
misleading.
All expenses incurred in connection with the registration under this
Article 16 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall be
borne by RV Centers.
16.3. INDEMNIFICATION.
(a) In connection with any registration under Section 16.1,
RV Centers shall indemnify, to the extent permitted by law, each selling
Stockholder (an "Indemnified Stockholder") against all losses, claims, damages,
liabilities and expenses arising out of or resulting from any untrue or alleged
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or associated term sheet or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in or omitted from any information furnished in
writing to RV Centers by such Indemnified Stockholder expressly for use therein
or by any Indemnified Stockholder's failure to deliver a copy of the
registration statement or prospectus or any amendment or supplements thereto
after RV Centers has furnished such Indemnified Stockholder with a sufficient
number of copies of the same.
(b) In connection with any registration under Section
16.1, each Stockholder shall furnish to RV Centers in writing such information
as is reasonably requested by RV Centers for use in any such registration
statement or prospectus and will indemnify, to the extent permitted by law, RV
Centers, its directors and officers and each person who controls RV Centers
(within the meaning of the 1933 Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
or material fact or any omission or alleged omission of a material fact required
to be stated in the registration statement or prospectus or any amendment
thereof or supplement thereto or necessary to make the statements therein, in
light of the circumstances in which they are made, not misleading, but only to
the extent that such untrue or alleged untrue statement or omission or alleged
omission is contained in or omitted from information so furnished in writing by
such Stockholder specifically for use in preparing the registration statement.
Notwithstanding the foregoing, the liability of a Stockholder under this Section
16.3 shall be limited to an amount equal to the net proceeds actually received
by such Stockholder from the sale of the relevant shares covered by the
registration statement.
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<PAGE> 66
(c) Any person entitled to indemnification hereunder will
(i) give prompt notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified parties'
reasonable judgment, a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. Any failure to give prompt notice shall
deprive a party of its right to indemnification hereunder only to the extent
that such failure shall have adversely affected the indemnifying party. If the
defense of any claim is assumed, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party that is not entitled
or elects not to assume the defense of a claim, will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
16.4. UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 16.1 covering an underwritten registered offering, RV
Centers and each participating Stockholder agree to enter into a written
agreement with the managing underwriters in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such managing underwriters and companies of RV Centers's size and
investment stature, including a customary indemnification agreement; provided,
however, that the Stockholders shall be excluded from any indemnification of the
underwriters other than with respect to information provided by the Stockholders
to RV Centers or the managing underwriters specifically for use in the
registration statement.
16.4. RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of RV
Centers stock to the public without registration, RV Centers agrees to use
commercially reasonable efforts to:
(i) make and keep public information regarding RV Centers
available as those terms are understood and defined in Rule 144 under
the 1933 Act for a period of four years beginning 90 days following
the effective date of the Registration Statement;
(ii) file with the SEC in a timely manner all reports and other
documents required of RV Centers under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting
requirements; and
(iii) so long as a Stockholder owns any restricted RV Centers
Stock, furnish to each Stockholder forthwith upon written request a
written statement by RV Centers as to its compliance with the current
public information requirements of Rule 144 (at any time from and
after 90 days following the effective date of the Registration
Statement), and of the 1933 Act and the 1934 Act (any time after it
has become subject to such reporting requirements),
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<PAGE> 67
a copy of the most recent annual or quarterly report of RV Centers,
and such other reports and documents so filed as a Stockholder may
reasonably request in availing itself of any rule or regulation of the
SEC allowing a Stockholder to sell any such shares without
registration.
16.6. AVAILABILITY OF RULE 144. RV Centers shall not be obligated to
register shares of RV Centers Stock held by a Stockholder at any time when the
resale provisions of Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act are available to such Stockholder.
17. GENERAL
17.1. COOPERATION. The Company, the Stockholders and RV Centers shall
each deliver or cause to be delivered to the other on the Consummation Date, and
at such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate with
RV Centers on and after the Consummation Date in furnishing information,
evidence, testimony and other assistance in connection with any tax return
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Consummation
Date.
17.2. SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of RV Centers, and the heirs and legal representatives of the
Stockholders.
17.3. ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company and RV Centers and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and subject to Section 6.7 may be
modified or amended only by a written instrument executed by the Stockholders,
the Company and RV Centers, acting through their respective officers or
trustees, duly authorized by their respective Boards of Directors. Any
disclosure made on any Schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other Schedule required hereby, provided
that the Company shall make a good faith effort to cross reference disclosure,
as necessary or advisable, between related Schedules.
17.4. COUNTERPARTS. This Agreement may be executed simultaneously in
two (2) or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument. A telecopied
facsimile of an executed counterpart of this Agreement shall be sufficient to
evidence the binding agreement of each party to the terms hereof. However, each
party agrees to return to the other parties an original, duly executed
counterpart of this Agreement promptly after delivery of a telecopied facsimile
thereof.
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<PAGE> 68
17.5. BROKERS AND AGENTS. Except as disclosed on Schedule 17.5, each
party represents and warrants that it employed no broker or agent in connection
with this transaction and agrees to indemnify the other parties hereto against
all loss, cost, damages or expense arising out of claims for fees or commission
of brokers employed or alleged to have been employed by such indemnifying party.
17.6. EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, RV Centers will pay or reimburse Baker Kreft Funding I,
L.L.C. and its Affiliates for the fees, expenses and disbursements of RV Centers
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto and the
IPO, including all costs and expenses incurred in the performance and compliance
with all conditions to be performed by RV Centers under this Agreement, the fees
and expenses of Andrews & Kurth L.L.P., and any other person or entity retained
by RV Centers or Baker Kreft Funding I, L.L.C. ("BKF") and the costs of
preparing the Registration Statement. All expenses, including, but not limited
to, all professional fees of accountants, lawyers, tax consultants and others,
incurred by the Stockholders in connection with this Agreement shall be paid by
the Stockholders or the Company; provided, however, that any such amount paid by
the Company shall be disclosed to RV Centers in writing prior to Closing and
deducted from the cash payable to Stockholders pursuant to Annex I. Upon
consummation of the transactions contemplated herein, BKF will pay up to
$150,000 of the fees charged by Bracewell & Patterson L.P., counsel to Company
and the Other Founding Companies; Stockholders and the stockholders of the Other
Founding Companies shall pay all amounts in excess of $150,000 to be shared pro
rata based upon the relative values of the Founding Companies. Each Stockholder
shall pay all sales, use, transfer, real property transfer, recording, gains,
stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in
connection with the purchase and sale of the Company Stock, other than Transfer
Taxes, if any, imposed by the State of Delaware. Each Stockholder shall file all
necessary documentation and Returns with respect to such Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company or RV
Centers, will pay all taxes due by him upon receipt of the consideration payable
pursuant to Section 3 hereof and the Additional Consideration. Without limiting
Stockholders' ability to rely on the tax opinion, the Stockholders acknowledge
that the risks of the transactions contemplated herein include tax risks, with
respect to which the Stockholders are relying partially on the opinion
contemplated by Section 7.3 hereof and representations by RV Centers.
17.7. NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party.
-60-
<PAGE> 69
(a) If to RV Centers, addressed to:
RV Centers, Inc.
600 Travis, Suite 2100
Houston, Texas 77002
Attention: Chief Executive Officer
with copies to:
Christopher S. Collins
Andrew & Kurth L.L.P.
600 Travis, Suite 4200
Houston, Texas 77002
(b) If to the Stockholders, addressed to them at their addresses set
forth on the signature pages hereto, with copies to:
Austin B. Byrd
Wyatt, Tarrant & Combs
Crescent Center Suite 650
6075 Poplar Avenue
Memphis, Tennessee 38119-4721
(c) If to the Company, addressed to it at:
American RV Centers, Inc.
8150 New Craft Road
Olive Branch, Mississippi 38654
Attn: President
with copies to:
Austin B. Byrd
Wyatt, Tarrant & Combs
Crescent Center Suite 650
6075 Poplar Avenue
Memphis, Tennessee 38119-4721
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 17.7 from time to time.
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<PAGE> 70
17.8. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Delaware, excluding any conflicts of law rule or
principle that might refer same to the laws of another jurisdiction.
17.9. EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
17.10. TIME. Time is of the essence with respect to this Agreement.
17.11. REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
17.12. REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
17.13. CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
17.14. AMENDMENTS AND WAIVERS. Subject to Section 6.7, any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived only with the written consent of RV Centers, the Company and Stockholders
who hold or held at least 51% of the Company Stock. Any amendment or waiver
effected in accordance with this Section 17.14 shall be binding upon each of the
parties hereto, any other person receiving RV Centers Stock in connection with
the purchase and sale of the Company Stock and each future holder of such RV
Centers Stock.
17.15. DISPUTE RESOLUTION. Except with respect to disputes involving
parties other than the parties to this Agreement, no party to this Agreement
shall institute a proceeding in any court or administrative agency to resolve a
dispute arising under this Agreement before that party has sought to resolve the
dispute through direct negotiation with the other party or parties. If the
dispute is not resolved within two weeks after a demand for direct negotiation,
the parties shall attempt to resolve the dispute through mediation. If the
parties do not promptly agree on a mediator, the parties shall request the
Association of Attorney Mediators in Harris County, Texas to appoint a mediator
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<PAGE> 71
certified by the Supreme Court of Texas. If the mediator is unable to facilitate
a settlement of the dispute within a reasonable period of time, as determined by
the mediator, the mediator shall issue a written statement to the parties to
that effect and any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in Houston, Texas, in accordance
with the rules promulgated by the American Arbitration Association then in
effect. Each party shall choose one arbitrator and those arbitrators shall agree
upon the third arbitrator; if they cannot agree upon a third arbitrator within
20 days, the American Arbitration Association shall appoint the third
arbitrator. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The costs and expenses, including reasonable attorneys' fees, of
the prevailing party in any dispute arising under this Agreement will be
promptly paid by the other party or parties.
17.16. REFERENCES, GENDER, NUMBER. All references in this Agreement to
a "Section," or "subsection" shall be to a Section, or subsection of this
Agreement, unless the context requires otherwise. Unless the context otherwise
requires, the words "this Agreement," "hereof," "hereunder," "herein," or words
of similar import shall refer to this Agreement as a whole and not to a
particular Section, subsection, clause or other subdivision hereof. Whenever the
context requires, the words used herein shall include the masculine, feminine
and neuter gender, and the singular and the plural.
17.17. SOLE STOCKHOLDER. Notwithstanding anything in this Agreement to
the contrary, if there is only a single Stockholder, all references herein to
"Stockholders," "each of the Stockholders," "any Stockholder" and any other
reference to Stockholders in the plural context, as well as any reference to any
potential liability or obligation of the Stockholders being "joint and several,"
shall be deemed to mean and include only the sole Stockholder of the Company.
17.18. SCHEDULES AND ANNEXES. Each schedule and annex attached to this
Agreement is incorporated herein by reference and made a part hereof. The
disclosures made on any schedule or annex hereto with respect to any
representation or warranty shall be deemed to be made with respect to any other
representation or warranty requiring the same or similar disclosure to the
extent that the relevance of such disclosure to other representations and
warranties is evident from the face of such schedule or annex.
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<PAGE> 72
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
RV CENTERS, INC.
By: /s/ Clayton K. Trier
----------------------------
Name: Clayton K. Trier
Title: Chairman of the Board,
Chief Executive Officer and
President
AMERICAN RV CENTERS, INC.
By: /s/ Peter A. Albano
----------------------------
Name: Peter A. Albano
Title: President
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<PAGE> 73
STOCKHOLDERS:
/s/ Peter A. Albano ###-##-####
- ------------------------------------ ---------------------------
Peter A. Albano Social Security Number
4400 Walnut Grove Road
Memphis, Tennessee 38117
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<PAGE> 74
ANNEX I -
AMERICAN RV CENTERS, INC.
(MISSISSIPPI)
TO THE ACQUISITION AGREEMENT
DATED AS OF JANUARY 12, 1999
BY AND AMONG
RV CENTERS, INC.
AMERICAN RV CENTERS, INC. (MISSISSIPPI)
AND ITS STOCKHOLDER
CONSIDERATION TO BE PAID TO THE STOCKHOLDER
A. AGGREGATE CONSIDERATION TO BE PAID TO STOCKHOLDER
Five Hundred Twenty-One Thousand Seven Hundred Fifty Dollars ($521,750) in cash
and the value of outstanding Common Stock of RV Centers, Inc. ("RV Centers")
(assuming a public offering price of $12.50 per share), consisting of: (A)
Thirty-One Thousand One Hundred (31,100) shares of RV Centers Common Stock, and
(B) One Hundred Thirty Three Thousand Dollars ($133,000) cash; provided however,
that the aggregate consideration shall not be less than the minimum value set
forth below.
<TABLE>
<CAPTION>
Consideration to be paid to the
STOCKHOLDER:
-----------------------------------
Number of
Company Shares of RV Centers
Stockholder Shares Owned Common Stock Cash
- ----------- ------------ -------------------- --------------
<S> <C> <C> <C>
Peter A. Albano 600 31,100 $ 133,000
</TABLE>
MINIMUM VALUE: Four Hundred Forty-Four Thousand Dollars ($444,000)
ASSETS TO BE REMOVED FROM THE COMPANY: RV Centers and the Stockholder agree
that, after the Balance Sheet Date, no assets other than the following
assets, along with any associated debt, may be removed from the
Company, such assets to become the property of the Stockholder and any
associated debt to become the liability of the Stockholder:
None.
Page 1 of Annex I
<PAGE> 75
ANNEX I -
AMERICAN RV CENTERS, INC.
(MISSISSIPPI)
ALLOWABLE DIVIDENDS: With the exception of the following, no dividends or
distributions will be paid subsequent to June 30, 1998:
1. An amount equal to the reasonably estimated
federal and state (net of federal benefit) income
taxes owed on S-corporation profits of the Company
for the period from July 1, 1998 to December 31,
1998.
2. An amount equal to the reasonably estimated
federal and state (net of federal benefit) income
taxes owed on S-corporation profits of the Company
for the period from January 1, 1999 to the
Consummation Date.
3. If Company is an S Corporation at the date of this
Agreement, at any time and from time to time up
until five days prior to the Consummation Date,
Company may distribute to the Stockholder cash up
to the lesser of (A) the amount of such
corporation's "accumulated adjustment account" (as
such term is used in the Internal Revenue Code of
1986, as amended) as of the Consummation Date, and
(B) the total amount of cash to be paid to the
Stockholder as provided above. If any such
distributions are made, Stockholder shall provide
written notice of the amount of such distributions
to RV Centers no later than five days prior to the
Consummation Date, and the total amount of such
distributions shall be deducted from the cash to
be paid to the Stockholder pursuant to this Annex
I..
ALLOWABLE MONTHLY COMPENSATION: The Company has not since June 30, 1998, and
will not after the date hereof, pay or agree to pay salary, bonus, sales
commissions, fees or any other form of compensation, directly or indirectly, to
the Stockholder or any members of his family in excess of an aggregate of $0.00
per month. Notwithstanding the foregoing, family members, who are not
Stockholders and who are currently employed by the Company and are disclosed on
Schedule 4.18, may continue to receive their current salary.
Page 2 of Annex I
<PAGE> 76
ANNEX III
FORM OF OPINION OF COUNSEL
TO RV CENTERS, INC.
, 1998
- ---------------------------
- ---------------------------
- ---------------------------
Ladies and Gentlemen:
We have acted as counsel to RV Centers, Inc., a Delaware corporation
("RV Centers"), in connection with the transactions contemplated by the
Acquisition Agreement (the "Agreement") dated as of , 1998, among RV Centers,
[Founding Company] and the stockholders named therein (the "Stockholders"). This
opinion is being delivered to you pursuant to Section 8.3 of the Agreement. All
capitalized terms used herein, unless expressly defined herein, shall have the
meanings ascribed to such terms in the Agreement.
We have examined originals, or copies certified or otherwise identified
to our satisfaction, of the Agreement and such documents and records as we
deemed to be necessary as a basis for the opinion hereinafter expressed. With
respect to such examination, we have assumed the genuineness of all signatures
appearing on all documents presented to us as originals, and the conformity to
the originals of all documents presented to us as conformed or reproduced
copies. We also have assumed the due execution and delivery of the Agreement by
all parties thereto other than RV Centers. In addition, we have relied on
certificates of officers of RV Centers and certificates of public officials as
to certain matters of fact relating to this opinion and have made such
investigations of law as we have deemed necessary and relevant as the basis
hereof.
Based upon the foregoing and such consideration of matters of law as we
deemed to be relevant, and subject to the limitations, qualifications and
assumptions set forth herein, we are of the following opinion:
1. RV Centers has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware.
Page 1 of Annex III
<PAGE> 77
2. The Agreement has been duly authorized, executed and delivered by RV
Centers and constitutes a legal, valid and binding agreement of RV Centers,
enforceable against it in accordance with its terms. RV Centers has taken all
corporate action necessary to authorize the execution, delivery and performance
of the Agreement.
3. The authorized capital stock of RV Centers consists of shares of
Common Stock, par value $.01 per share (the "RV Centers Common Stock"); and
shares of Preferred Stock par value $.01 per share (the "Preferred Stock") As of
, 1998, there were outstanding shares of RV Centers Common
Stock [and no shares of Preferred Stock] which were duly and validly authorized
and issued and, to our knowledge, fully paid and nonassessable and not issued in
violation of the preemptive rights of any stockholder of RV Centers. Each share
of RV Centers Common Stock to be issued to the Stockholders has been duly and
validly authorized and upon issuance on consummation of the transactions set
forth in the Agreement such shares will be validly issued, fully paid and
nonassessable and, to our knowledge, none of such shares will have been issued
in violation of the preemptive rights of any stockholder of RV Centers.
4. To our knowledge, except as set forth in the Prospectus, (a) RV
Centers is not in violation of any order issued by any court or governmental
agency and (b) there is no action, suit or proceeding pending or threatened
against RV Centers before any court, arbitrator or governmental authority.
5. To our knowledge, RV Centers is not in default, nor has it received
any notice of default, under any contract or agreement to which it is a party,
except where such default would not have a material adverse effect on RV
Centers.
6. No notice to, consent, authorization, approval or order of any court
or governmental agency or body or, to our knowledge, any other person is
required in connection with the execution, delivery or performance by RV Centers
of the Agreement, except for such notices, consents, authorizations, approvals
or orders as have already been made or obtained.
7. The execution of the Agreement and the performance by RV Centers of
its obligations thereunder will not violate any of the terms or provisions of
its Certificate of Incorporation or By-laws or, to our knowledge, conflict with,
violate or result in any breach of or default under any lease, instrument,
license, permit or any other agreement or instrument to which it is a party or
by which it may be bound or to which any of its properties is subject, except
where such violation, breach or default would not have a material adverse effect
on RV Centers and its subsidiaries, taken as a whole.
The opinions expressed herein are, with your concurrence, predicated on
and qualified in their entirety by the following:
(i) This opinion is limited to the laws of the State of Texas, the
General Corporation Law of the State of Delaware and the
relevant law of the United States of America (other than laws
applicable to patents, copyrights and trademarks).
Page 2 of Annex III
<PAGE> 78
(ii) Our opinion in paragraph 2, above regarding the enforceability
of the Agreement is subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights generally and to principles
of equity. Furthermore, the enforceability of any indemnity
and contribution obligations contained in the Agreement may be
limited under applicable law or public policy.
(iii) In rendering the opinion herein related to the absence of any
litigation, suits or proceedings, we express no opinion with
respect to the possible effect of administrative and
legislative actions and proceedings as to which RV Centers is
not a named party.
(iv) Whenever our opinion is based on circumstances "to our
knowledge," we have relied exclusively on certificates of
officers (after discussion of the contents thereof with such
officers) of RV Centers or certificates of others as to the
existence or nonexistence of the circumstances upon which such
opinion is predicated. We have no reason to believe, however,
that any such certificate is untrue or inaccurate in any
material respect.
We understand that we have no obligation to update this opinion to
reflect any facts or circumstances occurring after the date hereof, provided
however, that unless we otherwise notify you on or prior to the Consummation
Date that this opinion may no longer be relied upon, you shall be entitled to
rely on this opinion as of the Consummation Date if it were dated on such date.
This opinion is delivered to you solely as a party to the Agreement and
may not be quoted, circulated or published in whole or in part, or furnished to
any other Person without our express consent. The opinions set forth are limited
to matters expressly set forth and no opinion is to be implied or may be
inferred beyond the matters expressly stated.
Very truly yours,
Page 3 of Annex III
<PAGE> 79
ANNEX IV
FORM OF OPINION OF COUNSEL TO COMPANY
AND STOCKHOLDERS
,1998
RV Centers, Inc.
Houston, Texas 77002
[Underwriters]
[International Underwriters, if any]
Ladies and Gentlemen:
We have acted as counsel to ____________________________, a
___________________ corporation (the "Company"), in connection with the
transactions contemplated by the Acquisition Agreement (the "Agreement"), dated
as of , 1998, among RV Centers, Inc., a Delaware corporation, the Company and
the stockholders named therein (the "Stockholders"). This opinion is being
delivered to you pursuant to Section 9.7 of the Agreement. All capitalized terms
used herein, unless expressly defined herein, shall have the meanings ascribed
to such terms in the Agreement.
We have examined originals, or copies certified or otherwise identified
to our satisfaction of the Agreement and such documents and records as we deemed
to be necessary as the basis for the opinion hereinafter expressed. [Documents
and records may be listed.] With respect to such examination, we have assumed
the genuineness of all signatures appearing on all documents presented to us as
originals, and the conformity to the originals of all documents presented to us
as conformed or reproduced copies. We also have assumed the due execution and
delivery of the Agreement by all parties thereto other than the Company. In
addition, we have relied without independent inquiry on the representations and
warranties of the Company and the Stockholders contained in the Agreement, the
certificate of officers of the Company and certificates of public officials as
to certain matters of fact relating to this opinion.
Based upon the foregoing and such consideration of matters of law as we
deemed to be relevant, and subject to the limitations, qualifications and
assumptions set forth herein, we are of the following opinion:
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1. The Company has been duly incorporated and is validly existing and
has all requisite corporate power and authority to own and operate its
properties, to lease the properties it operates under lease and to conduct its
business as currently conducted. The Company has no subsidiaries.
2. The authorized capital stock of the Company is as represented in the
Agreement and, based solely on our review of the stock records of the Company,
the outstanding capital stock of the Company is as represented in the Agreement.
Each share of such stock has been duly and validly authorized and issued and, to
our knowledge, is fully paid and nonassessable and was not issued in violation
of the preemptive rights of any stockholder.
3. To our knowledge, there are no outstanding securities of the Company
convertible into or exercisable or exchangeable for or evidencing the right to
purchase or subscribe for any shares of capital stock of the Company and there
are no outstanding or authorized options, warrants or rights of any character
obligating the Company to issue or sell any shares of its capital stock or any
securities convertible into or exercisable or exchangeable for or evidencing the
right to purchase or subscribe for any shares of such stock.
4. The Agreement has been duly authorized, executed and delivered by
the Company and the Stockholder and constitutes a legal, valid and binding
agreement of the Company and the Stockholder, enforceable against the Company
and such Stockholder in accordance with its terms. The Company and its
Stockholders have taken all corporate action necessary to authorize the
execution, delivery and performance by the Company of the Agreement and the
consummation by the Company of the transactions contemplated thereby.
5. To our knowledge, and except as is set forth in the Schedules to the
Agreement, the Company is not in material default, nor has it received any
notice of default, in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any other agreement, indenture or instrument material to the conduct of the
business of the Company, to which the Company is a party or by which the Company
or its property is bound.
6. To our knowledge, except to the extent set forth in the Schedules to
the Agreement, the Company is not in violation of any order issued by any court
or governmental agency and there is no action, suit or proceeding pending or
threatened against the Company before any court, arbitrator or governmental
authority.
7. To our knowledge, no notice to, consent, authorization, approval or
order of or filings with any court or governmental agency or body or, to our
knowledge, any other person is required in connection with the execution,
delivery or performance of the Agreement, or the consummation of the
transactions therein contemplated, by the Company or any of the Stockholders,
except for such notices, consents, authorizations, approvals, orders or filings
as have already been made or obtained, as applicable.
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8. The execution of the Agreement and the performance by the Company
and the Stockholders of their respective obligations thereunder do not and will
not violate any of the terms or provisions of the Company's Articles of
Incorporation or By-laws or, to our knowledge, conflict with, violate or result
in any breach of or default under any lease, instrument, license, permit or any
other agreement or instrument to which the Company is a party or by which the
Company may be bound or to which any of the properties of the Company is
subject.
9. To our knowledge, there is no pending or threatened action, suit or
proceeding that (a) questions the validity of the Agreement or the Employment
Agreement or any action taken or to be taken by the Company or any Stockholder
in connection with the Agreement or the Employment Agreement, at law or in
equity, before or by any governmental authority or before any court or
arbitrator or (b) if adversely determined, would have a material adverse effect
(i) on the condition (financial or other), earnings, business, operations or
prospects of the Company, (ii) on the ability of the Company to perform its
obligations under the Agreement or (iii) on the ability of any Stockholder to
perform his obligations under the Agreement or the Employment Agreement.
The opinions expressed herein are, with your concurrence, predicated on
and qualified in their entirety by the following:
(A) This opinion is limited to the laws of the State of Tennessee
and the relevant law of the United States of America (other
than laws applicable to patents, copyrights and trademarks),
and we express no opinion as to the application or effect of
the law of any other jurisdiction. Moreover, we express no
opinion with respect to any of the following:
(i) federal or state antitrust laws and regulations
(including without limitation, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976);
(ii) federal or state securities laws and regulations;
(iii) federal or state labor or employee benefit laws and
regulations;
(iv) compliance with fiduciary duty requirements;
(v) federal or state tax laws and regulations;
(vi) federal patent, copyright and trademark, state
trademark and other federal or state intellectual
property laws and regulations;
(vii) federal or state racketeering laws and regulations;
(viii) federal or state health and safety laws and
regulations;
(ix) federal or state criminal laws of general application;
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(x) federal or state nondiscrimination laws and
regulations of general application; or
(xi) federal, state or local environmental, zoning or
building codes, land use or other similar laws,
ordinances, rules or regulations.
We note that the agreement is, by its express terms, to be governed by
the laws of Delaware. We express no opinion how a court sitting in Delaware
would apply or interpret Tennessee law nor how a court in Tennessee would apply
or interpret Delaware law. Accordingly, for the purpose of this opinion, we have
assumed that the Agreement will be governed by the laws of Tennessee
notwithstanding these express terms.
(B) Our opinion relating to validity, binding effect and
enforceability in Paragraph 4 above is subject to: (i)
limitations imposed by any applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, preferential transfer,
moratorium and similar laws affecting creditors' rights
generally, (ii) the effect of general principles of equity
(regardless of whether considered in a proceeding in equity or
at law), including concepts of good faith, fair dealing,
commercial reasonableness and unconscionability, and (iii)
limitations imposed by public policy under certain
circumstances on the enforceability of provisions indemnifying
a party against liability for its own wrongful or negligent
acts and limitations on the enforceability of indemnification
provisions required by applicable state or federal securities
law. We express no opinion concerning (x) the enforceability
of the choice of Delaware law to govern the Agreement, if an
action arising out of the Agreement or its performance were
commenced in a court sitting in Tennessee, (y) the
enforceability of provisions relating to the waiver or rights,
remedies and defenses, or (z) the enforceability of the
noncompetition covenants set forth in the Agreement.
(C) Whenever our opinion is based on circumstances "to our
knowledge," we have relied exclusively on certificates of
officers (after the discussion of the contents thereof with
such officers) of the Company or certificates of others as to
the existence or nonexistence of the circumstances upon which
such opinion is predicated. Nothing has come to the attention
of the attorneys of the Firm in the course of our
representation of the Company in connection with the Agreement
which causes us to believe that any such certificate is untrue
or inaccurate in any material respect.
This opinion is delivered to you solely and may not be quoted,
circulated or published in whole or in part or delivered to any other person
without our express written consent. The Underwriters [and International
Underwriters] are entitled to rely upon this opinion.
Very truly yours,
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ANNEX V
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between American
RV Centers, Inc. (the "Company"), a Mississippi corporation and a wholly-owned
subsidiary of RV Centers, Inc. ("RV Centers"), a Delaware corporation, and Peter
A. Albano ("Executive") is hereby entered into and effective as of the day of ,
1999 (the "Effective Date"), the date of the consummation of the initial public
offering of the common stock of RV Centers (the "IPO"). This Agreement hereby
supersedes any other employment agreements or understandings, written or oral,
between and among the Company, RV Centers and Executive.
RECITALS
RV Centers, the Company and the other current subsidiaries of RV
Centers are engaged primarily in the recreational vehicle dealer business
including, but not limited to, sales, service, parts and rentals. RV Centers,
the Company and the other current and future subsidiaries of RV Centers are
collectively referred to herein as the "RV Centers Companies" and individually,
as an "RV Centers Company."
Executive is employed hereunder by the Company in a confidential
relationship wherein Executive, in the course of his employment with the
Company, has and will continue to become familiar with and aware of information
as to the Company's and RV Centers' customers and specific manner of doing
business, including the processes, techniques and trade secrets utilized by the
Company and RV Centers, and future plans with respect thereto, all of which has
been and will be established and maintained at great expense to the Company and
RV Centers. This information is a trade secret and constitutes valuable goodwill
of the Company and RV Centers.
Therefore, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby agreed
as follows:
AGREEMENTS
1. Employment and Duties.
(a) The Company hereby employs Executive as President of the Company.
As such, Executive shall have responsibilities, duties and authority reasonably
accorded to, expected of and consistent with such office and will report
directly to the Board of Directors of the Company (the "Board") or such person
as the Board may direct. Additional or different duties, titles or positions,
however, may be assigned to Executive or (without limiting Executive's right to
terminate for Good Reason) may be taken from Executive from time to time,
provided that any such changes are consistent and compatible with Executive's
experience, background and managerial skills. Executive hereby accepts this
employment upon the terms and conditions herein contained and, subject to
paragraph 1(c), agrees to devote substantially all of his business time,
attention and efforts to promote and further the business and interests of the
Company and its affiliates.
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(b) Executive shall faithfully adhere to, execute and fulfill all
lawful policies established, promulgated and communicated by the Company.
(c) Executive shall not, during the term of his employment hereunder,
engage in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Executive's duties and
responsibilities hereunder. If Executive intends to engage in any other business
activity, he shall give written notice of such intent to the Board, and the
Board shall in good faith determine whether such activity will interfere with
Executive's duties and responsibilities hereunder, and Executive agrees to
accept such a determination by the Board. The foregoing limitations shall not be
construed as prohibiting Executive from making personal investments in such form
or manner as will neither require his services in the operation or affairs of
the companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof. Notwithstanding the foregoing, Executive may
continue to engage in those activities described on Schedule 1(c) to the same
extent Executive is engaged in such activities currently and provided Executive
continues to devote at least the same amount of time to Executive's duties
hereunder as Executive has devoted to the Company prior to the Effective Date.
2. Compensation. For all services rendered by Executive, the Company
shall compensate Executive beginning upon consummation of the IPO as follows:
(a) Base Salary. The base salary payable to Executive shall be $_______
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures, but not less than monthly. Such base salary shall be
reviewed by the Board on at least an annual basis and may be adjusted in light
of Executive's position, responsibilities, performance and other relevant
factors; provided, however, as adjusted the base salary may not be less than the
amount in effect on the Effective Date.
(b) Incentive Bonus Plan. For 1999 and subsequent years, it is the
intent of RV Centers and the Company to develop written Management Incentive
Bonus Plans setting forth the criteria under which Executive and other officers
and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Executive
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Admittance for participation and payment of all premiums
for coverage for Executive and Executive's dependent family members
under health, hospitalization, disability, dental, life and other
insurance plans that the Company may have in effect from time to time,
provided benefits provided to Executive under this clause (b)(ii) shall
be at least equal to such benefits provided to other RV Centers'
executives similarly situated.
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(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Executive in the
performance of his services pursuant to this Agreement and in
accordance with Company and RV Centers' policies. All reimbursable
expenses shall be appropriately documented in reasonable detail by
Executive upon submission of any request for reimbursement, and in a
format and manner consistent with the Company's expense reporting
policy.
(iii) Four (4) weeks of paid vacation per year or such greater
amount as may be afforded officers and key employees under the
Company's or RV Centers' policies in effect from time to time.
(iv) The Company shall provide Executive with other executive
perquisites as may be available to or deemed appropriate for Executive
by the Board and participation in all other company-wide employee
benefits as are available from time to time to all RV Centers
Companies.
3. Non-Competition Agreement.
(a) Executive recognizes that the Company's willingness to enter into
this Agreement, including the compensation arrangements set forth in paragraph 2
above, and that certain Acquisition Agreement dated as of January 12, 1999 (the
"Acquisition Agreement") among the Company, RV Centers, Executive and other
Company stockholders, if any, is based in material part on Executive's agreement
to the provisions of this paragraph 3 and that Executive's breach of the
provisions of this paragraph 3 could materially damage the Company. Executive
will not, during the period of employment by or with the Company, and for a
period of two (2) years immediately following the termination of his employment
under this Agreement, for any reason whatsoever (other than a termination by the
Company without "Good Cause" or by Executive for "Good Reason," as each term is
defined below, in which case for a period of one (1) year immediately following
the termination), directly or indirectly, for himself or on behalf of or in
conjunction with any other person, company, partnership, corporation or business
of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any business in direct
competition with any current or future corporate affiliates of the
Company and the RV Centers Companies, within one hundred (100) miles of
any location where any of the RV Centers Companies conducts business,
including any territory serviced by any RV Centers Company;
(ii) call upon any person who is, at that time, an employee of
any of the RV Centers Companies for the purpose or with the intent of
enticing such employee away from or out of the employ of an RV Centers
Company;
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(iii) call upon any person or business entity which is, at
that time, or which has been, within two (2) years prior to that time,
a customer of an RV Centers Company, for the purpose of soliciting or
selling products or services in competition with any of the RV Centers
Companies;
(iv) call upon any prospective acquisition candidate, on
Executive's own behalf or on behalf of any competitor, which candidate
was, to Executive's knowledge after due inquiry of the company
approached, either called upon by an RV Centers Company or for which RV
Centers has made an acquisition analysis, for the purpose of acquiring
such entity; or
(v) voluntarily testify as an expert witness in recreational
vehicle matters for an adverse party to any RV Centers Company in
litigation or arbitration.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Executive from acquiring as an investment not more than five percent
(5%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or on an over-the-counter or similar market.
(b) Because of the difficulty of measuring economic losses to the
Company and RV Centers as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to the
Company and RV Centers for which they would have no other adequate remedy,
Executive agrees that the foregoing covenant may be enforced by RV Centers or
the Company, in the event of breach by Executive, by injunctions, restraining
orders and orders of specific performance issued by a court. Executive further
agrees to waive any requirement for the Company's securing or posting of any
bond in connection with such remedies.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Executive in light of the
activities and business of the RV Centers Companies on the Effective Date and
the current plans of the RV Centers Companies; but it is also the intent of the
Company and Executive that such covenants be construed and enforced in
accordance with the changing activities, business and locations of the RV
Centers Companies, throughout the term of the employment of Executive under this
Agreement. For example, if, during the term of this Agreement, an RV Centers
Company engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Executive will be precluded
from soliciting the customers or employees of such new activities and business
or from directly competing with such new activities or business within one
hundred (100) miles of its then-established operating locations through the term
of this covenant.
It is further agreed by the parties hereto that, if Executive shall
cease to be employed hereunder and shall enter into a business or pursue other
activities not in competition with an RV Centers Company, or shall engage in
similar activities or business in locations the proximity and activities of
which do not violate clause (a) of this paragraph 3 Executive shall not be
chargeable with a violation of this paragraph 3 if an RV Centers Company shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
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(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth
herein are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and this Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against an RV Centers
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by RV Centers or the Company of such covenants. It
is specifically agreed that the period of two (2) years (or one (1) year in
certain circumstances as herein provided) following termination of employment
stated at the beginning of this paragraph 3, during which the agreements and
covenants of Executive made in this paragraph 3 shall be effective, shall be
computed by excluding from such computation any time during which Executive is
in violation of any provision of this paragraph 3.
4. Term; Termination; Rights on Termination. The initial term of this
Agreement shall begin on the Effective Date and continue for three (3) years
(the " Initial Term") unless terminated sooner as herein provided. After the
Initial Term, this Agreement shall continue thereafter on a year-to-year basis
(each such year is referred to herein as a "Renewal Term") on the same terms and
conditions contained herein in effect as of the time of renewal unless the
Company gives written notice of non-renewal at least ninety (90) days prior to
the end of the Initial Term or the then current Renewal Term, as the case may
be. If this Agreement is not renewed prior to the end of the Initial Term or any
subsequent Renewal Term, then Executive shall become an employee at-will at the
expiration of the term of the Agreement. If the Agreement is not renewed, this
Agreement, including the restrictions in paragraph 3, shall expire; provided,
however, Executive's obligations under paragraphs 6, 7, 8 and 9 and all rights
and liabilities which have accrued hereunder to either party prior to such
expiration shall survive. Non-renewal of the Agreement shall not be "Good
Reason" for Executive to terminate employment under subparagraph (d) below nor
shall it be considered a termination without "Good Cause" by the Company.
During the Initial Term or subsequent Renewal Terms, this Agreement and
Executive's employment may be terminated in any one of the following ways:
(a) Death. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.
(b) Disability. If, as a result of a long-term incapacity or disability
from which Executive is not reasonably likely to continue to full employment, as
such concept is defined in the insurance programs, from time to time, maintained
by the Company ("Long-Term Disability") due to physical
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<PAGE> 88
or mental illness or injury, and Executive shall have been absent from his
full-time duties hereunder for three (3) consecutive months, then, the Company
may terminate Executive's employment hereunder. Company shall give Executive
thirty (30) days advance written notice of such termination. Such notice may be
given before or after the end of such three (3) month period, but which shall
not be effective earlier than the last day of such three (3) month period
provided, however, such termination shall not be effective if Executive is able
to resume his full-time duties at the conclusion of such thirty (30) day notice
period.
If Executive shall have been absent from his full-time duties hereunder
for six (6) consecutive months as a result of a short-term incapacity or
disability from which Executive is reasonably likely to continue to full
employment, as such concept is defined in the insurance programs, from time to
time, maintained by the Company ("Short-Term Disability") due to physical or
mental illness or injury, then the Company may terminate Executive's employment
hereunder. Company shall give Executive thirty (30) days advance written notice
of such termination. Such notice may be given before or after the end of such
six (6) month period, but which shall not be effective earlier than the last day
of such six (6) month period. Provided, however, such termination shall not be
effective if Executive is able to resume his full-time duties at the conclusion
of such thirty (30) day notice period.
For purposes of the foregoing paragraphs, if the Company does not have
an insurance program which includes a definition of long-term disability or
short-term disability, such terms shall have the meanings generally ascribed to
them by the insurance industry.
During such three (3) month or six (6) month period, the Company shall
pay to Executive his base salary amount hereunder net of any disability
insurance payments under policies maintained by the Company or RV Centers which
are received by Executive; provided, however, that such payments shall be netted
only to the extent that the premiums for such insurance are borne by the Company
and are not paid or reimbursed by the Executive.
Also, Executive may terminate his employment hereunder if his health
should become impaired to an extent that makes the continued performance of his
duties hereunder hazardous to his physical or mental health or his life,
provided that Executive shall have furnished the Company with a written
statement from a qualified doctor to such effect and provided, further, that, at
the Company's request made within thirty (30) days of the date of such written
statement, Executive shall submit to an examination by a doctor selected by the
Company who is reasonably acceptable to Executive or Executive's doctor and such
doctor shall have concurred in the conclusion of Executive's doctor.
Notwithstanding the payments made pursuant to the provision of this
subparagraph (b) above, in the event this Agreement is terminated as a result of
Executive's incapacity or disability, Executive shall receive from the Company,
in a lump-sum payment due within ten (10) days of the effective date of
termination, the base salary at the rate then in effect for the greater of (i)
whatever time period is remaining under the Initial Term of this Agreement, but
for not more than two (2) years, or (ii) one (1) year.
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(c) Good Cause. The Company may terminate this Agreement ten (10) days
after written notice to Executive for "Good Cause," which shall be limited to:
(i) Executive's breach of any material provision of this Agreement (continuing
for ten (10) days after receipt of written notice of need to cure); (ii)
Executive's gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to cure)
of any of Executive's material duties and responsibilities hereunder which is
harmful or injurious to the Company or RV Centers; (iii) Executive's dishonesty,
fraud or willful misconduct with respect to the business or affairs of the
Company or RV Centers which materially and adversely affects the operations or
reputation of the Company or RV Centers; (iv) Executive's conviction of a felony
crime; or (v) Executive's violation of the Company's substance abuse policy that
would result in discharge under such policy as applied to the Company's
employees generally. In the event of a termination for Good Cause, as enumerated
above, Executive shall have no right to any severance compensation but shall
receive all compensation due and payable through the effective date of
termination. Any termination for Good Cause must be approved by at least
fifty-one percent (51%) of the members of the RV Centers Board in the form of a
resolution duly adopted by the RV Centers Board and delivered to the Executive,
finding in the good faith opinion of the RV Centers Board that Executive has
engaged in the type of conduct set forth above and specifying the particulars
thereof. In the event of a termination for Good Cause, as enumerated above,
Executive shall have no right to any severance compensation, but shall receive
all compensation due and payable through the effective date of termination.
(d) With or without Good Reason or Without Good Cause. At any time,
either Executive, with or without Good Reason, or the Company, without Good
Cause, may terminate this Agreement and Executive's employment; provided,
however, Executive may only be terminated without Good Cause by the Company
during the Initial Term hereof if such termination is approved by at least
fifty-one percent (51%) of the members of the Board of Directors of RV Centers.
Any such termination by Executive or the Company shall be effective thirty (30)
days after written notice of such termination is provided to the other party.
Should this Agreement be terminated by the Company without
Good Cause or by Executive with Good Reason during the Initial Term, Executive
shall receive from the Company an amount equal to the base salary at the rate
then in effect for the greater of (i) the time period remaining under the
Initial Term of this Agreement or (ii) one (1) year. Should this Agreement be
terminated by the Company without Good Cause or by Executive with Good Reason
during any Renewal Term, Executive shall receive from the Company an amount
equal to the base salary at the rate then in effect for the greater of (i) the
time period remaining under such Renewal Term or (ii) six (6) months. Such
amount, in all cases, shall be paid in equal monthly payments on the last
regular payday of each month for all Company employees. Further, any termination
without Good Cause by the Company or with Good Reason by Executive shall operate
to shorten the period set forth in paragraph 3(a) and during which the terms of
paragraph 3 apply to one (1) year from the date of termination of employment. If
Executive resigns or otherwise terminates his employment without Good Reason,
Executive shall receive no severance compensation except as may be provided in
paragraph 11 hereof, but shall be entitled to reimbursement for reasonable
business expenses incurred prior to the date of resignation or termination as
provided in paragraph 2 hereof.
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Executive shall be deemed to have "Good Reason" to terminate
this Agreement and employment hereunder upon the occurrence of any of the
following events:
(i) (A) Executive is requested to take on duties materially
inconsistent with Executive's managerial experience and abilities, (B)
there is a material reduction in authority, responsibilities or duties
to a position of clearly less stature or importance within RV Centers,
another RV Centers Company or the Company than the position described
in paragraph 1 hereof, or (C) Executive is requested to move his work
location to an area outside the greater metropolitan area of
Executive's present work location, and any such request by the Company
or any such material reduction, is not withdrawn within five (5)
business days after written notice from Executive that he is unwilling
to accept such proposed changes in duties or responsibilities or to
accept such move; Executive's failure to respond within five (5)
business days after receiving notification of any such proposed change
in Executive's duties, responsibilities, titles, or work location shall
be deemed an acceptance of such change by Executive; or
(ii) There is a "Change in Control" of the Company; for purposes of
this subparagraph (ii), "Change in Control" shall have the same
definition as in paragraph 11(e) except that in such definition the
term "Company" shall be substituted for "RV Centers" throughout the
definition other than in the third line of paragraph 11(e)(i).
Provided, however, if Executive is given at least five (5) business
days advance notice of such Change in Control, Executive's failure to
give notice of termination prior to the consummation of the Change in
Control shall be deemed acceptance of such Change in Control and such
event shall not constitute "Good Reason". If Executive is not given at
least five (5) business days advance notice, Executive's failure to
terminate this Agreement within ten (10) business days after receiving
such notice of a Change in Control shall be deemed an acceptance of
such Change in Control by Executive and such event shall not constitute
"Good Reason".
(iii) the Company breaches any material provision of this Agreement
(continuing for ten (10) business days after receipt of written notice
from Executive of the need to cure).
Executive acknowledges that certain changes in authority, responsibility or
duties will result from the acquisition and subsequent operation by RV Centers
of the Company (e.g., shift of responsibility for human resources, accounting,
insurance and other activities to officers of RV Centers, combining Company
operations and locations with other RV Centers Companies, establishment of
regional management and regional lines of authority) and agrees that such
changes shall not be of a nature to constitute Good Reason provided that
Executive is treated consistently, in all material respects, with executives in
similar positions in other operating subsidiaries of RV Centers.
(e) If any person other than Executive is appointed President of the
Company, this Agreement shall terminate and Executive and the Company will enter
into an advisory agreement to last for a period of six months, whose terms and
conditions shall be substantially similar to the terms and conditions of those
advisory agreements entered into by RV Centers and its subsidiaries, and under
which the compensation payable to Executive shall equal $4,000 per month.
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Upon termination of this Agreement for any reason provided in (a)
through (e) above, Executive shall be entitled to receive all compensation
earned and/or accrued and all benefits and reimbursements due and/or accrued
through the effective date of termination. Additional compensation subsequent to
termination, if any, will be due and payable to Executive only to the extent and
in the manner expressly provided above or in paragraph 11. All other rights and
obligations of the Company and Executive under this Agreement shall cease as of
the effective date of termination, except that Executive's obligations under
paragraphs 3, 5, 6, 7 and 8 herein, the Company's obligations with respect to
severance payments, if any, and indemnification under paragraph 13 below, and RV
Centers' obligations under paragraph 21 below shall survive such termination in
accordance with their terms if the Agreement is terminated pursuant to (a)
through (e) above or paragraph 11 below.
If Executive is terminated without cause or terminates his employment
hereunder with Good Reason, the Executive shall be entitled to receive a
prorated portion of any annual bonus, which under the bonus plan is based only
on a formula determination and is not discretionary, to which Executive was
entitled to receive for the year during which termination occurred had the
Executive not been terminated. If the formula for the bonus calls for the use of
full year numbers, the amount of such bonus shall be based on such numbers,
notwithstanding that such numbers include a period after termination.
(f) Change in Control of RV Centers. In the event of a "Change in
Control" of RV Centers (as defined below), refer to paragraph 11 below.
5. Return of Company Property. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Executive by or on behalf of any RV Centers Company,
their representatives, vendors or customers which pertain to the business of any
RV Centers Company shall be and remain the property of the RV Centers Companies,
and be subject at all times to their discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials and other
similar data pertaining to the business, activities or future plans of the RV
Centers Companies which is collected by Executive shall be delivered promptly to
the Company without request by it upon termination of Executive's employment.
6. Inventions. Executive shall disclose promptly to the Company any and
all conceptions, designs, inventions, improvements and valuable discoveries,
whether patentable or not, which are conceived or made by Executive, solely or
jointly with another, during the period of employment and which are directly
related to the then current business or activities of the Company and which
Executive conceives as a result of his employment by the Company. Executive
hereby assigns and agrees to assign all his interests therein to the Company or
its nominee. Whenever requested to do so by the Company, Executive shall execute
any and all applications, assignments or other instruments that the Company
shall deem necessary to apply for and obtain Letters Patent of the United States
or any foreign country or to otherwise protect the Company's interest therein.
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7. Trade Secrets. Executive agrees that he will not, during or after
the term of this Agreement with the Company, disclose the specific terms of any
RV Centers Company's relationships or agreements with their significant vendors
or customers or any other significant and material trade secret of an RV Centers
Company, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever, except in pursuit
of the Company's business (e.g. interaction with outside auditors and
consultants engaged by the Company) or with lenders or potential lenders
consistent with policies of the Company.
8. Confidentiality.
(a) Executive acknowledges and agrees that all Confidential Information
(as defined below) of the Company is confidential and a valuable, special and
unique asset of the Company that gives the Company an advantage over its actual
and potential, current and future competitors. Executive further acknowledges
and agrees that Executive owes the Company a fiduciary duty to preserve and
protect all Confidential Information from unauthorized disclosure or
unauthorized use, that certain Confidential Information constitutes "trade
secrets" under applicable laws, and that unauthorized disclosure or unauthorized
use of the Company's Confidential Information could irreparably injure the
Company.
(b) Both during the term of Executive's employment and after the
termination of Executive's employment for any reason (including wrongful
termination), Executive shall hold all Confidential Information in strict
confidence, and shall not use any Confidential Information except for the
benefit of the Company, in accordance with the duties assigned to Executive.
Executive shall not, at any time (either during or after the term of Executive's
employment), disclose any Confidential Information to any person or entity
(except other employees of the Company who have a need to know the information
in connection with the performance of their employment duties), or copy,
reproduce, modify, decompile or reverse engineer any Confidential Information,
or remove any Confidential Information from the Company's premises, without the
prior written consent of the Chief Executive Officer of RV Centers, or permit
any other person to do so except for the benefit of the Company. In the event
Executive is requested or required (by oral questions, interrogatories, requests
for information or documents, subpoena, civil investigative demand or other
process) to disclose any Confidential Information, Executive will provide the
Company with immediate written notice of any such request or requirement so that
the Company may seek an appropriate protective order or seek with Executive's
cooperation to narrow the request or demand or waive Executive's compliance with
the provisions of this Agreement. If, failing the entry of a protective order or
the receipt of a waiver hereunder, Executive is, in the opinion of his counsel,
compelled to disclose Confidential Information, Executive may disclose only that
portion of the Confidential Information which Executive's counsel advises
Executive in writing that Executive is compelled to disclose and Executive will
exercise his or her best efforts to obtain assurance that confidential treatment
will be accorded such Confidential Information. In any event, Executive will not
oppose action by the Company to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the Confidential
Information. Executive shall take reasonable precautions to protect the physical
security of all documents and other material containing Confidential Information
(regardless of the medium on which the Confidential Information is stored). This
Agreement applies to all Confidential Information, whether now known or later to
become known to Executive.
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(c) Upon the termination of Executive's employment with the Company for
any reason, and upon written request of the Company at any other time, Executive
shall promptly surrender and deliver to the Company all documents and other
written material of any nature containing or pertaining to any Confidential
Information and shall not retain any such document or other material. Within
five days of any such request, Executive shall certify to the Company in writing
that all such materials have been returned.
(d) As used in this Agreement, the term "Confidential Information"
shall mean any information or material known to or used by or for the Company
(whether or not owned or developed by the Company and whether or not developed
by Executive) that is not generally known to the public and has been generally
treated by the Company as confidential information. Confidential Information
includes, but is not limited to, the following: all trade secrets of the
Company; all information that the Company has marked as confidential or has
otherwise described to Executive (either in writing or orally) as confidential;
all nonpublic information concerning the Company's products, services,
prospective products or services, research, product designs, prices, discounts,
costs, marketing plans, marketing techniques, market studies, test data,
customers, customer lists and records, suppliers and contracts; all Company
business records and plans; all Company personnel files; all financial
information of or concerning the Company; all information relating to operating
system software, application software, software and system methodology, hardware
platforms, technical information, inventions, computer programs and listings,
source codes, object codes, copyrights and other intellectual property; all
technical specifications; any proprietary information belonging to the Company;
and all data and all computer system passwords and user codes.
"Confidential Information" shall not include information which (i) is
in the public domain to such an extent as to be readily available to competitors
of the RV Centers Companies, (ii) becomes generally known to the public other
than by disclosure by Executive, or (iii) is received by Executive, outside his
capacity as an employee of the Company, from a third party which was under no
legal obligation of confidentiality with an RV Centers Company with respect to
such information.
9. No Prior Agreements. Executive hereby represents and warrants to the
Company that the execution of this Agreement by Executive and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Executive agrees to indemnify the Company for any loss or
damage, including, but not limited to, attorneys' fees and expenses of
investigation, the Company may incur based upon or arising out of any breach of
this paragraph 9.
10. Assignment; Binding Effect. Executive understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Executive agrees, therefore, that he
cannot assign all or any portion of his performance under this
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Agreement. Subject to the preceding two sentences and the express provisions of
paragraph 11 below, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
11. Change in Control.
(a) Executive understands and acknowledges that RV Centers may be
merged or consolidated with or into another entity or that RV Centers may
undergo a "Change in Control" (as defined below). In the event a Change in
Control is initiated or occurs during the Initial Term, then the provisions of
this paragraph 11 shall be applicable.
(b) In the event of a Change in Control wherein Executive has not
received written notice at least five (5) business days prior to the anticipated
date of the event or transaction giving rise to the Change in Control from the
successor to all or a substantial portion of the Company's business and/or
assets that such successor is willing as of the closing to assume and agrees to
perform, or continue to cause the Company to perform, the Company's obligations
under this Agreement in the same manner and to the same extent that the Company
is required to perform prior to such event or transaction, then Executive may,
at Executive's sole discretion, elect to terminate his employment on the
effective date of such Change in Control. In such case, the applicable
provisions of paragraph 4(d) will apply as though the Company had terminated
Executive without Good Cause; however, the amount of the severance payments due
Executive shall be triple the amount calculated under the terms of paragraph
4(d), but shall in no event in the aggregate exceed six (6) times Executive's
annual base salary.
(c) For purposes of applying paragraph 4 under the circumstances
described in (b) above, in the case where Executive's employment under this
Agreement will terminate, the effective date of termination will be the closing
date of the transaction giving rise to the Change in Control and all
compensation, benefits and reimbursements due Executive under paragraph 2 above
must be paid in full by the Company at or prior to such closing. In the case
where Executive's employment under this Agreement does not terminate with a
Change in Control under (b) above, then for one (1) year following the closing
date of a Change in Control, if the Initial Term is ending during such one (1)
year period, the Company shall automatically renew this Agreement for one (1)
year pursuant to the second sentence of paragraph 4 above.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person, entity or group (as such terms are used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Act"), other than RV Centers or an employee benefit plan
of RV Centers, acquires, directly or indirectly, the beneficial
ownership (as defined in Section 13(d) of the Act)) of any voting
security of RV Centers and immediately after such acquisition such
person is, directly or indirectly, the beneficial owner of voting
securities representing 50% or more of the total voting power of all of
the then outstanding voting securities of RV Centers entitled to vote
generally in the election of directors;
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(ii) the stockholders of RV Centers shall approve a merger,
consolidation, recapitalization or reorganization of RV Centers, or a
reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not obtained, other
than any such transaction which would result in at least 75% of the
total voting power represented by the voting securities of the
surviving entity outstanding immediately after such transaction being
beneficially owned by the holders of all of the outstanding voting
securities of RV Centers immediately prior to the transactions with the
voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or
(iii) the stockholders of RV Centers shall approve a plan of
complete liquidation or dissolution of RV Centers or an agreement for
the sale or disposition by RV Centers of all or a substantial portion
of RV Centers' assets (i.e., 50% or more of the total consolidated
assets of RV Centers).
(f) If it shall be finally determined that any payment made or benefit
provided to Executive in connection with a Change in Control of RV Centers,
whether or not made or provided pursuant to this Agreement, is subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, or any successor thereto, RV Centers or the Company shall pay Executive
an amount of cash (the "Additional Amount") such that the net amount received by
Executive after paying all applicable taxes on such Additional Amount shall be
equal to the amount that Executive would have received if Section 4999 were not
applicable.
13. Release. Notwithstanding anything in this Agreement to the
contrary, Executive shall not be entitled to receive any severance payments
pursuant to paragraphs 4 or 11 of this Agreement unless Executive has executed
(and not revoked) a general release of all claims Executive may have against the
Company and its affiliates relating to Executive's employment hereunder, other
than claims for unpaid compensation amounts required to be paid by the Company
pursuant to paragraph 2 hereof, in a form of such release acceptable to the
Company.
14. Indemnification. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Executive), by reason of the fact that he is or was performing services
in good faith under this Agreement or as an executive officer of the Company
prior to the date of this Agreement, then the Company shall indemnify Executive
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement, as actually and reasonably incurred by Executive in
connection therewith. In the event that both Executive and the Company are made
a party to the same third-party action, complaint, suit or proceeding, the
Company agrees to engage competent legal representation, and Executive agrees to
use the same representation, provided that if counsel selected by the Company
shall have a conflict of interest that prevents such counsel from representing
Executive, he may engage separate counsel and the Company shall pay all
reasonable attorneys' fees and reasonable expenses of such separate counsel.
Further, while Executive is expected at all times to use his best efforts to
faithfully discharge his duties under this Agreement, Executive cannot be held
liable to the Company for errors or omissions made in good faith where Executive
has not exhibited gross, willful and wanton negligence and misconduct nor
performed criminal and fraudulent acts which materially damage the business of
the Company.
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<PAGE> 96
15. Complete Agreement. Except as expressly set forth herein, this
Agreement is not a promise of future employment. Executive has no oral
representations, understandings or agreements with the Company or any of its
officers, directors or representatives covering the same subject matter as this
Agreement. This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Executive, and it cannot
be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of the Company, RV Centers and Executive, and no term of this Agreement may be
waived except by a writing signed by the party waiving the benefit of such term.
16. Notice. Whenever any notice is required hereunder, it shall be
given in writing addressed as follows:
To the Company: American RV Centers, Inc.
8150 New Craft Road
Olive Branch, Mississippi 38654
with a copy to: RV Centers, Inc.
Attention: President
600 Travis, Suite 6500
Houston, Texas 77002
To Executive: Peter A. Albano
4400 Walnut Grove Road
Memphis, Tennessee 38117
Notice shall be deemed given and effective on the earlier of three (3) days
after the deposit in the U.S. mail of a writing addressed as above and sent
first class mail, certified, return receipt requested, or when actually
received. Either party may change the address for notice by notifying the other
party of such change in accordance with this paragraph 16.
17. Severability; Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
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<PAGE> 97
18. Arbitration. Any unresolved dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration;
provided, however, the Company shall be entitled to bring an action to enforce
its rights under paragraphs 3, 5, 6, 7 and 8. The arbitration shall be conducted
before a panel of three (3) arbitrators in Houston, Texas, in accordance with
the National Rules for the Resolution of Employment Disputes of the American
Arbitration Association ("AAA") then in effect. Unless both parties agree
otherwise, the arbitrators will be those provided by the AAA. The arbitrators
shall not have the authority to add to, detract from or modify any provision
hereof nor to award punitive damages to any injured party. The arbitrators shall
have the authority to order back pay, severance compensation, vesting of options
(or cash compensation in lieu of vesting of options), reimbursement of legal
fees and costs, including those incurred to enforce this Agreement, and interest
thereon. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The AAA fees and all direct expenses (e.g., room rental for a
location to conduct the proceedings, reimbursement of arbitrators' per diems and
out-of-pocket expenses) of any arbitration proceeding shall be borne evenly by
the parties pending a final determination by the arbitrators as to how the costs
shall be borne between the parties.
19. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of Texas, without regard to its conflicts of
laws provisions.
20. Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
21. Guarantee of Payments. RV Centers has executed this Agreement for
the limited purposes of paragraph 21. In this connection, RV Centers hereby
unconditionally guarantees the punctual payment when due by the Company of all
obligations payable by the Company to the Executive hereunder.
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<PAGE> 98
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"EXECUTIVE" "COMPANY"
By:
- --------------------------- ---------------------------------------
Peter A. Albano Name:
------------------------------------
Title:
-----------------------------------
For Purposes of paragraph 21:
"RV CENTERS"
By:
---------------------------------------
Name: Clayton K. Trier
Title: Chairman, Chief Executive Officer
and President
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<PAGE> 99
ANNEX VI
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "LEASE") is made and entered into as of ____________,
1999 by and between ___________________("LANDLORD"), and ______________________
("TENANT").
In consideration of the rentals reserved hereunder and the duties, covenants and
obligations of the other hereunder, Landlord and Tenant hereby covenant and
agree as follows:
I.
1.01 DEMISE OF THE PREMISES. Landlord hereby leases, demises and lets to Tenant,
and Tenant hereby leases and takes from Landlord, that certain tract of land
(the "LAND") located in ______________________, and more particularly described
on Exhibit "A" attached hereto together with all buildings, improvements and
fixtures located thereon (the "IMPROVEMENTS") and the non-exclusive use of all
rights, easements, privileges and appurtenances thereto (said Land, Improvements
and appurtenances being hereinafter referred to as the "PREMISES").
1.02 TERM. The term of this Lease shall commence on ___________, 1999 (the
"COMMENCEMENT DATE") and, unless sooner terminated or renewed and extended in
accordance with the terms and conditions set forth herein, shall expire on
_____________, 2002 (the "Initial Term"). If Tenant occupies the Premises prior
to the Commencement Date, it shall do so subject to all of the terms and
provisions of this Lease except for the obligation to pay Base Rental (as
hereinafter defined).
1.03 RENEWAL TERM. Landlord hereby grants to Tenant the right, privilege and
option to extend the initial term of this Lease for three (3) periods of three
(3) years each (the "RENEWAL TERMS"), beginning on the day following the
expiration of the Initial Term or the first or second Renewal Term, as
applicable, upon the same terms and conditions as herein contained. Tenant may
exercise each such option by delivering written notice to Landlord of Tenant's
exercise of such option at least three (3) months prior to the expiration of the
initial term or renewal term, as applicable, upon satisfaction of the following
terms and conditions: (i) that, at the time of the exercise of such option and
at the time the applicable Renewal Term begins, Tenant shall not be in default
in the performance of any of the terms, covenants and conditions contained in
this Lease after notice and the expiration of any applicable cure periods; and
(ii) that this Lease shall not have been theretofore terminated and shall be in
full force and effect at the date of the exercise of such option and at the date
the applicable Renewal Term begins. As used herein, "TERM" shall mean the
Initial Term of this Lease as described in Section 1.02 above, as extended and
renewed by any Renewal Terms.
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<PAGE> 100
1.04 USE. The Premises are to be used for the operation of a recreational
vehicle dealership and servicing facility and related uses or any lawful purpose
with the prior written consent of Landlord, such consent not to be unreasonably
withheld or delayed.
II.
2.01 BASE RENTAL. Tenant hereby covenants and agrees to pay to Landlord at
Landlord's address set forth in Section 12.01 or such other address as Landlord
may designate from time to time in writing to Tenant, a base annual rental (the
"BASE RENTAL"). Base Rental shall be payable in 12 equal monthly installments in
advance on the first business day of each month during the Initial Term except
that all payments due hereunder for any fractional month of the commencement or
end of this Lease shall be prorated based upon the number of days in such
fractional month during the Term. All Base Rental or any other sums due
hereunder will be paid without notice, demand, abatement, deduction or setoff
except as otherwise set forth herein. Base Rental for the Initial Term shall
equal $96,000.
2.02 BASE RENTAL ADJUSTMENT FOR RENEWAL TERMS. The Base Rental for each Renewal
Term shall be calculated in accordance with the following formula:
Base Rental for the Renewal Term = Base Rental for the Initial
Term x (CPI(2)/CPI(1))
In applying the above formula for rental adjustment, the following
definitions shall prevail:
(s) "CPI" means the monthly indexes of the National Consumer Price
Index for All Urban Consumers (All items: 1982-84 equals 100) issued by the U.S.
Department of Labor, Bureau of Labor Statistics or any successor agency that
shall issue the indexes.
(t) "CPI(1)" means the CPI as of the commencement date of the Initial
Term.
(u) "CPI(2)" means the CPI as of the commencement date of the Renewal
Term for which the adjustment of Base Rental is computed.
In the event that (i) the Bureau of Labor Statistics ceases to use the
1982-84 average of 100 as the basis of calculation, or (ii) a substantial change
is made in the number or characters of "market basket" items used in determining
the CPI, or (iii) Landlord and Tenant mutually agree in writing that the CPI
does not accurately reflect the purchasing power of the dollar, or (iv) the CPI
shall be discontinued for any reason, the Bureau shall be requested to furnish a
new index comparable to the CPI together with information which will make
possible the conversion to the new index in computing the adjusted rental. If
for any reason the Bureau does not furnish such an index and such
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<PAGE> 101
information, the parties shall thereafter accept and use such other index or
comparable statistics on the cost of living for the county in which the Premises
is located, as shall be computed and published by an agency of the United States
or by a responsible financial periodical of recognized authority then to be
selected by Landlord (but subject to reasonable approval by Tenant).
2.03 TENANT'S MAINTENANCE AND REPAIRS. Except as otherwise notified to Tenant in
writing to Landlord prior to the Commencement Date, Landlord hereby represents
and warrants that as of the date hereof, the Improvements and all structural and
non-structural elements thereof (including all electrical, mechanical, heating,
ventilating, air conditioning, plumbing and other systems serving the Premises)
and all entryways, driveways, walkways and parking areas are free of defects and
in good repair and operating condition, normal wear and tear excepted. From and
after the Commencement Date and during the Term, Tenant shall, at Tenant's sole
cost and expense: (i) make non-structural repairs, replacements and renewals
necessary to keep the Premises in good condition, order and repair as the same
are in as of the Commencement Date, reasonable wear and tear and damage by fire
or other casualty or condemnation excepted; (ii) keep all electrical,
mechanical, heating, ventilating and air conditioning, plumbing and any other
systems serving the Premises in good order and repair; (iii) keep all entryways,
driveways, walkways and parking areas on the Premises in good order and repair,
and (iv) with respect only to capital improvements constructed by Tenant under
Section 5.01 below, structural repairs necessary to keep such capital
improvements in good condition, order and repair, reasonable wear and tear and
damage by fire or other casualty or condemnation excepted. Notwithstanding
anything contained herein to the contrary, replacement of shingles, tar and
gravel, membranes or other similar exterior roofing material, if required, shall
be Tenant's responsibility. In the event that heating, ventilation and air
conditioning systems (including furnaces) must be replaced during the Term and
no violation of the representation in the first sentence of this Section 2.03
has occurred with respect to such system, then Tenant will be responsible for
such replacement and the associated costs. In the event Tenant shall fail to
fulfill its obligations to repair and maintain the Premises in accordance with
this Section 2.03, Landlord, notwithstanding anything herein to the contrary,
shall have the right upon not less than thirty (30) days' prior written notice
to Tenant (except in cases of emergency), to make such repairs and maintain the
Premises at the expense of Tenant, and Tenant shall promptly pay to Landlord the
actual cost thereof.
2.04 LANDLORD'S MAINTENANCE AND REPAIRS. From and after the Commencement Date
and during the Term, Landlord shall, at its own cost and expense, make all
necessary structural repairs, replacements and renewals to the Premises
including, but not limited to, maintaining the foundation, floor slabs, exterior
walls, structural roof members and all other structural supports of such
Improvements in good and sound condition. Landlord shall not, however, be
obligated to make structural repairs to any capital improvements constructed by
Tenant under Section 5.01 which repairs are the responsibility of Tenant under
Section 2.03 above. In the event Landlord shall fail to fulfill its obligations
to repair and maintain the Premises in accordance with this Section 2.04,
Tenant, notwithstanding anything herein to the contrary, shall have the right,
upon not less than
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<PAGE> 102
thirty (30) days' prior written notice to Landlord (except in the case of an
emergency), to make such repair and maintain the Premises at the expense of
Landlord, and to deduct the cost of the same from the Base Rental that shall
thereafter become due. In the event Landlord disputes the amount being offset by
Tenant and Landlord prevails through arbitration pursuant to Section 12.02
hereof, Tenant shall promptly reimburse Landlord for such amount.
III.
3.01 UTILITIES. Landlord agrees to provide, at its cost, water, electricity and
telephone service connections into the Premises, but Tenant shall pay for all
water, gas, heat, lights, power, telephone, sewer, sprinkler charges and other
utilities and shall furnish all electric light bulbs and tubes. In the event of
a failure by Landlord to provide the service connections specified in this
Section 3.01 which is not caused by a failure of the applicable utility company
to provide actual service or another Force Majeure event as set forth in Section
12.03(k) ("FAILURE OF SERVICES"), which such Failure of Services is not cured
within five (5) days, Tenant shall have the following rights:
(a) For each day or portion thereof that Failure of Services continues for more
than five (5) days, Tenant will be entitled to an abatement of Base Rental,
beginning with the inception of the sixth (6th) day and terminating on the day
such Failure of Services is completely cured by Landlord having resumed
furnishing the interrupted service.
(b) In the event Failure of Services is not completed cured by Landlord within
thirty (30) days, Tenant will have the option to terminate this Lease and all of
its obligations for the remaining balance of the Term by giving written notice
for such termination to Landlord within five (5) days of the expiration of such
thirty (30) day period.
IV.
4.01 CARE OF THE PREMISES. Tenant shall not commit any waste or damage to any
portion of the Premises, and shall, subject to Sections 2.03 and 2.04, at its
own cost and expense, maintain the Premises in good condition and repair. Upon
termination of this Lease, by lapse of time or otherwise, Tenant shall deliver
up the Premises to Landlord in as good condition as existed on the Commencement
Date, ordinary wear and tear only excepted. Upon such termination of this Lease,
Landlord shall have the right to re-enter and resume possession of the Premises.
4.02 LAWS AND REGULATIONS; HAZARDOUS SUBSTANCES.
(a) Tenant shall use its diligent good faith efforts to comply with all laws,
ordinances, orders, rules, regulations and other requirements of governmental
authority pertaining to or governing Tenant's particular use and occupancy of
the Premises, whether now in force or hereafter enacted, and all applicable
federal, state or local laws, regulations, orders, judgments and decrees
regarding
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<PAGE> 103
health, safety or the environment ("ENVIRONMENTAL LAWS"), including without
limitation the application for and maintenance of all required permits, the
submittal of all notices and reports, proper labeling, training and record
keeping, and timely and appropriate response to any release or other discharge
by Tenant of a substance under Environmental Laws.
(b) Landlord shall use its diligent good faith efforts to comply with all laws,
ordinances, orders, rules, regulations and other requirements of governmental
authority pertaining to or governing Landlord's ownership, maintenance and
repair of the Premises, whether now in force or hereafter enacted, including,
without limitation, the American Disabilities Act and all Environmental Laws,
including without limitation the application for and maintenance of all required
permits, the submittal of all notices and reports, proper labeling, training and
record keeping, and timely and appropriate response to any release or other
discharge by Landlord of a substance under Environmental Laws.
(c) Tenant shall indemnify, protect and hold harmless Landlord and each of its
officers, directors, employees, shareholders and respective subsidiaries from
and against all loss, cost, damage, expense and liability incurred by Landlord
in connection with the presence, emanation, migration, disposal, release or
threatened release of any oil or other petroleum products or hazardous materials
or substances on, within or to or from the Premises as a result of (i) the
operations of Tenant on the Premises after the Commencement Date and (ii) the
activities of third parties affiliated with Tenant or invited on the Premises by
Tenant after the Commencement Date. Landlord represents and warrants to Tenant
that as of the Commencement Date, the Premises do not contain any oil or other
petroleum products or hazardous materials or substances, the existence of which
imposes a requirement under any law or regulation to remove, remediate, reduce
the levels of such substances or otherwise perform any response, corrective or
preventive measure or pay for any environmental response costs. Landlord shall
indemnify, protect and hold harmless Tenant and each of its officers, directors,
employees, shareholders and respective subsidiaries from and against all loss,
cost damage, expense and liability incurred by Tenant in connection with the
presence, emanation, migration, disposal, release or threatened release of any
oil or other petroleum products or hazardous materials or substances on, within,
or to or from the Premises as a result of (i) any activity or action by any
party prior to the Commencement Date or after the expiration of the Term, except
any action or activity, during the Term, of Tenant, its agents, employees,
contractors or any other party acting by or through or on behalf of Tenant, (ii)
the condition of the Premises prior to the Commencement Date or after the
expiration of the Term, including any future manifestations of such conditions,
except to the extent that any such condition is caused by or attributable to the
activities or the actions of the Tenant, its agents, employees or contractors or
by any other party acting by, through or under Tenant which are taken during the
Term or (iii) the actions or activities of Landlord. Each party agrees that such
party will promptly give written notice to the other party of any investigation,
claim, demand, lawsuit or other action by any governmental or regulatory agency
or private party involving the Premises and any hazardous substance or
environmental law of which such party has actual notice. Notwithstanding the
foregoing, Tenant acknowledges that it can make
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no claim against the Landlord for indemnity or for breach of representation or
warranty under this Section 4.02(c) which claim is based upon actions taken by
or activities of the Tenant at the Premises prior to the Commencement Date
unless (i) notice of such claim is given to Landlord in writing prior to June
30, 2000, or (ii) the Landlord had actual knowledge of such matter and failed to
disclose same, in writing, to Tenant prior to the Commencement Date.
V.
5.01 ALTERATIONS TO THE PREMISES. Subject to the other provisions of this
Section 5.01, at any time and from time to time during the Term, Tenant may
perform such alteration, renovation, repair, refurbishment, and other work,
including the construction of new improvements (collectively called the
"ALTERATIONS") with regard to any Improvements as Tenant may elect. Any and all
alteration, renovation, repair, refurbishment, construction of new improvements
or other work with regard thereto shall be performed, in accordance with the
following "CONSTRUCTION STANDARDS" herein so referenced:
(i) All such construction or work shall be performed in a good
and workmanlike manner in accordance with good industry practice for
the type of work in question;
(ii) All such construction or work shall be done in compliance
with all applicable building codes, ordinances, and other laws or
regulations having jurisdiction;
(iii) No such construction or work shall be commenced until
there shall have been first obtained all licenses, permits, and
authorizations required by applicable laws;
(iv) Tenant shall have obtained and shall maintain in force
and effect the insurance coverage required in Section 7.01 with respect
to the type of construction or work in question;
(v) After commencement, such construction or work shall be
prosecuted with due diligence to its completion;
(vi) Tenant shall furnish Landlord with a copy of all plans
and specifications relating to each alteration to the extent that such
plans and specifications have been furnished to Tenant; and
(vii) Any such construction or work which has a cost in excess
of $25,000 shall be subject to the approval of Landlord. Such approval
shall not be unreasonably withheld and if no approval or disapproval is
expressed within 15 days of the receipt of the request and related
plans, the approval of Landlord shall be deemed to have been granted.
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5.02 MECHANIC'S LIEN. Tenant shall not permit any mechanic's lien or liens to be
placed upon the Premises during the term hereof caused by or resulting from any
work performed, materials furnished, or obligation incurred by or at the request
of Tenant. If a lien is filed upon the interest of Landlord or Tenant in the
Premises, Tenant shall cause the same to be discharged of record or bonded
within one hundred twenty (120) days after the filing of same. If Tenant shall
fail to discharge such mechanic's lien within such period, then, in addition to
any other right or remedy of Landlord, Landlord may discharge the same, either
by paying the amount claimed to be due, or by procuring the discharge of such
lien by deposit in court or bonding. Any amount paid by Landlord for any of the
aforesaid purposes, or for the satisfaction of any other lien not caused by
Landlord, with interest thereon at the rate hereinafter provided from the date
of payment, shall be paid by Tenant to Landlord immediately on demand as rent.
5.03 SIGNS. Tenant shall have the right to install signs upon the Premises,
subject to any applicable governmental law, ordinances, restrictive covenants,
regulations and other requirements. Tenant shall remove all such signs by the
termination of this Lease. Such installations and removals shall be made in such
manner as to avoid injury or defacement of the Improvements, and Tenant shall
repair any injury or defacement caused by such installation and/or removal.
Tenant shall not be obligated to remove any signs existing on the Premises as of
the Commencement Date.
VI.
6.01 CONDEMNATION.
(a) If the whole or any substantial part of the Premises should be taken for any
public or quasi-public use under governmental law, ordinance or regulation, by
right of eminent domain or by private purchase in lieu thereof, and the taking
would prevent or materially interfere with the use of the Premises for the
purpose for which they are being used, this Lease shall, at Tenant's option,
terminate and the Base Rental shall be abated during the unexpired portion of
this Lease, effective when the physical taking of said Premises shall occur.
(b) If part of the Premises shall be taken for any public or quasi-public use
under any governmental law, ordinance or regulation, by right of eminent domain
or by private purchase in lieu thereof, and this Lease is not terminated as
provided in clause (a) above, this Lease shall not terminate but the Base Rental
payable hereunder during the unexpired portion of this Lease shall be reduced
based on the percentage of the Premises that is not usable.
(c) In the event of any such taking or private purchase in lieu thereof,
Landlord and Tenant shall each be entitled to receive and retain such separate
awards and/or portion of lump sum awards as may be allocated to their respective
interests in any condemnation proceedings.
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6.02 CASUALTY.
(a) If the Improvements should be damaged or destroyed by fire, water, tornado,
hurricane, snowstorm or other casualty, Tenant shall give immediate written
notice thereof to Landlord.
(b) If the Improvements should be totally destroyed by fire, water, tornado,
hurricane, snowstorm or other casualty, or if they should be so damaged thereby
that restoration thereof cannot, in Landlord's reasonable judgment, be completed
within one hundred fifty (150) days after the date upon which Landlord is
notified by Tenant of such damage, this Lease shall, at Tenant's option,
terminate and the Base Rental shall be abated during the unexpired portion of
this Lease, effective upon the date of the occurrence of such damage.
(c) If the Improvements should be damaged by any casualty and this Lease is not
terminated by Tenant pursuant to the foregoing provisions of this Section 6.02,
Landlord shall at its sole cost and expense thereupon proceed with reasonable
diligence to rebuild and repair such Improvements to substantially the condition
in which they existed prior to such damage. Notwithstanding the previous
sentence, Landlord's obligation to restore, rebuild and repair any casualty
during the Term of this Lease shall be limited to the extent of the insurance
proceeds received by Landlord. Landlord shall be entitled to receive
disbursements of insurance proceeds received by Tenant in respect of the
insurance for improvements Tenant is required to maintain hereunder as
restoration progresses for the costs Landlord incurs in connection with such
restoration. If all or a part of the Premises are untenantable, Base Rental
shall be reduced based on the percentage of the Premises that is not usable. In
the event that Landlord should fail to complete such repairs and rebuilding
within one hundred eighty (180) days after the date upon which Landlord is
notified by Tenant of such damage, Tenant may at its option terminate this Lease
by delivering written notice of termination to Landlord as Tenant's exclusive
remedy, whereupon all rights and obligations hereunder shall cease and
terminate.
VII.
7.01 INSURANCE. Tenant agrees to maintain standard fire and extended coverage
insurance covering the Improvements in an amount not less than 100% of the
replacement costs thereof, insuring against the perils of fire, lightening and
other perils as now or hereafter may be included in "All Risk" insurance
coverage, such coverage and endorsements to be as defined, provided and limited
in the standard bureau forms prescribed by the insurance regulatory authority
for the state in which the Premises are situated for use by insurance companies
admitted in such state for the writing of such insurance on risks located within
such state.
Tenant shall obtain and keep in full force (i) a policy of commercial general
liability and property damage insurance (including, but not limited to,
automobile, personal injury, broad form contractual liability and broad form
property damage), with combined single limits of liability (on an occurrence
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basis) of not less than $1,000,000, and (ii) an "all risk" property policy
covering all of Tenant's personal property in, on or about the Premises,
containing an agreed amount endorsement in an amount not less than 100% of the
full replacement cost valuation, with proceeds of such policy to be used by
Tenant for the replacement of such personal property. Tenant shall be named as
the insured under the foregoing policies and Landlord and any mortgagees (whose
names shall have been furnished to Tenant) shall be named as additional
insureds.
All the insurance required to be maintained by Tenant under this Lease shall (i)
be issued by insurance companies authorized to do business in the state in which
the Premises are located, with a financial rating of at least A:XII for any
property insurance and A+ for any liability insurance as rated in the most
recent edition of Best's Insurance Reports, (ii) be issued as a primary policy,
and (iii) contain an endorsement requiring thirty (30) days' written notice from
the insurance company to both parties and to Landlord's lender, if any, before
cancellation or any material change in the coverage, scope, or amount of any
policy. A duplicate original policy, or certificate of the policy with the
actual policy attached shall be deposited with the other party on or before the
Commencement Date, and on the renewal of the policy a certificate of insurance
listing the insurance coverages required hereunder and naming Landlord, and any
mortgagee of Landlord (whose names have been furnished to Tenant), as
applicable, as additional insureds shall be deposited with the other party not
less than seven (7) days before expiration of the term of the policy.
7.02 HOLD HARMLESS.
(a) Tenant releases Landlord from all liability for any injury or damage to
person or property occurring in the Premises, and agrees to protect, defend,
indemnify and hold Landlord harmless from and against all liabilities, claims,
suits, actions and costs (including reasonable attorneys' fees and costs of
suit) arising out of or in connection with any such injury or caused by the
negligence or willful misconduct of Tenant, its partners, agents, servants,
employees or contractors.
(b) Landlord hereby agrees to protect, defend, indemnify and hold Tenant
harmless from and against all liabilities, claims, suits, actions and costs
(including reasonable attorneys' fees and costs of suit) arising out of or in
connection with any injury or damage to person or property occurring in the
Premises, to the extent that such injury or damage is caused by the negligence
or willful misconduct of Landlord, its partners, agents, servants, employees or
contractors.
7.03 WAIVER OF CLAIMS AND RECOVERY RIGHTS. Anything in this Lease to the
contrary notwithstanding, Landlord and Tenant each, on behalf of themselves and
their respective heirs, successors, legal representatives, assigns and insurers,
hereby (a) waives any and all rights of recovery, claims, actions or causes of
action against the other and its respective officers, directors, partners,
shareholders, agents, servants, employees, guests, licensees or invitees for any
loss or damage that may occur to the Premises or any personal property of such
party therein, by reason of fire, the elements, or any other cause which is
required to be insured against under the terms of the
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insurance policies referred to in Section 7.01 hereof, regardless of cause or
origin, including negligence of the other party hereto or its respective
officers, directors, partners, shareholders, agents, servants, employees,
guests, licensees or invitees, and (b) covenants that no insurer shall hold any
right of subrogation against such other party; provided, however, the waiver set
forth in this Section 7.03 shall not apply to any deductibles on insurance
policies carried by Landlord or Tenant or to any coinsurance penalty which
Landlord or Tenant might sustain. If the respective insurer of Landlord and
Tenant does not permit such a waiver without an appropriate endorsement to such
party's insurance policy, then Landlord and Tenant each shall notify its insurer
of the waiver set forth herein and to secure from such insurer an appropriate
endorsement to its respective insurance policy with respect to such waiver.
7.04 TAXES DEFINED.
(a) Tenant shall be responsible for all Taxes during the Term of the Lease.
"Taxes" means all taxes, assessments, use and occupancy taxes and other charges
by any public authority, including penalties levied for failure by Tenant to pay
any of same in a timely manner, which shall or may during the Term be assessed,
levied, charged, confirmed or imposed by any governmental authority upon the
Premises or any part thereof. "Taxes" shall not include any income tax, capital
levy, estate, succession, inheritance or transfer taxes, or similar tax of
Landlord; any franchise tax imposed upon any owner of the fee of the Premises;
or any income, profits, or revenue tax, assessment, or charge imposed upon the
rent or other benefit received by Landlord under this Lease by any municipality,
county, state, the United States of America, or any other governmental body.
(b) Tenant may, at its expense, contest the validity or amount of Taxes for
which it is responsible, in which event the payment thereof may be deferred, as
permitted by law, during the pendency of such contest, if diligently prosecuted.
Landlord shall cooperate with Tenant in connection with any such contest but
Landlord shall not be required to spend any sums or incur any liability in
cooperating with Tenant.
VIII.
8.01 DEFAULT BY TENANT. The occurrence of any one or more of the following
events shall constitute an "EVENT OF DEFAULT" under this Lease:
(a) Tenant shall fail to pay any sum of Base Rental when due, and such failure
shall continue for ten (10) days after written notice to Tenant;
(b) Tenant shall fail in the performance of any of the other covenants or
conditions under this Lease, and such failure shall continue for thirty (30)
days after written notice to Tenant or, if such failure cannot reasonably be
cured within said thirty (30) day period despite Tenant's diligent good
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faith efforts, the failure of Tenant to promptly commence its diligent good
faith efforts to cure such failure within said thirty (30) day period and to
thereafter diligently pursue such efforts; or
(c) the interest of Tenant under this Lease shall be levied on under execution
or other legal process; any petition shall be filed by or against Tenant to
declare Tenant a bankrupt or to delay, reduce or modify Tenant's debts or
obligations, or to reorganize or modify Tenant's capital structure; Tenant is
declared insolvent according to law; any assignment of Tenant's property shall
be made for the benefit of creditors; or a receiver or trustee is appointed for
Tenant or its property and such levy, execution, legal process, petition,
declaration, assignment or appointment is not removed or vacated within ninety
(90) days from the date of its creation, service or filing.
8.02 REMEDIES. Upon the occurrence of any Event of Default, at Landlord's
option, Landlord may (without further notice or grace) exercise any one or more
of the following remedies, in addition to all other rights and remedies provided
at law or in equity:
(a) Terminate this Lease and immediately repossess the Premises by forcible
entry and detainer suit or otherwise.
(b) Terminate Tenant's right of possession (but not this Lease) and immediately
repossess the Premises by forcible entry and detainer suit or otherwise, without
thereby releasing Tenant from any liability hereunder and without terminating
this Lease. After regaining possession of the Premises under this Section
8.02(b), Landlord shall use commercially reasonable efforts to relet the
Premises on such terms and conditions as Landlord in its sole, good faith
judgment deems acceptable, and if the Premises are so relet, Tenant shall
receive credit against the sums otherwise payable to Landlord hereunder only for
the amount of the rentals actually received by Landlord under such new lease.
8.03 NON-WAIVER. Failure of Landlord to declare any default immediately upon
occurrence thereof, or delay in taking any action in connection therewith, shall
not waive such default, but Landlord shall have the right to declare any such
default at any time and take such action as might be lawful or authorized
hereunder, either in law or in equity.
8.04 HOLDING OVER. If Tenant continues in occupancy of the Premises after
expiration or termination of this Lease without the written consent of Landlord,
Tenant shall pay as rent for the holdover period (pro rated on a daily basis)
125% of the Base Rental payable immediately prior to the expiration or
termination. No holding over by Tenant after the Term of this Lease without the
written consent of Landlord shall be construed to extend the term hereof. Any
holding over with the written consent of Landlord shall constitute this a
month-to-month tenancy, unless specifically stated otherwise in such consent.
The provisions of this paragraph shall survive the expiration or termination of
this Lease.
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IX.
9.01 ASSIGNMENT OR SUBLEASE BY TENANT.
(a) Tenant may assign this Lease or sublet the Premises or any part thereof to
an Affiliate of Tenant without the prior consent of Landlord; provided, however,
that Tenant shall promptly notify Landlord of any such assignment or subletting,
and with respect to any assignment of this Lease, shall deliver a written
assumption in favor of Landlord of the duties, obligations and liabilities of
Tenant hereunder by such Affiliate. "Affiliate" shall mean any corporation,
limited liability company, partnership, sole proprietorship or other entity
controlling, controlled by, or under common control with the Tenant. The term
"control" (including the terms "controlling," "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or the policies of an entity,
whether through the ownership of voting securities, by contract or otherwise.
(b) Except as provided in Section 9.01(a), Tenant shall not assign this Lease or
sublease all or any portion of the Premises without Landlord's prior written
consent in accordance with this Section 9.01(b) which consent shall not be
unreasonably withheld or delayed. Tenant shall give Landlord at least fifteen
(15) days advanced written notice of a proposed assignment or subletting to an
unaffiliated entity. Landlord shall then have a period of ten (10) days
following receipt of such notice within which to notify Tenant in writing
whether Landlord consents to the proposed assignment or subletting. Failure by
Landlord to respond to Tenant within such ten (10) day period shall be deemed to
be Landlord's approval of such assignment.
9.02 ASSIGNMENT BY LANDLORD. Landlord shall have the right to transfer and
assign its rights and obligations hereunder to any person or entity acquiring
ownership of the Premises, and in such event and upon such transfer no further
liability or obligation shall thereafter accrue against Landlord hereunder, but
Landlord will remain liable for any accrued and unpaid obligations to Tenant
that are not expressly assumed in writing by the successor Landlord.
X.
10.01 PEACEFUL ENJOYMENT. Landlord covenants that Tenant shall and may
peacefully have, hold and enjoy the Premises, subject to the other terms hereof,
provided that Tenant pays the rental and other sums herein recited to be paid by
Tenant and performs all of Tenant's covenants and agreements herein contained.
It is understood and agreed that this covenant shall be binding upon Landlord
only with respect to breaches occurring during its ownership of the Landlord's
interest hereunder.
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XI.
11.01 SUBORDINATION. Tenant covenants and agrees with Landlord that this Lease
shall be subject and subordinate in all respects to any mortgage or deed of
trust or any ground lease which now encumbers or may hereafter encumber the
Premises, and to any advances made on the security thereof and to any and all
increases, renewals, modifications, consolidations, replacements and extensions
thereof, provided that Landlord shall use reasonable efforts to cause the owner
of any such mortgage, deed of trust or ground lease to enter into a written
non-disturbance and attornment agreement with Tenant, in form and content
reasonably satisfactory to Tenant, providing that in the event of foreclosure or
other rights asserted under the applicable mortgage, deed of trust or ground
lease by the holder or any assignee thereof (a) this Lease and all of the rights
of Tenant hereunder shall continue in full force and effect and shall not be
terminated or disturbed except in accordance with the provisions of this Lease;
and (b) Tenant will automatically become the tenant of such ground lessor or
successor in interest without any change in the terms or other provisions of
this Lease. Landlord hereby represents and warrants that, except for the
mortgage more fully described on Exhibit B attached hereto and made apart
hereof, it owns the Premises in fee simple and that the Premises is not
presently subject to any mortgage, deed of trust or ground lease.
11.02 ESTOPPEL CERTIFICATE. Tenant agrees, at any time and from time to time,
upon not less than twenty (20) days prior written request by Landlord, to
execute, acknowledge and deliver to Landlord an estoppel certificate certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that it is in full force and effect as modified, and stating
the modifications), that there have been no defaults thereunder by Landlord or
Tenant (or if there have been defaults, setting forth the nature thereof), the
date to which the Rent and other charges have been paid in advance, if any, and
such other matters as are reasonably requested by Landlord, it being intended
that any such statement delivered pursuant to this section may be relied upon by
any prospective purchaser or lender on all or any portion of the Landlord's
interest herein, or a holder of any mortgage or deed of trust encumbering the
Premises. Tenant's failure to deliver such statement as provided herein shall
constitute an event of default (as that term is defined elsewhere in this
Lease).
11.03 DEFAULT BY LANDLORD. If Landlord shall default in the performance of any
of the terms, covenants, conditions, warranties or agreements of this Lease on
Landlord's part to be performed, and such default has a material adverse effect
on Tenant's use and enjoyment of the Premises, and if such default continues for
thirty (30) days after written notice to Landlord, and to any first lien
mortgagee or ground lessor of Landlord of which Tenant has notice (or, if such
failure cannot reasonably be cured within said thirty (30) day period despite
Landlord's or such mortgagee's or ground lessor's diligent good faith efforts,
the failure of Landlord or such mortgagee or ground lessor to promptly commence
its diligent good faith efforts to cure such failure within said thirty (30) day
period and to thereafter diligently pursue such efforts) Tenant may at its
option, in addition to all other remedies available at law or under this Lease:
(a) cure such default and invoice Landlord for the reasonable costs thereof, in
which event Tenant shall have the right to deduct from the rents
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payable hereunder the amount of any such invoice not paid by Landlord within ten
(10) days of its receipt thereof; (b) institute legal proceedings against
Landlord to recover the damages incurred by Tenant on account of such default
and/or to enjoin such default; or (c) terminate this Lease.
XII.
12.01 NOTICES.
(a) Any notice or other communications to Landlord or Tenant required or
permitted to be given under this Lease (and copies of the same to be given to
the parties as below described) must be in writing and shall be effectively
given if delivered to the addresses for Landlord and Tenant set forth below, or
if sent by United States mail, certified or registered, return receipt
requested, to said addresses:
The address for notices to Landlord is:
_______________________________________
_______________________________________
_______________________________________
Facsimile No. _________________________
The address for notices to Tenant is:
_______________________________________
_______________________________________
_______________________________________
Facsimile No. _________________________
(b) Any notice mailed shall be deemed to have been given on the second business
day following the date of deposit of such item in a depository of the United
States Postal Service. Notice effected other than by mail shall be deemed to
have been given at the time of actual delivery. Either party shall have the
right to change its address to which notices shall thereafter be sent by giving
the other written notice thereof.
12.02 ARBITRATION.
Except with respect to disputes involving parties other than the parties to this
Lease, no party to this Lease shall institute a proceeding in any court or
administrative agency to resolve a dispute arising under this Lease before that
party has sought to resolve the dispute through direct negotiation with the
other party, provided that nothing herein shall restrict the Landlord from
instituting a proceeding in any court or administrative agency with respect to a
failure by the Tenant to pay monetary
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<PAGE> 113
amounts where there is no non-monetary dispute involved. If the dispute is not
resolved within two weeks after a demand for direct negotiation, the parties
shall attempt to resolve the dispute through mediation. If the parties do not
promptly agree on a mediator, the parties shall request the Association of
Attorney Mediators (or equivalent organization) in the county where the Premises
is located to appoint a mediator. If the mediator is unable to facilitate a
settlement of the dispute within a reasonable period of time, as determined by
the mediator, the mediator shall issue a written statement to the parties to
that effect and any unresolved dispute or controversy arising under or in
connection with this Lease shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in _______________ [insert city in
which property is located], in accordance with the rules promulgated by the
American Arbitration Association then in effect. Each party shall choose one
arbitrator and those arbitrators shall agree upon the third arbitrator; if they
cannot agree upon a third arbitrator within 20 days, the American Arbitration
Association shall appoint the third arbitrator. A decision by a majority of the
arbitration panel shall be final and binding. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The costs and expenses,
including reasonable attorneys' fees, of the prevailing party in any dispute
arising under this Lease will be promptly paid by the other party or parties.
12.03 MISCELLANEOUS.
(a) This Lease shall be binding upon and inure to the benefit of the successors
and assigns of Landlord, and shall be binding upon and inure to the benefit of
Tenant, its successors, and, to the extent assignment may be approved by
Landlord hereunder, Tenant's assigns. The pronouns of any gender shall include
the other genders, and either the singular or the plural shall include the
other.
(b) All rights and remedies of Landlord under this Lease shall be cumulative and
none shall exclude any other rights or remedies allowed by law.
(c) This Lease may not be altered, changed or amended, except by an instrument
in writing executed by all parties hereto. The terms and provisions of all
Exhibits described herein and attached hereto are hereby made a part hereof for
all purposes. This Lease constitutes the entire agreement of the parties with
respect to the subject matter hereof, and all prior correspondence, memoranda,
agreements or understandings (written or oral) with respect hereto are merged
into and superseded by this Lease.
(d) If either party defaults in the performance of any of the terms, agreements
or conditions contained in this Lease and the other party places the enforcement
of this Lease, or any part thereof, or the collection of any rental due or to
become due hereunder, or recovery of the possession of the Premises, in the
hands of an attorney who files suit upon the same, and should such
non-defaulting party prevail in such suit, the defaulting party agrees to pay
the other party's reasonable legal fees.
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(e) If any term or provision of this Lease, or the application thereof to any
person or circumstance, shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby, and each provision of this Lease shall be valid and
shall be enforceable to the extent permitted by law.
(f) Landlord and Tenant hereby represent and warrant each to the other that they
have not employed any agents, brokers or other such parties in connection with
this Lease, and each agrees that they shall hold the other harmless from and
against any and all claims of all other agents, brokers or other such parties
claiming by, through or under the respective indemnifying party.
(g) This Lease may be executed and delivered in any number of counterparts, each
of which so executed and delivered shall be deemed to be an original and all of
which shall constitute one and the same instrument.
(h) This Lease shall be construed and enforced in accordance with the laws of
the state of which the Premises are located.
(i) If litigation is ever instituted by either party hereto to enforce, or to
seek damages for the breach of, any provision hereof, the prevailing party
therein shall be promptly reimbursed by the other party for all attorneys' fees
reasonably incurred by the prevailing party in connection with such litigation.
(j) It is the intention of Landlord and Tenant to hereby create the relationship
of landlord and tenant, and no other relationship whatsoever is hereby created.
Nothing in this Lease shall be construed to make Landlord and Tenant partners or
joint venturers or to render either party hereto liable for any obligation of
the other.
(k) As used herein "Force Majeure" means the occurrence of any event whereby
Landlord or Tenant shall be delayed or prevented from the performance of any act
required hereunder by reason of acts of God, strikes, lockouts, labor troubles,
failure or refusal of governmental authorities or agencies to timely issue
permits or approvals or conduct reviews or inspections, civil disorder,
restrictive governmental laws or regulations or other cause without fault and
beyond the control of the party obligated (financial inability excepted). If
Tenant or Landlord shall be delayed, hindered, or prevented from performance of
any of its obligations by reason of Force Majeure, the time for performance of
such obligation shall be extended for the period of such delay.
(l) Landlord and Tenant have fully negotiated the provisions of this Lease and,
notwithstanding any rule or principle of law to the contrary, no provision of
the Lease shall be construed in favor of or against either party by virtue of
the authorship or purported authorship thereof.
Page 16 of Annex VI
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IN TESTIMONY WHEREOF, the parties hereof have executed this Lease as of the date
first above written.
LANDLORD:
-----------------------------------------
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TENANT:
By:
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Name:
------------------------------------
Title:
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Page 17 of Annex VI
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EXHIBIT A
[TO COME]
Page 18 of Annex VI
<PAGE> 1
EXHIBIT 2.3
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ACQUISITION AGREEMENT
dated as of the 12th day of January, 1999
by and among
RV CENTERS, INC.
AMERICAN RV CENTERS, INC.
and all of
the STOCKHOLDERS of AMERICAN RV CENTERS, INC.
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TABLE OF CONTENTS
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RECITALS ...............................................................................................1
1. ACQUISITION OF STOCK...........................................................................5
1.1 Acquisition...........................................................................5
1.2 Consideration.........................................................................5
1.3 Certain Information With Respect to the Capital Stock
of the Company and RV Centers.........................................................5
2. DELIVERY OF CONSIDERATION......................................................................6
2.1 Stockholders' Consideration...........................................................6
2.2 Stockholders' Deliveries..............................................................6
3. CLOSING........................................................................................6
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.............................................7
4.1 Due Organization......................................................................7
4.2 Authorization.........................................................................7
4.3 Capital Stock of the Company..........................................................8
4.4 Transactions in Capital Stock; Organization Accounting................................8
4.5 No Bonus Shares.......................................................................8
4.6 Subsidiaries; Ownership in Other Entities.............................................8
4.7 Predecessor Status; etc...............................................................9
4.8 Spin-off by the Company...............................................................9
4.9 Financial Statements..................................................................9
4.10 Liabilities and Obligations..........................................................10
4.11 Accounts and Notes Receivable........................................................10
4.12 Permits and Intangibles..............................................................11
4.13 Environmental Matters................................................................11
4.14 Personal Property....................................................................13
4.15 Significant Customers and Suppliers;
Material Contracts and Commitments...................................................13
4.16 Real Property........................................................................14
4.17 Insurance............................................................................15
4.18 Compensation; Employment Agreements; Labor Matters...................................15
4.19 Employee Plans.......................................................................16
4.20 Compliance with ERISA................................................................16
4.21 Conformity with Law; Litigation......................................................18
4.22 Taxes................................................................................18
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4.23 No Violations; No Consent Required, Etc..............................................19
4.24 Government Contracts.................................................................20
4.25 Absence of Changes...................................................................20
4.26 Deposit Accounts; Powers of Attorney.................................................22
4.27 Validity of Obligations..............................................................22
4.28 Relations with Governments...........................................................22
4.29 Disclosure...........................................................................23
4.30 Prohibited Activities................................................................23
4.31 No Warranties or Insurance...........................................................23
4.32 Interest in Customers and Suppliers and Related Party Transactions...................24
4.33 Registration Statement...............................................................24
4.34 Inventory............................................................................24
4.35 Year 2000............................................................................24
4.36 Authority; Ownership.................................................................25
4.37 Preemptive Rights....................................................................25
5. REPRESENTATIONS OF RV CENTERS.................................................................25
5.1 Due Organization.....................................................................25
5.2 Authorization........................................................................25
5.3 Capital Stock of RV Centers..........................................................26
5.4 Transactions in Capital Stock; Organization Accounting...............................26
5.5 Subsidiaries.........................................................................26
5.6 No Violations........................................................................26
5.7 Validity of Obligations..............................................................27
5.8 RV Centers Stock.....................................................................27
5.9 Business; Real Property; Material Agreements.........................................28
5.10 Investment Representations...........................................................28
5.11 Authorization of Other Agreements....................................................28
5.12 Financial Statements.................................................................28
5.13 Liabilities and Obligations..........................................................29
5.14 Conformity with Law; Litigation......................................................29
5.15 No Side Agreements...................................................................29
5.16 Relations with Governments...........................................................29
5.17 Other Agreements.....................................................................29
5.18 Registration Statement...............................................................30
5.19 Disclosure...........................................................................30
6. COVENANTS PRIOR TO CLOSING....................................................................30
6.1 Access and Cooperation; Due Diligence................................................30
6.2 Conduct of Business Pending Closing..................................................31
6.3 Prohibited Activities................................................................32
6.4 No Shop..............................................................................33
6.5 Agreements...........................................................................34
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6.6 Notification of Certain Matters......................................................34
6.7 Amendment of Schedules...............................................................34
6.8 Cooperation in Preparation of Registration Statement.................................35
6.9 Final Financial Statements...........................................................36
6.10 Further Assurances...................................................................36
6.11 Compliance with the Hart-Scott Act...................................................36
6.12 Transfers of Permits and Intangibles.................................................36
6.13 Dividends............................................................................36
6.14 Authorized Capital...................................................................36
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY.......................................................................................37
7.1 Representations and Warranties; Performance of Obligations...........................37
7.2 No Litigation........................................................................38
7.3 Opinions.............................................................................38
7.4 Registration Statement; Minimum Value................................................38
7.5 Consents and Approvals...............................................................38
7.6 Good Standing Certificates...........................................................38
7.7 No Material Adverse Change...........................................................38
7.8 Closing of IPO.......................................................................39
7.9 Secretary's Certificate..............................................................39
7.10 Employment Agreements................................................................39
7.11 Other Founding Companies.............................................................39
7.12 Management Lock-Up Agreements........................................................39
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RV CENTERS.............................................39
8.1 Representations and Warranties; Performance of Obligations...........................40
8.2 No Litigation........................................................................40
8.3 Secretary's Certificate..............................................................40
8.4 No Material Adverse Effect...........................................................40
8.5 Stockholders' Release................................................................40
8.6 Termination of Related Party Agreements..............................................41
8.7 Opinion of Counsel...................................................................41
8.8 Consents and Approvals...............................................................41
8.9 Good Standing Certificates...........................................................41
8.10 Registration Statement...............................................................41
8.11 Employment Agreements................................................................41
8.12 Closing of IPO.......................................................................41
8.13 FIRPTA Certificate...................................................................41
8.14 Resignations of Directors............................................................42
8.15 Lease Agreements.....................................................................42
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9. COVENANTS OF RV CENTERS AND THE STOCKHOLDERS AFTER CLOSING
42
9.1 Preservation of Tax and Accounting Treatment.........................................42
9.2 Preparation and Filing of Tax Returns................................................42
9.3 Directors............................................................................43
9.4 Release From Guarantees; Repayment of Certain Obligations............................43
9.5 Access to Records....................................................................44
10. INDEMNIFICATION...............................................................................44
10.1 Indemnification by the Stockholders..................................................44
10.2 Indemnification by RV Centers........................................................45
10.3 Third Person Claims..................................................................46
10.4 Exclusive Remedy.....................................................................47
10.5 Limitations on Indemnification.......................................................47
10.6 Tax Indemnification by the Stockholders..............................................48
11. TERMINATION OF AGREEMENT......................................................................49
11.1 Termination..........................................................................49
11.2 Liabilities in Event of Termination..................................................49
11.3 Return of Stock Certificates.........................................................49
12. NONCOMPETITION................................................................................50
12.1 Prohibited Activities................................................................50
12.2 Damages..............................................................................51
12.3 Reasonable Restraint.................................................................51
12.4 Severability; Reformation............................................................51
12.5 Independent Covenant.................................................................51
12.6 Materiality..........................................................................51
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.....................................................52
13.1 Stockholders.........................................................................52
13.2 RV Centers...........................................................................52
13.3 Damages..............................................................................53
13.4 Survival.............................................................................53
14. TRANSFER RESTRICTIONS.........................................................................53
14.1 Transfer Restrictions................................................................53
15. FEDERAL SECURITIES ACT REPRESENTATIONS........................................................54
15.1 Compliance with Law..................................................................54
15.2 Economic Risk; Sophistication........................................................55
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16. REGISTRATION RIGHTS...........................................................................55
16.1 Piggyback Registration Rights........................................................55
16.2 Registration Procedures..............................................................56
16.3 Indemnification......................................................................57
16.4 Underwriting Agreement...............................................................58
16.5 Rule 144 Reporting...................................................................58
16.6 Availability of Rule 144.............................................................59
17. GENERAL.......................................................................................59
17.1 Cooperation..........................................................................59
17.2 Successors and Assigns...............................................................59
17.3 Entire Agreement.....................................................................59
17.4 Counterparts.........................................................................59
17.5 Brokers and Agents...................................................................60
17.6 Expenses.............................................................................60
17.7 Notices..............................................................................60
17.8 Governing Law........................................................................62
17.9 Exercise of Rights and Remedies......................................................62
17.10 Time.................................................................................62
17.11 Reformation and Severability.........................................................62
17.12 Remedies Cumulative..................................................................62
17.13 Captions.............................................................................62
17.14 Amendments and Waivers...............................................................62
17.15 Dispute Resolution...................................................................62
17.16 References, Gender, Number...........................................................63
17.17 Sole Stockholder.....................................................................63
17.18 Schedules and Annexes................................................................63
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ANNEXES
Annex I - Consideration to Be Paid to Stockholders
Annex II - Certificate of Incorporation and By-Laws of RV Centers
Annex III - Form of Opinion of Counsel to RV Centers
Annex IV - Form of Opinion of Counsel to Company and Stockholders
SCHEDULES
4.1 Due Organization
4.2 Authorization
4.3 Capital Stock of the Company
4.4 Transactions in Capital Stock; Organization Accounting
4.5 No Bonus Shares
4.6 Subsidiaries; Ownership in Other Entities
4.7 Predecessor Status; etc
4.8 Spin-off by the Company
4.9 Financial Statements
4.10(a) Liabilities and Obligations
4.10(b) Trade Account Payables etc. and Copies of Loan Agreements
4.11 Accounts and Notes Receivable
4.12 Permits and Intangibles
4.13 Environmental Matters
4.14 Personal Property
4.15(a) Significant Customers and Suppliers
4.15(b) Material Contracts and Commitments
4.16 Real Property
4.17 Insurance
4.18 Compensation; Employment Agreements; Labor Matters
4.19 Employee Plans
4.20 Compliance with ERISA
4.21 Conformity with Law; Litigation
4.22 Taxes
4.23(a) Defaults
4.23(b) Violations or Defaults Arising From This Agreement
4.23(c) Notices Required By Material Documents
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4.23(e) Restrictions Imposed By Material Documents
4.24 Government Contracts
4.25 Absence of Changes
4.26 Deposit Accounts; Powers of Attorney
4.30 Prohibited Activities
4.31 No Warranties or Insurance
4.32 Interest in Customers and Suppliers and Related Party Transactions
4.34 Inventory in Interim Financial Statements
5.2 Authorization
5.3 Authorized Capital Stock of RV Centers
5.17 Unique Terms in Other Agreements
6.2 Conduct of Business Pending Closing
6.3 Prohibited Activities
6.5 Agreements
8.6 Termination of Related Party Agreements
8.11 Employment Agreements
9.4 Release From Guarantees; Repayment of Certain Obligations
12.1 Prohibited Activities
15.2 Non-accredited Investors
17.5 Brokers and Agents
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 12th day
of January, 1999, by and among RV Centers, Inc., a Delaware corporation ("RV
Centers"), American RV Centers, Inc., a Tennessee corporation (the "Company")
and the stockholders listed on the signature pages of this Agreement (the
"Stockholders"), who are all the stockholders of the Company.
RECITALS
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Consummation Date the Stockholders will own, all of the issued and outstanding
capital stock of the Company (the "Company Stock");
WHEREAS, RV Centers is entering into other separate agreements
substantially similar to this Agreement (the "Other Agreements") with each of
the Other Founding Companies (as defined herein) and their respective
stockholders in order to acquire additional recreational vehicle dealership
companies;
WHEREAS, this Agreement and the Other Agreements constitute the "RV
Centers Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of RV Centers and each of the Other Founding Companies that are
parties to the Other Agreements have approved and adopted the RV Centers Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the Other Founding Companies (as defined herein) will
transfer the capital stock of each of the Founding Companies to RV Centers and
the stockholders of each of the Founding Companies will acquire shares of RV
Centers Stock (as defined herein);
WHEREAS, it is the intent of the parties that the transfer to RV
Centers of stock of the Company by the Stockholders in consideration for stock
of RV Centers qualify as a tax-free transfer of property under Section 351 of
the Code (as hereinafter defined);
WHEREAS, the Board of Directors of the Company has approved this
Agreement as part of the RV Centers Plan of Organization in order to transfer
the capital stock of the Company to RV Centers;
WHEREAS, unless the context otherwise requires, capitalized terms used
in this Agreement or in any schedule attached hereto and not otherwise defined
shall have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
<PAGE> 10
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the Company, any Subsidiary of the Company and
any member of a Relevant Group.
"Additional Consideration" means that additional consideration, if any,
payable to the Stockholder pursuant to the provisions of Part B of Annex I to
this Agreement.
"Affiliate" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"Balance Sheet Date" means June 30, 1998.
"Charter" means the certificate of incorporation or articles of
incorporation of the Company, as the case may be.
"Charter Documents" has the meaning set forth in Section 4.1.
"Closing" has the meaning set forth in Section 3.
"Closing Date" has the meaning set forth in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the first recital of this
Agreement.
"Consummation Date" has the meaning set forth in Section 3.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Draft Registration Statement" means the draft of the Registration
Statement as included in the Private Placement Memorandum for RV Centers dated
January 5, 1999, and any corrections thereto and supplemental information
delivered by RV Centers to the Company for delivery to the Stockholders prior to
the time this Agreement is delivered by the Stockholders to RV Centers.
"Effective Time" means the effective time of the consummation of the
purchase and sale of the Company Stock, which shall occur on the Consummation
Date.
"Environmental Law" has the meaning set forth in Section 4.13(c).
"Expiration Date" has the meaning set forth in Section 4(A).
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"Founding Companies" means: Ace Fogdall, Inc., an Iowa corporation,
American RV Centers, Inc., a Tennessee corporation, American RV Centers, Inc., a
Mississippi corporation, Casey Motors, Inc., a Colorado corporation, County Line
Select Cars, Inc., a Florida corporation, Dusty's Camper World of Bartow, Inc.,
a Florida corporation, Emerald Coast RV Center, Inc., a Florida corporation,
Hall Enterprises, Inc., a Kentucky corporation, Little Valley Auto & RV Sales,
Inc., a West Virginia corporation, Growth Ventures, Inc., a Texas corporation,
RVs Northwest, Inc., a Washington corporation, Saddleback Recreational Vehicles,
Inc., a California corporation, Scott Motor Coach Sales, Inc., a New Jersey
corporation, Stoltzfus Trailer Sales, Inc., a Pennsylvania corporation, Roy B.
Padgett d/b/a Young's RV Center, a sole proprietorship operating in California.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 4.13(d).
"Information Technology" has the meaning set forth in section 4.35.
"IPO" means the initial public offering of RV Centers Stock pursuant to
the Registration Statement.
"known," "knowledge" or "best knowledge," when used in reference to a
statement regarding the existence or absence of facts in this Agreement, is
intended by the parties to mean that the only information to be attributed to
such person is information actually known to (a) the person in the case of an
individual or (b) in the case of a corporation or other entity, an officer,
director or member. With respect to the "knowledge" of the Stockholders who are
officers, directors, employees, consultants or agents of the Company, such term
is also intended to mean that such Stockholder has made inquiry of the officers
and directors of the Company and its Affiliates, and with respect to the
representations made in Section 4.13, the Company's management.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its Subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 4.23(a).
"Minimum Value" has the meaning set forth in Annex I.
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"Other Agreements" has the meaning set forth in the second recital of
this Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Person" means an individual, partnership, joint venture, corporation,
limited liability company, bank, trust, unincorporated organization or other
entity.
"Plans" has the meaning set forth in Section 4.19.
"Pricing" means the date of determination by RV Centers and the
Underwriters of the public offering price of the shares of RV Centers Stock in
the IPO.
"Qualified Plans" has the meaning set forth in Section 4.20.
"RV Centers" has the meaning set forth in the first paragraph of this
Agreement.
"RV Centers Charter Documents" has the meaning set forth in Section
5.1.
"RV Centers Documents" has the meaning set forth in Section 5.6.
"RV Centers Plan of Organization" has the meaning set forth in the
fourth recital of this Agreement.
"RV Centers Stock" means the common stock, par value $.01 per share, of
RV Centers.
"Registration Statement" means that certain registration statement on
Form S-1 to be filed with the SEC covering the shares of RV Centers Stock to be
issued in the IPO, including the prospectus and all amendments and supplements
thereto.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto (as amended or
supplemented pursuant to Section 6.7), which shall reference the relevant
sections of this Agreement, on which parties hereto disclose information as part
of their respective representations, warranties and covenants.
"SEC" means the United States Securities and Exchange Commission.
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<PAGE> 13
"State of Incorporation" means, as it relates to a referenced
corporation, the state of incorporation for such corporation.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiaries" means with respect to a Person, any corporation or other
entity in which such Person owns a 50% or greater ownership interest.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, payroll, excise, property, deed, stamp,
alternative or add-on minimum, or other taxes, assessments, duties, fees, levies
or other governmental charges, whether disputed or not, together with any
interest, penalties, additions to tax or additional amounts with respect
thereto.
"Underwriters" means the prospective underwriters identified in the
Draft Registration Statement and any additional or substitute underwriter
appointed by RV Centers as identified in writing to the Stockholders.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. ACQUISITION OF STOCK
1.1 ACQUISITION. Upon the terms and subject to the conditions contained
in this Agreement and in reliance upon the representations, warranties,
covenants and agreements contained in this Agreement, on the Consummation Date,
the Stockholders shall transfer to RV Centers and RV Centers shall acquire from
the Stockholders, all of the issued and outstanding shares of capital stock of
the Company as set forth in Annex I hereto.
1.2 CONSIDERATION. The consideration for the Company Stock shall be as
set forth on Annex I to this Agreement.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND RV CENTERS. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of the
Company and RV Centers as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding capital stock of the Company is as set forth on Schedule
4.3 hereto; and
(ii) immediately prior to the Closing Date and the
Consummation Date, the authorized capital stock of RV Centers will
consist of 20,000,000 shares of RV Centers
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<PAGE> 14
Stock, of which the number of issued and outstanding shares will be set
forth in the Registration Statement, and 5,000,000 shares of preferred
stock, $.01 par value, of which no shares will be issued and
outstanding, all of which will be issued and outstanding except as
otherwise set forth in the Registration Statement.
2. DELIVERY OF CONSIDERATION
2.1 STOCKHOLDERS' CONSIDERATION. On the Consummation Date, the
Stockholders, who are now and on the Consummation Date will be, the holders of
all of the outstanding capital stock of the Company, shall, upon surrender of
certificates evidencing that capital stock, receive from RV Centers the
respective number of shares of RV Centers Stock and the amount of cash described
on Part A to Annex I hereto, which shall be payable by certified check or wire
transfer. The number of shares of RV Centers Stock in Annex I has been adjusted
for the stock split provided for in the Draft Registration Statement and will
not be adjusted upon the occurrence of such split.
2.2 STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
3. CLOSING
At or prior to the Pricing and subject to the satisfaction or waiver of
the conditions in Sections 7 and 8, the parties shall take all actions necessary
to effect the delivery of shares referred to in Section 2 hereof; provided, that
such actions shall not include the actual completion of the purchase and sale of
the Company Stock or the delivery of the RV Centers Stock and cash referred to
in Section 2 hereof, each of which actions shall only be taken upon the
Consummation Date as herein provided. The delivery of the Company Stock, which
shall occur at or prior to the Pricing (the "Closing"), shall take place on the
closing date (the "Closing Date") at the offices of Andrews & Kurth L.L.P, 600
Travis, Suite 4200, Houston, Texas 77002. All Company Stock shall be delivered
at the Closing to Andrews & Kurth L.L.P., to be held in trust for the
Stockholders until the Consummation Date, and shall be returned immediately to
the Stockholders upon any termination of this Agreement prior to the
Consummation Date. Within 20 days after the Pricing (x) all transactions
contemplated by this Agreement, including the delivery of shares and cash which
the Stockholders are entitled to receive pursuant to Part A of Annex I hereof,
shall be completed, and (y) the closing with respect to the IPO shall occur and
be completed. The date on which the actions described in the preceding clauses
(x) and (y) occur shall be referred to as the "Consummation Date." During the
period from the Closing Date to the Consummation Date, this Agreement may only
be terminated by the Company if the underwriting agreement in respect of the IPO
is terminated pursuant to the terms of such underwriting agreement. This
Agreement shall in any event terminate
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<PAGE> 15
if the Consummation Date does not occur within 20 days of the Pricing or the
Closing Date, whichever occurs first. Time is of the essence with respect to the
performance hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
(A) Representations and Warranties of the Stockholders.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, each of the Stockholders, jointly and
severally, represents and warrants that all of the following representations and
warranties in this Section 4(A) are true at the date of this Agreement, and that
such representations and warranties shall survive the Consummation Date until
June 30, 2000 (the "Expiration Date"), except that the warranties and
representations set forth in Sections 4.3 and 4.22 hereof shall survive until
such time as the applicable limitations period has run, which shall be deemed to
be the Expiration Date for Sections 4.3 and 4.22. For purposes of this Section
4, the term "Company" shall mean and refer to the Company and all of its
Subsidiaries, if any.
4.1 DUE ORGANIZATION. The Company is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the State
of Incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified or
authorized to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or authorization necessary except where the failure to be so
qualified or authorized would not have a Material Adverse Effect on the Company.
Schedule 4.1 sets forth a list of all states in which the Company is authorized
or qualified to do business. True, complete and correct copies of (i) the
Charter and By-laws, each as amended, of the Company (the "Charter Documents"),
and (ii) the stock records of the Company, are all attached to Schedule 4.1. The
Company has delivered to RV Centers complete and correct copies of all minutes
of meetings, written consents and other evidence, if any, of deliberations of or
actions taken by the Company's Board of Directors, any committees of the Board
of Directors and stockholders during the last three years.
4.2 AUTHORIZATION. (i) The officers or other representatives of the
Company executing this Agreement have the authority to enter into and bind the
Company to the terms of this Agreement and (ii) the Company has the full legal
right, power and authority to enter into this Agreement and consummate the
transactions contemplated herein. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions adopted
by the Stockholders, which approve this Agreement and the transactions
contemplated herein in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 4.2.
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4.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company is as set forth on Schedule 4.3. All of the issued and outstanding
shares of the capital stock of the Company are owned by the Stockholders in the
amounts set forth in Schedule 4.3, other than any treasury shares listed on
Schedule 4.3. Each Stockholder, severally, represents and warrants that except
as set forth on Schedule 4.3, the shares of capital stock of the Company owned
by such Stockholder are owned free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the issued and outstanding shares of the capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by the Stockholders and
further, such shares were offered, issued, sold and delivered by the Company in
compliance with all applicable state and Federal laws concerning the issuance of
securities. Further, none of such shares were issued in violation of any
preemptive rights of any past or present stockholder.
4.4 TRANSACTIONS IN CAPITAL STOCK; ORGANIZATION ACCOUNTING. Except as
set forth on Schedule 4.4, the Company has not acquired or redeemed any Company
Stock since January 1, 1995. Except as set forth on Schedule 4.4, (i) no option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Company to issue any of its authorized but unissued capital stock; (ii) the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof; and (iii) neither
the voting stock structure of the Company nor the relative ownership of shares
among any of its respective Stockholders has been altered or changed in
contemplation of the transactions contemplated herein and/or the RV Centers Plan
of Organization. There are no voting trusts, proxies or other agreements or
understandings to which the Company or any of the Stockholders is a party or is
bound with respect to the voting of any shares of capital stock of the Company.
Schedule 4.4 also includes complete and accurate copies of all stock option or
stock purchase plans, including a list of all outstanding options, warrants or
other rights to acquire shares of the Company's stock and the material terms of
such outstanding options, warrants or other rights.
4.5 NO BONUS SHARES. Except as set forth on Schedule 4.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the RV Centers Plan of Organization.
4.6 SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set forth on
Schedule 4.6, the Company has no Subsidiaries. Except as set forth in Schedule
4.6, the Company does not presently own, of record or beneficially, or control,
directly or indirectly, any capital stock, securities convertible into capital
stock or any other equity interest in any corporation, association or business
entity nor is the Company, directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity.
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4.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 4.7 is a listing of
all predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger or otherwise) or owned by the
Company or from whom the Company previously acquired assets which are material
to the Company, in any case, from the earliest date upon which any Stockholder
acquired his or her stock in any Company. Except as disclosed on Schedule 4.7,
the Company has not been, within such period of time, a subsidiary or division
of another corporation or a part of an acquisition which was later rescinded,
nor, within such period of time, has the Company had any substantial operations
that have been discontinued or any operating plants or facilities that have been
discontinued, sold or spun off.
4.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 4.8, there
has not been any sale, spin-off or split-up of material assets of the Company
since January 1, 1995.
4.9 FINANCIAL STATEMENTS. Copies of the following financial statements
are attached hereto as Schedule 4.9:
(i) the combined balance sheets of the Company and American RV
Centers, Inc., a Mississippi corporation (the "Mississippi Store") as
of December 31, 1996 and 1997 and the related statements of operations,
stockholder's equity and cash flows for the two-year period ended
December 31, 1997, together with the related notes and schedules (such
balance sheets, the related statements of operations, stockholder's
equity and cash flows and the related notes and schedules are referred
to herein as the "Year-end Financial Statements"); and
(ii) the balance sheet of the Company and the Mississippi
Store as of the Balance Sheet Date and the related statements of
operations, stockholder's equity and cash flows for the six-month
period ended June 30, 1998 and on the Balance Sheet Date, together with
the related notes and schedules (such balance sheets, the related
statements of operations, stockholder's equity and cash flows and the
related notes and schedules are referred to herein as the "Interim
Financial Statements").
The Year-end Financial Statements and the Interim
Financial Statements are collectively referred to herein as the
"Financial Statements". The Financial Statements have been, and the
financial statements to be delivered pursuant to Section 6.9 will be,
prepared in accordance with GAAP applied on a consistent basis and
fairly present in all material respects the financial position of the
Company and the Mississippi Store as of the dates thereof and the
results of its operations and changes in financial position for the
periods then ended. The Company's books of account have been kept
accurately in all material respects, the transactions entered therein
represent bona fide transactions, and the revenues, expenses, assets
and liabilities of the Company have been properly recorded in such
books in all material respects.
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4.10 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule
4.10(a), as of the Balance Sheet Date, the Company has no liabilities or
obligations of any kind, character or description, whether accrued, absolute,
secured or unsecured, contingent or otherwise, which are not reflected in the
Company Interim Financial Statements at the Balance Sheet Date. In addition,
except as set forth on Schedule 4.10(a), since the Balance Sheet Date, the
Company has not incurred any material liabilities or obligations of any kind,
character or description whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business and consistent with past operating practices. For each contingent
liability or other liability for which the amount is not fixed or is contested,
the Company has included on Schedule 4.10(a) the following information:
(i) a summary description of the liability together with the
following:
(A) copies of the principal documentation in the
possession of the Company or its directors, officers,
management, stockholders or key employees relating
thereto;
(B) amounts claimed and any other action or relief
sought; and
(C) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending; and
(iii) the date such claim, suit or proceeding was instituted.
Schedule 4.10(b) sets forth an accurate list of all trade
accounts payable, accrued liabilities, indebtedness and other liabilities of the
Company as reflected in the Company Interim Financial Statements as of the
Balance Sheet Date. Schedule 4.10(b) also includes copies of all loan
agreements, floor plan financing agreements, warranty, indemnity or guarantee
agreements, bonds, mortgages, pledges or other security agreements to which the
Company is a party or by which its properties may be bound.
4.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 4.11 sets forth an
accurate list of the accounts and notes receivable of the Company, as of the
Balance Sheet Date, including any such amounts which are not reflected in the
balance sheet as of the Balance Sheet Date, and including all receivables from
and advances to employees and the Stockholders, which are identified as such.
Schedule 4.11 also sets forth an accurate aging of all accounts and notes
receivable as of the Balance Sheet Date showing amounts due in 30-day aging
categories. Except to the extent reflected on Schedule 4.11, such accounts,
notes and other receivables arose in connection with bona fide transactions, the
reserves reflected in the balance sheet as of the Balance Sheet Date are
adequate and such accounts, notes and other receivables are, subject to the
stated reserves, collectible.
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4.12 PERMITS AND INTANGIBLES. The Company holds all licenses,
franchises, permits and other governmental authorizations ("Licenses") necessary
to conduct the business of the Company, and the Company has delivered to RV
Centers a list that is accurate and a summary description (which is set forth on
Schedule 4.12) of all such Licenses, including any trademarks, trade names,
patents, patent applications and copyrights owned or held by the Company or any
of its employees (including interests in software or other technology systems,
programs and intellectual property) the absence of which would have a Material
Adverse Effect on the Company. Except as set forth on Schedule 4.12, the
Licenses and other rights listed on Schedule 4.12 are valid, held by the Company
and the Company has not received any notice that any Person intends to cancel,
terminate or not renew any such License or other right. Except as set forth on
Schedule 4.12, the Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the Licenses and other rights listed on Schedule 4.12 and is not in violation
of any of the foregoing. Except as specifically provided in Schedule 4.12, the
consummation by the Company of the transactions contemplated in this Agreement
will not result in a default under or a breach or violation of, or adversely
affect the rights and benefits afforded to the Company by, any such Licenses or
other rights.
4.13 ENVIRONMENTAL MATTERS. (a) Except as specifically set forth in
Schedule 4.13 attached hereto, (i) the Company has conducted and is conducting
its businesses in compliance with all applicable Environmental Laws, including,
without limitation, having all environmental permits, licenses and other
approvals and authorizations required by Environmental Laws for the operation of
its business as presently conducted, (ii) none of the properties now or
previously owned or occupied by the Company contain any Hazardous Substance, the
existence of which imposes a requirement under Environmental Laws to remove,
remediate, reduce the levels of Hazardous Substances to levels below regulatory
action levels, or otherwise perform any response, corrective or preventive
measure or pay for any environmental response costs ("Environmental Response
Measures"), (iii) the Company has not received any written notices, demand
letters or requests for information from any Federal, state, local or foreign
governmental entity or third party indicating that the Company may be in
violation of, or liable for any Environmental Response Measures under, any
Environmental Law in connection with the ownership or operation of its business,
and has no reason to believe that any such written documentation may be
forthcoming, (iv) there have been and are no civil, criminal or administrative
actions, suits, demands, claims, hearings, consent orders, investigations or
proceedings pending or, to the knowledge of the Stockholders, threatened,
against the Company relating to any Environmental Law, (v) no reports have been
filed, or are required to be filed, by the Company concerning the release of any
Hazardous Substance or the threatened or actual violation of any Environmental
Law, (vi) no Hazardous Substance has been disposed of, released or transported
in violation of any applicable Environmental Law from any properties owned,
leased or operated by the Company as a result of any activity of the Company
during the time such properties were owned, leased or operated by the Company,
(vii) there have been and are no environmental investigations, studies, audits,
tests, reviews or other analyses regarding compliance or non-compliance with any
applicable Environmental Law conducted by or which are in the possession of the
Company relating to the activities of the Company prior to the date hereof,
(viii) there are no underground storage tanks on, in or under any properties
owned by the Company,
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there were no underground storage tanks owned or used by the Company on
properties formerly owned, leased or operated by the Company, and no underground
storage tanks have been closed or removed from any of such properties during the
time such properties were owned, leased or operated by the Company, (ix) there
is no asbestos or asbestos-containing material present in any of the properties
owned, leased or operated by the Company that is required to be removed or
otherwise abated under Environmental Laws, and no asbestos was removed from any
properties now or formerly owned, leased or operated during the time such
properties were owned, leased or operated by the Company, except in compliance
with Environmental Laws, (x) neither the Company nor any of its respective
properties are subject to any liabilities or expenditures (fixed or contingent)
relating to any suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any Environmental Law,
(xi) there are no environmental liabilities at sites not owned, operated or
leased by the Company, for which the Company could, in whole or in part, be
liable, and (xii) the Company has not been a contractee under any tolling
agreement, processing agreement or netback agreement with a third party.
(b) With respect to any past direct or indirect Subsidiaries or
Affiliates of the Company, the representations contained in Section 4.13(a)
shall apply to the assets and activities conducted by such entity while owned,
directly or indirectly, by the Company or affiliated therewith to the extent
that a failure of such representations to be true and correct could subject the
Company to liability.
(c) As used herein, "Environmental Law" means any federal, state, or
local, statute, ordinance, rule, regulation, code, license, permit,
authorization, order, judgment, decree, injunction, restriction or agreement
with any governmental entity, relating to (x) the protection, preservation or
restoration of the environment or to human health or safety or (y) the exposure
to, or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as in effect on the Closing Date. The
term Environmental Law includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Toxic Substances Control Act,
the Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970, and similar law, regulation or requirement of any
governmental authority or agency having jurisdiction over the Company or its
property, each as amended and as in effect on the Closing Date, and (ii) any
common law or equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
(d) As used herein, "Hazardous Substance" means any substance regulated
under any Environmental Law or the exposure to which is regulated by any
Environmental Law, and shall include, without limitation, any industrial
substance, petroleum or any derivative or by-product thereof, radon, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead, fibers or
polychlorinated biphenyls.
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4.14 PERSONAL PROPERTY. Schedule 4.14 sets forth an accurate list of
(x) all personal property material to the operations of the Company included in
"plant, property and equipment" on the balance sheet of the Company, (y) all
other personal property owned by the Company with an individual net book value
in excess of $5,000 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date and (z) all material leases and agreements in respect of
personal property, including, in the case of each of (x), (y) and (z), (1) true,
complete and correct copies of all such leases and agreements and (2) an
indication as to which assets are currently owned, or were formerly owned, by
Stockholders, relatives of Stockholders, or Affiliates of the Company. Except as
set forth on Schedule 4.14, (i) all personal property material to, and used by,
the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 4.14, (ii) all of the personal
property listed on Schedule 4.14 or replacement property thereof is in working
order and condition, ordinary wear and tear excepted and (iii) all leases and
agreements included on Schedule 4.14 are in full force and effect and constitute
valid and binding agreements of the Company and (to the knowledge of the
Stockholders) the other parties thereto (or their successors) in accordance with
their respective terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium, liquidation or
other similar laws and equity principles relating to creditors' rights
generally. For the purposes of this Section 4.14, "personal property" shall be
deemed to exclude personal property addressed by Sections 4.11 and 4.12 and
inventory of the Company.
4.15 SIGNIFICANT CUSTOMERS AND SUPPLIERS; MATERIAL CONTRACTS AND
COMMITMENTS
(a) Schedule 4.15(a) sets forth an accurate list of (i) all customers
(persons or entities) representing 5% or more of the Company's annual revenues
for fiscal year 1997, showing the approximate total sales to each such customer,
and (ii) all suppliers (persons or entities) representing 5% or more of the
Company's annual purchases of supplies for fiscal year 1997, showing the
approximate total purchases of supplies from each such supplier. Except to the
extent set forth on Schedule 4.15(a), none of such customers or suppliers has
canceled or substantially reduced or is currently attempting or threatening to
cancel a contract or substantially reduce utilization of the services provided
by the Company.
(b) The Company has listed on Schedule 4.15(b) all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties is bound (including, but not limited to, contracts
with significant customers or suppliers, joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land), other than agreements listed on Schedules 4.10, 4.14
or 4.16, (i) in existence as of the Balance Sheet Date and (ii) entered into
since the Balance Sheet Date, and in each case has delivered true, complete and
correct copies of such agreements to RV Centers. Except as set forth on Schedule
4.15(b), the Company has complied with all commitments and obligations
pertaining to it and is not in default in any material respect under any
contracts or agreements listed on Schedules 4.10, 4.14, 4.15(b) or 4.16 and has
not received notice of a default under any such contract or agreement. Where
required prior to the execution of this Agreement under such contracts or
agreements, the Company has furnished notice of the Agreement to third parties
and has, where
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<PAGE> 22
required prior to the execution of this Agreement, obtained consent from third
parties to enter into the transactions contemplated in this Agreement. The
Company has also indicated on Schedule 4.15(b) a list of all plans or projects
involving the opening of new operations, expansion of existing operations, or
the acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the Company.
(c) Except as set forth on Schedule 4.15(b), since January 1, 1997, the
Company has not experienced any difficulties in obtaining any inventory items
necessary to the operation of its business, and, to the knowledge of the
Stockholders, no such shortage of supply of inventory items is threatened or
pending. Except as set forth in Schedule 4.15(b), to the knowledge of the
Stockholders, no customer or supplier of the Company has indicated that it will
cease to do business with, or substantially reduce its purchases from or sales
to, the Company by reason of or after the consummation of the transactions
contemplated hereby.
(d) Except as set forth on Schedule 4.15(b), the Company is not
required to provide any bonding or other financial security arrangements in any
amount in connection with any contract listed on Schedule 4.15(b).
4.16 REAL PROPERTY. Schedule 4.16 includes a list of all real property
owned or leased by the Company at the date hereof and all other real property,
if any, used by the Company in the conduct of its business. The Company has good
title to any real property owned by it that is shown on Schedule 4.16, and all
real property so owned is subject to no mortgage, pledge, lien, conditional
sales agreement, encumbrance, lease, possessory rights of third parties or
charge, except for:
(i) liens reflected on Schedules 4.10 or 4.16 as securing
specified liabilities (with respect to which no material default
exists);
(ii) liens for current taxes not yet payable and assessments
not in default and other inchoate liens for amounts not yet payable and
assessments not in default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other
exceptions to title which do not adversely affect the current or
contemplated use of the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct, are attached to
Schedule 4.16, and an indication as to which such properties, if any, are
currently owned, or were formerly owned, by Stockholders or Affiliates of the
Company is included in Schedule 4.16. Copies of all title reports and title
insurance policies with respect to such real property owned by the Company and
in its possession or reasonably accessible to it are attached to Schedule 4.16.
Except as set forth on Schedule 4.16, all of such leases included on Schedule
4.16 are in full force and effect and constitute valid and binding agreements of
the Company and to the knowledge of the Stockholders the other parties thereto
in accordance
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with their respective terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium, liquidation or
other similar laws and equity principles relating to creditors' rights
generally.
4.17 INSURANCE. The Company has delivered to RV Centers (i) an accurate
list as of the Balance Sheet Date and as of the date hereof of all insurance
policies carried by the Company, (ii) an accurate list of all insurance loss
runs or workers compensation claims received by the Company for the past three
policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance the Company is required to carry pursuant to all of its contracts and
other agreements and pursuant to all applicable laws. Except as set forth on
Schedule 4.17, all of such insurance policies are currently in full force and
effect and shall remain in full force and effect through the Consummation Date.
Since January 1, 1996, no insurance carried by the Company has been canceled by
the insurer and the Company has not been denied coverage.
4.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to RV Centers an accurate list (which is
set forth on Schedule 4.18) showing all officers, directors and key employees of
the Company, listing all employment, compensation, change in control and
severance agreements with such officers, directors and key employees (the
"Agreements") and the rate of compensation, and sales commissions, (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of (i) the Balance Sheet Date and (ii)
the date hereof. The Company has provided to RV Centers true, complete and
correct copies of all Agreements. Since the Balance Sheet Date, except as
disclosed on Schedule 4.18, there have been no increases in the compensation
payable or any special bonuses to any officer, director, key employee or other
employee, except ordinary salary increases implemented on a basis and in amounts
consistent with past practices.
(b) Except as set forth on Schedule 4.18, (i) the Company is not bound
by or subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no campaign to establish
such arrangement is in progress and (iii) to the knowledge of the Stockholders,
there is no pending or threatened labor dispute involving the Company and any
group of its employees nor has the Company experienced any labor interruptions
over the past three years. Except as set forth on Schedule 4.18, the
Stockholders believe that the Company's relationship with its employees is good.
(c) Except as set forth in Schedule 4.18 attached hereto, (i) there are
no significant controversies pending or, to the knowledge of the Stockholders,
threatened between the Company and any of its employees, (ii) the Company has
complied in all material respects with all applicable laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (iii) the Company has not received notice from
any person asserting that the Company is liable for any arrears of wages or any
taxes or penalties for failure to comply with any of the foregoing.
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4.19 EMPLOYEE PLANS. Schedule 4.19 lists all employee benefit plans and
compensation plans, programs or arrangements (the "Plans") which are maintained
by, contributed to or with respect to which there is or would be any obligation
or liability of the Company, including all employment agreements and other
agreements or arrangements containing "golden parachute" or other similar
provisions, incentive compensation agreements, and deferred compensation
agreements, together with true, complete and correct copies of such plans,
agreements and any trusts related thereto, and classifications of employees
covered thereby as of the Balance Sheet Date and as of the date of this
Agreement. Such Plans cover the Company and the Mississippi Store, as described
on Schedule 4.19. Except for the Plans, if any, described on Schedule 4.19, the
Company does not sponsor, maintain or contribute to any plan, program, fund or
arrangement that constitutes an "employee benefit plan," and the Company does
not have any obligation to contribute to or accrue or pay any benefits under any
deferred compensation or retirement arrangement on behalf of any current or
former employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")). For the purposes of this Agreement, the term "employee
benefit plan" shall have the same meaning as is given that term in Section 3(3)
of ERISA. The Company has not sponsored, maintained or contributed to any
employee benefit plan other than the Plans set forth on Schedule 4.19, and the
Company is not or could not be required to contribute to any Plan pursuant to
the provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the Company's employees.
Except as set forth on Schedule 4.19, the Company is not now, and will
not as a result of its past activities become, liable to the Pension Benefit
Guaranty Corporation or to any multiemployer employee pension benefit plan under
the provisions of Title IV of ERISA.
All Plans listed on Schedule 4.19 and the administration thereof are in
compliance in all material respects with their terms and all applicable
provisions of ERISA and the regulations issued thereunder, as well as with all
other applicable federal, state and local statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any Plan listed on Schedule 4.19 have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company included in the Interim Financial Statements. All accrued contribution
obligations of the Company since the Balance Sheet Date with respect to any Plan
listed on Schedule 4.19 have been fulfilled or will be fully reflected on the
balance sheets delivered pursuant to Section 6.9.
4.20 COMPLIANCE WITH ERISA. All such Plans listed on Schedule 4.19 that
are intended to qualify (the "Qualified Plans") under Section 401(a) of the Code
are, and have been from their inception, so qualified and are the subject of a
determination letter or notification letter issued by the Internal Revenue
Service, which letter covers the status of such Qualified Plans under the
provisions of the Tax Reform Act of 1986, and copies of such letters are
attached to Schedule 4.19. Except as
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disclosed on Schedule 4.20, all reports and other documents required to be filed
with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, actuarial reports, audits or tax
returns) have been timely filed or distributed. Neither the Stockholders, any
such Plan listed in Schedule 4.19, nor the Company or, to the knowledge of the
Stockholders, any other person has engaged in any transaction with any Plan
which is prohibited under the provisions of Section 4975 of the Code or Section
406 of ERISA, and to which no exemption under the Code or ERISA applies. No such
Plan listed in Schedule 4.19 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(l) of ERISA, whether or
not waived; and neither the Company nor, to the knowledge of the Stockholders,
any other person has incurred any liability for excise tax or penalty due to the
Internal Revenue Service or any liability to the Pension Benefit Guaranty
Corporation ("PBGC") with respect to any Plan or breached any fiduciary duty
with respect to any Plan. The Company further represents that except as set
forth on Schedule 4.20 hereto:
(i) With respect to any plan year for which the applicable
statutes of limitations has not expired, there have been no
terminations, partial terminations or discontinuations of contributions
to any Qualified Plan intended to qualify under Section 401(a) of the
Code without notice to and approval by the Internal Revenue Service;
(ii) no Plan listed in Schedule 4.19 is subject to the
provisions of Title IV of ERISA;
(iii) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any Plan listed in
Schedule 4.19;
(iv) the Company has not incurred liability under Section
4062 or Section 4069 of ERISA;
(v) no circumstances exist pursuant to which the Company
could have any direct or indirect liability whatsoever (including, but
not limited to, any liability to any multiemployer plan or the PBGC
under Title IV of ERISA or to the Internal Revenue Service for any
excise tax or penalty, or being subject to any statutory lien to
secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the
Company that is, or at any time was, a member of a "controlled group"
(as defined in Section 412(n)(6)(B) of the Code) that includes the
Company; and
(vi) each Plan may be unilaterally terminated at any time by
the Company without material liability to the Company.
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4.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 4.21 or 4.13, the Company is not in violation of any law or regulation
or any order of any court or Federal, state, local or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it other than violations that would not have a Material
Adverse Effect on the Company and except to the extent set forth on Schedules
4.10, 4.13 or 4.21, there are no claims, actions, suits or proceedings, pending
or, to the knowledge of the Stockholders, threatened against, the Company, at
law or in equity, or before or by any Federal, state, local or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them and no written notice of any claim, action,
suit or proceeding, whether pending or threatened, has been received by the
Company. Except as set forth in Schedule 4.21, the Company has conducted and is
now conducting its business in compliance in all material respects with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, orders, approvals, variances,
rules and regulations.
4.22 TAXES.
(a) The Company has timely filed all requisite Federal, state, local
and other income and payroll tax returns or extension requests for all fiscal
periods ended on or before the Balance Sheet Date; and except as set forth on
Schedule 4.22, there are no examinations in progress or claims pending against
the Company for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for Taxes, whether pending or threatened, has
been received. All Taxes, including interest and penalties (whether or not shown
on any tax return), owed by the Company has been paid or reflected as accrued as
of the Balance Sheet Date. The amounts shown as accruals for Taxes on the
Company's Financial Statements are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date. Copies of (i) any tax examinations, (ii)
extensions of statutory limitations and (iii) the federal and local income tax
returns and franchise tax returns of Company for their last three (3) fiscal
years, or such shorter period of time as any of them shall have existed, are
attached hereto as Schedule 4.22 or have otherwise been delivered to RV Centers.
The Company has a taxable year ended as of the year end date in the Year-end
Financial Statements in Schedule 4.9. Except as set forth on Schedule 4.22, the
Company uses the accrual method of accounting for income tax purposes, and the
Company's methods of accounting have not changed in the past five years. The
Company is not an Investment Company as defined in Section 351(e)(1) of the
Code. Except as set forth on Schedule 4.22, the Company is not and has not been
a party to any tax sharing agreement or agreement of similar effect. Except as
set forth on Schedule 4.22, the Company is not and has not been a member of any
consolidated group. The Company has not received, been denied, or applied for
any private letter ruling during the last ten years.
(b) The Company has timely filed all requisite Federal, state, local
and other income and payroll tax returns or extension requests for all fiscal
periods ended on or prior to the date hereof; and except as set forth on
Schedule 4.22, there are no examinations in progress or claims pending against
the Company for federal, state, local and other Taxes (including penalties and
interest) for
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any period or periods ended on or prior to the date hereof and no notice of any
claim for Taxes, whether pending or threatened, has been received. All Taxes,
including interest and penalties (whether or not shown on any tax return), owed
by the Company have been paid or reflected as accrued. The amounts shown as
accruals for Taxes on the Company's Financial Statements are sufficient for the
payment of all Taxes of the kinds indicated (including penalties and interest)
for all fiscal periods ended on or before that date.
(c) If the Company is an S corporation, the Company makes the
representations and warranties in this subsection 4.22(c). Except as set forth
in Schedule 4.22 or disclosed in the Year- end Financial Statements, the Company
has been a validly existing S corporation within the meaning of Sections 1361
and 1362 of the Code at all times during its existence and the Company will be
an S corporation up to and including the day before the Closing Date. The
Company would not be liable for any tax under Section 1374 of the Code if its
assets were sold for their fair market value as of the Closing Date. Neither the
Company nor any qualified subchapter S subsidiary of the Company has, in the
past 10 years, (A) acquired assets from another corporation in a transaction in
which the Company's tax basis in the acquired assets was determined, in whole or
part, by reference to the tax basis of the acquired assets in the hands of the
transferor or (B) acquired the stock of any corporation which is a qualified
subchapter S subsidiary. The Stockholders shall pay, and they hereby indemnify
RV Centers and the Company against, all income taxes payable with respect to the
Company's operations for all periods through and including the Consummation
Date.
4.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document. Except as
set forth on Schedule 4.23(a), neither the Company nor, to the knowledge of the
Stockholders, any other party thereto, is in default under any lease,
instrument, agreement, license, or permit set forth on Schedule 4.10(b), 4.12,
4.14, 4.15(b) or 4.16 (the "Material Documents").
(b) Except as set forth on Schedule 4.23(b), the execution and delivery
of this Agreement by each of the Company and the Stockholders do not violate,
conflict with or result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company under any of the terms,
conditions or provisions of (i) the Charter Documents of the Company, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to the
Company or any of its properties or assets, or (iii) any Material Document to
which the Company or any of the Stockholders is now a party or by which any of
the Stockholders or the Company or any of its properties or assets may be bound
or affected. The consummation by the Company and the Stockholders of the
transactions contemplated herein will not result in any material violation,
conflict, breach, right of termination or acceleration or creation of liens
under any of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the preceding sentence, subject, in the case of the
terms,
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conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Effective Time) such consents as may be required from
commercial lenders, lessors or other third parties.
(c) Except as set forth on Schedule 4.23(c) and except for requirements
under the Hart- Scott Act, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to the consummation by the Company and the Stockholders of any of the
transactions contemplated herein in order to remain in full force and effect,
and consummation by the Company and the Stockholders of the transactions
contemplated herein will not give rise to any right to termination, cancellation
or acceleration or loss of any right or benefit.
(d) Except for (i) the filing of the Registration Statement, (ii) the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities and (iii) any filing required under the Hart-Scott
Act in connection with the purchase and sale of the Company Stock, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Company and
the Stockholders or the consummation by the Company and the Stockholders of the
transactions contemplated herein.
(e) Except as set forth on Schedule 4.23(e), none of the Material
Documents prohibits the use or publication by the Company or RV Centers of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from providing services or selling
products to any other customer or potential customer of the Company, RV Centers
or any Other Founding Company.
4.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 4.24, the
Company is not a party to any governmental contract subject to price
redetermination or renegotiation.
4.25 ABSENCE OF CHANGES. Since June 30, 1998, except as set forth on
Schedule 4.25 or as otherwise contemplated herein, there has not been:
(i) any Material Adverse Change in the Company;
(ii) any material damage, destruction or loss to any property
or asset of the Company (whether or not covered by insurance) which has
caused a Material Adverse Effect on the Company;
(iii) any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
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(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of the Company except for distributions that are described in Annex I;
(v) any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by the Company to any
of its officers, directors, Stockholders, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases
for employees in accordance with past practice; notwithstanding the
foregoing, the Company has not paid or agreed to pay salary, bonus,
sales commissions, fees or any other form of compensation, directly or
indirectly, to the Stockholders or any members of their family in
excess of the aggregate monthly compensation provided for in Annex I
hereto.
(vi) any work interruptions, labor grievances or claims filed,
or any similar event or condition of any character which has caused a
Material Adverse Effect on the Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to any
Person, including, without limitation, the Stockholders and their
Affiliates, except inventory sold in the ordinary course of business;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company, including
without limitation any indebtedness or obligation of any Stockholders
or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
material assets, property or rights of the Company or requiring consent
of any party to the transfer and assignment of any such assets,
property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a
party;
(xiii) any transaction by the Company outside the ordinary
course of its business;
(xiv) any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date other
than in the ordinary course of business of the Company and of which
notice has been given to RV Centers;
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(xv) any other distribution of property or assets by the
Company other than in the ordinary course of business and other than
distributions of real estate and other assets as permitted by this
Agreement (including the Schedules hereto); or
(xvi) any occurrence that is reasonably likely to give rise to
a contingent liability which would have a Material Adverse Effect on
the Company excluding occurrences due to general economic conditions,
legislative or regulatory developments or occurrences affecting the
recreational vehicle industry generally.
4.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered to
RV Centers an accurate schedule (which is set forth on Schedule 4.26) as of the
date of the Agreement of:
(i) the name of each financial institution in which the
Company has accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
All of the cash indicated on the Company's balance sheet as of June 30,
1998, was held in the accounts listed on Schedule 4.26, and as of the
Consummation Date, the Company will have no other accounts. Schedule 4.26 also
sets forth the name of each person, corporation, firm or other entity holding a
general or special power of attorney from the Company and a description of the
terms of such power.
4.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance by the Company of the transactions
contemplated herein have been duly and validly authorized by the Board of
Directors and the Stockholders of the Company and this Agreement has been duly
and validly authorized by all necessary corporate action and is a valid and
binding obligation of the Company, subject to the effect of applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium,
liquidation or other similar laws and equity principles relating to creditors'
rights generally.
4.28 RELATIONS WITH GOVERNMENTS. None of the Company, any of the
Stockholders, nor any Affiliate of any of them has given or offered anything of
value to any governmental official, political party or candidate for government
office nor has it or any of them otherwise taken any action which would in any
case cause the Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
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<PAGE> 31
4.29 DISCLOSURE. (a) The representations and warranties of the
Stockholders as set forth in this Agreement, including the Annexes and Schedules
hereto, to the extent such representations and warranties relate to the Company
and the Stockholders, and the completed Director and Officer Questionnaires,
with respect to any Stockholder who has completed such Questionnaires do not
contain an untrue statement of a material fact concerning the Company or the
Stockholders or omit to state a material fact concerning the Company or the
Stockholders necessary to make the statements herein and therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from any
of such documents made or omitted in reliance upon information furnished in
writing by the Other Founding Companies, RV Centers and its Affiliates or any
representatives or agents of RV Centers and its Affiliates.
(b) The Stockholders acknowledge and agree that (i) there exists no
firm commitment, binding agreement, or promise or other assurance of any kind,
whether express or implied, oral or written, that a Registration Statement will
become effective or that the IPO pursuant thereto will occur; (ii) neither RV
Centers nor Baker Kreft Funding I, L.L.C. or any of their officers, directors,
agents or representatives nor any Underwriter shall have any liability to the
Company, the Stockholders or any other person affiliated or associated with the
Company for any failure of the Registration Statement to become effective, the
IPO to occur at a particular price or within a particular range of prices or to
occur at all, the transactions contemplated by this Agreement to be successful
or the prospects for RV Centers described in the Registration Statement to be
realized; and (iii) the decision of Stockholders to enter into this Agreement,
or to vote in favor of or consent to the proposed purchase of RV Centers Stock
and sale of the Company Stock, has been or will be made independent of, and
without reliance upon, any statements, opinions or other communications, or due
diligence investigations which have been or will be made or performed by any
prospective Underwriter, relative to RV Centers or the prospective IPO.
(c) No Stockholder has any present plan, intention, commitment or
binding agreement or arrangement to dispose of any shares of RV Centers Stock to
be received by such Stockholder as a result of the transactions contemplated in
this Agreement, except for transfers permitted pursuant to Sections 14 and 15
hereof.
4.30 PROHIBITED ACTIVITIES. Except as set forth on Schedule 4.30, the
Company has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 6.3.
4.31 NO WARRANTIES OR INSURANCE. Except as set forth on Schedule 4.31,
the Company has no liability to any person under any warranty relating to goods
sold or services provided by the Company and the Company does not offer or sell
insurance or consumer protection plans or other arrangements that could result
in the Company being required to make any payment to or perform any service for
any person.
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4.32 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 4.32, no Stockholder, officer,
director or Affiliate of the Company (i) possesses, directly or indirectly, any
financial interest in, or is a director, officer, employee or Affiliate of, any
corporation, firm, association or business organization that is a client,
supplier, customer, lessor, lessee or competitor of the Company, or (ii) is a
party to an agreement or relationship, that involves the receipt by such person
of compensation or property from the Company other than through a customary
employment relationship.
4.33 REGISTRATION STATEMENT. None of the information supplied by the
Company in writing for inclusion in the Registration Statement contains any
untrue statement of a material fact concerning the Company or the Stockholders
or has omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein concerning the Company or the
Stockholders, in light of the circumstances under which they are made, not
misleading. The Stockholders will have the right to review and approve in
advance any statements made about the Company in the Registration Statement.
4.34 INVENTORY. Except as provided in Schedule 4.34, all of the
Company's inventories at June 30, 1998 are reflected on the Interim Financial
Statements. The values at which inventories are carried on the Interim Financial
Statements reflect the normal inventory valuation policies of the Company in
conformity with GAAP consistently applied. The inventories reflected on the
Interim Financial Statements or arising since the date thereof are currently
marketable and substantially all of such inventories can reasonably be
anticipated to be sold at normal mark-ups within 180 days after the date hereof
in the ordinary course of business (subject to any reserve for obsolete,
off-grade or slow-moving items that is reflected in the Interim Financial
Statements) except for spare parts inventory which inventory is good and usable.
4.35 YEAR 2000. Except and to the extent described in Schedule 4.35,
the "Information Technology" (as defined below in this Section 4.35) of the
Company and its Subsidiaries is Year 2000 compliant. "Year 2000 compliant" means
that the Information Technology is designed to be used prior to, during and
after the calendar Year 2000 A.D. and the Information Technology used during
each such time period will accurately receive, provide and process date/time
data (including, but not limited to, calculating, comparing and sequencing)
from, into and between the 20th and 21st centuries, including the years 1999 and
2000, and leap-year calculations and will not malfunction, cease to function, or
provide invalid or incorrect results as a result of date/time data.
For purposes hereof, "Information Technology," means all computer
operated or micro processor controlled equipment, including, but not limited to
computer software, computer hardware and related software, all central
processing units, terminals, disk drives, tape drives, electronic memory units,
printers, keyboards, screens, peripherals (and other input/output devices),
modems and other communication controllers, and any and all parts and
appurtenances thereto, together with all intellectual property used in the
operation of such computer equipment and hardware, and other similar or related
items of automated, computerized, or software system(s) that are used or relied
on by the Company or its Subsidiaries in the conduct of their business.
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(B) Individual Representations and Warranties of Stockholders.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement, and that the representations and warranties set forth in Section 4(B)
shall survive the Consummation Date.
4.36 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement. Such Stockholder owns
beneficially and of record all of the shares of the Company Stock identified on
Schedule 4.3 hereto as being owned by such Stockholder, and such Company Stock
is owned free and clear of all liens, encumbrances and claims of every kind.
4.37 PREEMPTIVE RIGHTS. Stockholder does not have, or hereby waives,
any preemptive or other right to acquire shares of Company Stock that such
Stockholder has or may have had. Nothing herein, however, shall limit or
restrict the rights of any Stockholder to acquire RV Centers Stock pursuant to
(i) this Agreement or (ii) any outstanding option, warrant or other rights
granted by RV Centers.
5. REPRESENTATIONS OF RV CENTERS
Except as set forth in the disclosure schedules attached hereto and
except otherwise qualified below, RV Centers represents and warrants that all of
the following representations and warranties in this Section 5 are true at the
date of this Agreement, and that such representations and warranties, except for
those in Section 5.3, shall survive the Consummation Date until June 30, 2000
(the "Expiration Date"). The representations and warranties set forth in Section
5.3 shall survive until the date on which the applicable statute of limitations
expires, which date shall be the "Expiration Date" for purposes of Section 5.3.
5.1 DUE ORGANIZATION. RV Centers is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Delaware, and it has the requisite power and authority to carry on its business
as it is now being conducted and as contemplated in the RV Centers Plan of
Organization. RV Centers is duly qualified or authorized to do business and is
in good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or authorization
necessary, except where the failure to be so qualified or authorized to do
business would not have a Material Adverse Effect. True, complete and correct
copies of the Certificate of Incorporation and By-laws, as proposed to be
amended, of RV Centers (the "RV Centers Charter Documents") are attached hereto
as Annex II.
5.2 AUTHORIZATION. (i) The officers of RV Centers executing this
Agreement have the authority to enter into and bind RV Centers to the terms of
this Agreement and (ii) RV Centers has the full legal right, power and authority
to enter into and perform this Agreement and consummate the transactions
contemplated herein. All corporate acts and other proceedings required to have
been taken by RV Centers to authorize the execution, delivery and performance of
this Agreement
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and all the transactions contemplated hereby have been duly and properly
authorized. Copies of the most recent resolutions adopted by the Board of
Directors of RV Centers, which approve this Agreement and the transactions
contemplated herein in all respects, certified by the Secretary or an Assistant
Secretary of RV Centers, as the case may be, as being in full force and effect
on the date hereof, are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF RV CENTERS. As of the date of this Agreement, the
authorized capital stock of RV Centers is as set forth on Schedule 5.3.
Immediately prior to the Closing Date and the Consummation Date, all of the
issued and outstanding shares of the capital stock of RV Centers will be as set
forth in the Registration Statement, free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind other than any restrictions described in the Registration
Statement. All of the issued and outstanding shares of the capital stock of RV
Centers has been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by RV
Centers in compliance with all applicable state and Federal laws concerning the
issuance of securities. Further, none of such shares were issued in violation of
the preemptive rights of any past or present stockholder of RV Centers.
5.4 TRANSACTIONS IN CAPITAL STOCK; ORGANIZATION ACCOUNTING. Except for
the Other Agreements and except as set forth in the Draft Registration
Statement, (i) no option, warrant, call, conversion right or commitment of any
kind exists which obligates RV Centers to issue any of its authorized but
unissued capital stock; and (ii) RV Centers has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof. The outstanding options, warrants or other rights to acquire
shares of the stock of RV Centers will be as described in the Registration
Statement.
5.5 SUBSIDIARIES. RV Centers has no subsidiaries. RV Centers does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, and RV Centers,
directly or indirectly, is not a participant in any joint venture, partnership
or other non-corporate entity.
5.6 NO VIOLATIONS. (a) RV Centers is not in violation of any RV Centers
Charter Document. Neither RV Centers nor, to the best knowledge of RV Centers,
any other party thereto, is in default under any lease, instrument, agreement,
license, or permit to which RV Centers is a party, or by which RV Centers, or
any of its properties, is bound (collectively, the "RV Centers Documents").
(b) The execution and delivery of this Agreement by RV Centers does not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or
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result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of RV Centers under any of the terms,
conditions or provisions of (i) the RV Centers Charter Documents, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to RV
Centers or any of its properties or assets, or (iii) any RV Centers Document.
The consummation by RV Centers of the transactions contemplated herein will not
result in any material violation, conflict, breach, right of termination or
acceleration or creation of liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the preceding
sentence, subject, in the case of the terms, conditions or provisions of the
items described in clause (iii) above, to obtaining (prior to the Effective
Time) such consents as may be required from commercial lenders, lessors or other
third parties.
(c) Except for (i) the filings with the SEC pursuant to the 1933 Act in
connection with the IPO and the purchase and sale of the Company Stock, (ii) the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities, and (iii) any filings required under the Hart-Scott
Act in connection with the transactions contemplated by the RV Centers Plan of
Organization, none of the RV Centers Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by RV Centers of any of the transactions
contemplated herein, and consummation by RV Centers of the transactions
contemplated herein will not give rise to any right to termination, cancellation
or acceleration or loss of any material right or benefit under any of the RV
Centers Documents.
(d) Except for (i) the filings with the SEC pursuant to the 1933 Act in
connection with the IPO and the purchase and sale of the Company Stock, (ii) the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities, and (iii) any filings required under the Hart-Scott
Act in connection with the transactions contemplated in the RV Centers Plan of
Organization, no declaration, filing or registration with, notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by RV
Centers or the consummation by RV Centers of the transactions contemplated
herein.
5.7 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by RV Centers and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of RV
Centers and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of RV Centers.
5.8 RV CENTERS STOCK. At the time of issuance thereof and delivery to
the Stockholders, the RV Centers Stock to be delivered to the Stockholders
pursuant to this Agreement will constitute valid, duly authorized and legally
issued shares of RV Centers, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 14 and 15 hereof,
will be identical in all substantive respects (which do not include the form of
certificate upon which it is printed or the presence or absence of a CUSIP
number on any such certificate) to the RV Centers Stock issued
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and outstanding as of the date hereof by reason of the provisions of the
Delaware GCL. The RV Centers Stock issued and delivered to the Stockholders
shall at the time of such issuance and delivery be free and clear of any liens,
claims or encumbrances of any kind or character. The shares of RV Centers Stock
to be issued to the Stockholders pursuant to this Agreement will not be
registered under the 1933 Act, except as provided in Section 16 hereof.
5.9 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. RV Centers was formed
in May, 1998 and has conducted only limited operations since that time. RV
Centers has not conducted any material business since the date of its inception,
except in connection with this Agreement, the Other Agreements and the IPO.
Except as described in the Draft Registration Statement, RV Centers does not own
and has not at any time owned any real property or any material personal
property and is not a party to any other material agreement other than the Other
Agreements, the agreements contemplated hereby and such agreements as will be
filed as Exhibits to the Registration Statement. Except as set forth in the
Registration Statement, RV Centers has not entered into any material agreement
with any of the Founding Companies or any of the stockholders of the Founding
Companies other than the Other Agreements and the agreements contemplated in
each of the Other Agreements and the Registration Statement, including the
employment agreements and leases referred to herein or entered into in
connection with the transactions contemplated herein and therein.
5.10 INVESTMENT REPRESENTATIONS. RV Centers represents that the Company
Stock is being acquired by RV Centers for its own account for investment
purposes only and not with a view to the distribution thereof within the meaning
of the 1933 Act.
5.11 AUTHORIZATION OF OTHER AGREEMENTS. The Other Agreements have been
duly authorized, executed and delivered by RV Centers and constitute the legal,
valid and binding obligation of RV Centers enforceable against RV Centers in
accordance with their respective terms, subject to the effect of applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium,
liquidation or other similar laws and equity principles relating to creditors'
rights generally.
5.12 FINANCIAL STATEMENTS. The unaudited pro forma financial statements
of RV Centers included in the Draft Registration Statement comply as to form in
all material respects to the applicable accounting requirements of the 1933 Act
and the regulations promulgated under the 1933 Act. Management of RV Centers
believes that the assumptions underlying the pro forma adjustments utilized in
the preparation of such pro forma financial statements are reasonable, and such
pro forma adjustments have been properly applied to the historical financial
amounts in the compilation of the pro forma financial statements. Based on the
representations in Section 4.9 of this Agreement and in Section 4.9 of each of
the Other Agreements, to the knowledge of RV Centers, the pro forma financial
information of RV Centers fairly presents the pro forma financial position,
results of operations and other information purported to be shown therein at the
respective dates and for the respective periods specified.
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5.13 LIABILITIES AND OBLIGATIONS. Except as set forth in the Draft
Registration Statement, as of the date of this Agreement, RV Centers has no
material liabilities or obligations of any kind, character or description,
whether accrued, absolute, secured or unsecured, contingent or otherwise, other
than liabilities incurred in the ordinary course of business and consistent with
past practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
5.14 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in
the Draft Registration Statement, RV Centers is not in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of RV Centers,
threatened against or affecting, RV Centers, at law or in equity, or before or
by any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. RV Centers has conducted and is conducting its businesses in
compliance in all material respects with the requirements, standards, criteria
and conditions set forth in applicable Federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation, in any material respect, of any of the
foregoing.
5.15 NO SIDE AGREEMENTS. RV Centers has not entered into any agreement
with any of the Founding Companies or any of the Stockholders of the Founding
Companies other than the Other Agreements and the agreements referred to in the
Other Agreements or the Draft Registration Statement, including the employment
agreements and/or advisory agreements and leases referred to herein or entered
into in connection with the transactions contemplated hereby and thereby. RV
Centers has not entered into any agreements providing for rights to register
shares of RV Centers Stock under the 1933 Act except as provided in Section 16
of this Agreement, in Section 16 of the Other Agreements and the Exhibits to the
Draft Registration Statement.
5.16 RELATIONS WITH GOVERNMENTS. Neither RV Centers nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor has
RV Centers, any of its directors, officers or Affiliates of any of them
otherwise taken any action, which would cause RV Centers to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.17 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by RV Centers and constitute the legal, valid and binding
obligation of RV Centers enforceable against RV Centers in accordance with their
respective terms. Except as disclosed on Schedule 5.17 or the Draft Registration
Statement, the terms and conditions of the Other Agreements and the employment
agreements, advisory agreements and leases attached as annexes thereto
(excluding the terms relating to the consideration payable by RV Centers
thereunder) are identical in all material respects to the terms and conditions
in this Agreement and its comparable Annexes.
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5.18 REGISTRATION STATEMENT. On the date of each filing of the
Registration Statement with the SEC the Registration Statement will comply, as
to form in all material respects with the requirements of the Form S-1
Registration Statement and applicable requirements under Federal laws and
regulations (except for the inclusion of all exhibits required to be filed
therewith with respect to the Draft Registration Statement and the Registration
Statement prior to its effective date), provided that the foregoing does not
apply to any information that the Company and the Stockholders have furnished to
RV Centers in writing specifically for inclusion in the Registration Statement.
5.19 DISCLOSURE. The Draft Registration Statement delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted in
reliance upon, and in conformity with, information furnished to RV Centers by
the Company or the Stockholders in writing specifically for inclusion in the
Registration Statement. The Registration Statement, when it becomes effective,
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and each prospectus included therein, on the date of
filing thereof with the SEC and at the Closing Date and the Consummation Date,
will not include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that the
foregoing shall not apply to statements in or omissions from any such document
in reliance upon, and in conformity with, information furnished to RV Centers by
the Company or the Stockholders in writing specifically for inclusion therein.
6. COVENANTS PRIOR TO CLOSING
6.1 ACCESS AND COOPERATION; DUE DILIGENCE.
(a) Between the date of this Agreement and the Consummation Date, the
Company will afford to the officers and authorized representatives of RV Centers
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish RV Centers with such additional
financial and operating data and other information as to the business and
properties of the Company as RV Centers may from time to time reasonably
request. The Company will cooperate with RV Centers, its representatives,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by this
Agreement. RV Centers will treat all information obtained in connection with the
negotiation and performance of this Agreement or the due diligence
investigations conducted with respect to the Company as confidential in
accordance with the provisions of Section 13 hereof.
(b) Between the date of this Agreement and the Consummation Date, RV
Centers will afford to the officers and authorized representatives of the
Company and/or the Stockholder access
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to all of RV Centers's sites, properties, books and records and will furnish the
Company and/or the Stockholder with such additional financial and operating data
and other information as to the business and properties of RV Centers as the
Company and/or the Stockholder may from time to time reasonably request. RV
Centers will cooperate with the Company and/or the Stockholder, their
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. The Company and/or the Stockholder will
cause all information obtained in connection with the negotiation and
performance of this Agreement (including information regarding each of the Other
Founding Companies) to be treated as confidential in accordance with the
provisions of Section 13 hereof.
6.2 CONDUCT OF BUSINESS PENDING CLOSING. Except as set forth on
Schedule 6.2, between the date of this Agreement and the Consummation Date, the
Company will:
(i) carry on its respective businesses in the ordinary course,
consistent with past practice, and not introduce any material new
method or changes in operation or accounting;
(ii) use all commercially reasonable efforts to maintain its
respective properties, equipment and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its obligations under agreements relating
to or affecting its assets, properties, equipment or rights, the
nonperformance of which could have a Material Adverse Effect on the
Company;
(iv) use all reasonable efforts to keep in full force and
effect present insurance policies or other comparable insurance
coverage;
(v) use reasonable efforts to maintain and preserve its
business organization intact, retain its respective key employees and
maintain its respective material relationships with suppliers,
customers and others having business relations with the Company;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, the
noncompliance with which could have a Material Adverse Effect on the
Company;
(vii) maintain present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or
lease instruments without the knowledge and written consent of RV
Centers (which consent shall not be unreasonably withheld) provided
that debt or lease instruments may be replaced without the consent of
RV Centers if the replacement instruments are on terms at least as
favorable to the Company as the instruments being replaced;
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(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with past practices; notwithstanding the foregoing, the
Company will not pay or agree to pay salary, bonus, sales commissions,
fees or any other form of compensation, directly or indirectly, to the
Stockholders or any members of their family in excess of the aggregate
monthly compensation provided for in Annex I hereto; and
(ix) pay all of its obligations, including but not limited to
taxes, loans and manufacturers' invoices, as they become due and
payable and not prepay any of its obligations.
6.3 PROHIBITED ACTIVITIES. Except as set forth on Schedule 6.3 or on
Annex I to this Agreement, between the date hereof and the Consummation Date,
the Company will not, without prior written consent of RV Centers:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any kind
other than in connection with the exercise of options or warrants
listed in Schedule 4.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its
stock;
(iv) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the normal course of business (consistent with past practice) or
involves an amount per contract, commitment, liability or expenditure,
in the aggregate, not in excess of $100,000 except for purchases and
sales of recreational vehicles inventory in the ordinary course of
business;
(v) create or assume to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment, (excluding
rolling stock inventory) with an aggregate cost, per item, not in
excess of $25,000 necessary or desirable for the conduct of the
businesses of the Company, (2) (A) liens for taxes either not yet due
or being contested in good faith and by appropriate proceedings (and
for which contested taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary
course of business (the liens set forth in clause (2) being referred to
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herein as "Statutory Liens"), or (3) liens set forth on Schedule
4.10(b), 4.15(b) and/or 4.16 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment with a net book value in excess of $25,000
except in the normal course of business;
(vii) consummate or enter into any commitment for the
acquisition of any business or the start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust bills and accounts
in the course of good faith disputes with customers in a manner
consistent with past practice, provided, further, that such adjustments
shall not be deemed to be included in Schedule 4.11 unless specifically
listed thereon;
(x) commit a material breach of or amend or terminate any
material agreement, permit, license or other right of the Company;
(xi) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder; or
(xii) pay or agree to pay salary, bonus, sales commissions,
fees or any other form of compensation, directly or indirectly, to the
Stockholders or any members of their family in excess of the aggregate
monthly compensation provided for in Annex I hereto.
6.4 NO SHOP. None of the Stockholders or the Company, nor any
agent, officer, director, trustee or any representative of any of the foregoing
will, during the period commencing on the date of this Agreement and ending
with the earlier to occur of the Consummation Date or the termination of this
Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than RV
Centers or its authorized agents relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation, share exchange or
business combination of the Company.
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6.5 AGREEMENTS. Except as disclosed on Schedule 6.5, the Stockholders
and the Company shall terminate (i) any stockholders agreements, voting
agreements, voting trusts, options, warrants and employment agreements between
the Company and any employee listed on Schedule 8.11 hereto and (ii) except as
otherwise provided in this Agreement, any existing agreement between the Company
and any Stockholder, on or prior to the Consummation Date, provided that nothing
herein shall prohibit or prevent the Company from paying (either prior to or on
the Closing Date) notes or other obligations from the Company to the
Stockholders in accordance with the terms thereof, which terms have been
disclosed to RV Centers. Such termination agreements are listed on Schedule 6.5
and copies thereof are attached thereto.
6.6 NOTIFICATION OF CERTAIN MATTERS. The Stockholders and the Company
shall give prompt notice to RV Centers of the Company's or any Stockholder's
knowledge of (i) the occurrence or non-occurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
of the Company or the Stockholders contained herein to be untrue or inaccurate
in any material respect at or prior to the Closing and (ii) any material failure
of any Stockholder or the Company to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such person
hereunder. RV Centers shall give prompt notice to the Company of RV Centers's
knowledge of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of RV Centers contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing and (ii) any material failure of RV Centers
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder. The delivery of any notice pursuant to this
Section 6.6 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 6.7, (ii) modify the conditions set forth in Sections 7
and 8, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
6.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
anticipated effectiveness of the Registration Statement to supplement or amend
promptly the Schedules hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules or which may have
been omitted from the schedules previously provided by the Company; provided
however, that supplements and amendments to Schedules 4.10(b), 4.11, 4.14,
4.15(a), and 4.15(b) shall only have to be delivered at the Closing Date, unless
such Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the Company that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect on
the Company may be made unless RV Centers consents to such amendment or
supplement; and provided further, that no amendment or supplement to a Schedule
prepared by RV Centers that constitutes or reflects an event or occurrence that
would have a Material Adverse Effect on RV Centers may be made unless a majority
of the Founding Companies consent to such amendment or supplement. For all
purposes of this
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Agreement, including without limitation for purposes of determining whether the
conditions set forth in Sections 7.1 and 8.1 have been fulfilled, the Schedules
hereto shall be deemed to be the Schedules as amended or supplemented pursuant
to this Section 6.7. In the event that the Company seeks to amend or supplement
a Schedule pursuant to this Section 6.7 to reflect an item not known to the
Company or the Stockholders at the time of entering into this Agreement or an
event occurring after the date of this Agreement, and RV Centers does not
consent, in its reasonable discretion, to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
11.1(i) hereof. In the event that RV Centers seeks to amend or supplement a
Schedule pursuant to this Section 6.7 and a majority of the Founding Companies
do not consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 11.1(i) hereof. No party to
this Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of this Section 6.7 with respect to an
attempt to supplement or amend a Schedule to reflect an item not known to RV
Centers or the Company or Stockholders, as applicable, at the time of execution
or occurring after the date of execution of this Agreement. No amendment of or
supplement to a Schedule shall be made later than 24 hours prior to the
anticipated effectiveness of the Registration Statement, subject to the proviso
in the first sentence.
6.8 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The Company
and the Stockholders shall furnish or use reasonable efforts to cause to be
furnished to RV Centers and the Underwriters all of the information concerning
the Company and the Stockholders and their Affiliates as RV Centers may
reasonably request required for inclusion in, and will cooperate with RV Centers
and the Underwriters in the preparation of, the Registration Statement and the
prospectus included therein (including audited and unaudited financial
statements, prepared in accordance with GAAP, in form suitable for inclusion in
the Registration Statement). The parties hereto agree that the disclosure of
information with respect to the Company and the Stockholders and their
affiliates in the Registration Statement and while marketing the securities of
RV Centers in the IPO shall not be a violation of any confidentiality agreement,
including Article 13 of this Agreement, among the parties hereto or their
officers or stockholders. The Company and the Stockholders agree promptly to
advise RV Centers if at any time during the period in which a prospectus
relating to the offering is required to be delivered under the 1933 Act, any
information contained in the prospectus concerning the Company or the
Stockholders or their Affiliates becomes incorrect or incomplete in any material
respect and to provide the information needed to correct such inaccuracy.
Subject to the Company's right to review and approve such information in the
Registration Statement set forth in Section 4.33 above, only insofar as the
information relates solely to the Company or the Stockholders or their
affiliates, the Company represents and warrants as to such information with
respect to itself, and each Stockholder represents and warrants, as to such
information with respect to the Company and himself or herself, that the
Registration Statement will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
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6.9 FINAL FINANCIAL STATEMENTS. The Company shall provide at least five
(5) business days prior to the Consummation Date the consolidated balance sheets
of the Company, audited as of December 31, 1998 and unaudited as of the end of
all fiscal months following December 31, 1998 and ending at least 25 days prior
to the Consummation Date, and the consolidated statement of income, cash flows
and retained earnings of the Company, audited for the quarter ending December
31, 1998 and unaudited for the same months as the balance sheets. Such financial
statements shall have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated (except as noted therein), and
will present fairly the financial position and results of operations of the
Company for the periods indicated therein.
6.10 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated herein.
6.11 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act, (ii) such compliance by
the Stockholders and the Company shall be deemed a condition precedent in
addition to the conditions precedent set forth in Section 8 of this Agreement,
and such compliance by RV Centers shall be deemed a condition precedent in
addition to the conditions precedent set forth in Section 7 of this Agreement,
and (iii) the parties agree to cooperate and use their best efforts to cause all
filings required under the Hart- Scott Act to be made. If filings under the
Hart-Scott Act are required, the costs and expenses thereof (including filing
fees) shall be borne by RV Centers. The obligation of each party to consummate
the transactions contemplated in this Agreement is subject to the expiration or
termination of the waiting period under the Hart-Scott Act, if applicable.
6.12 TRANSFERS OF PERMITS AND INTANGIBLES. The Stockholders shall use
commercially reasonable efforts to cause all trademarks, trade names, patents,
patent applications, copyrights and other intellectual property owned or held by
employees of the Company which are material to the operations of the business of
the Company to be assigned or licensed to the Company for no additional
consideration.
6.13 DIVIDENDS. The Company may, after the Balance Sheet Date and
before the Consummation Date, pay to the Stockholder only the dividends or
distributions expressly permitted by Annex I hereto.
6.14 AUTHORIZED CAPITAL. Prior to the Consummation Date, RV Centers
shall maintain its authorized capital stock as set forth in the Registration
Statement filed with the SEC except for stock splits, such changes in authorized
capital stock as are made to respond to comments made by the SEC or requirements
of any exchange or automated trading system for which application is made
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to register the RV Centers Stock and any changes necessary or advisable in order
to permit the delivery of the opinion contemplated by Section 7.3 hereof.
6.15 YEAR 2000 COMPLIANCE COST ESTIMATES. Promptly upon execution
hereof, the Company and its Subsidiaries will undertake an investigation of all
Information Technology suppliers and vendors to determine whether all
Information Technology products purchased, leased, licensed or used by or in
connection with the Company or its Subsidiaries, or their respective Information
Technology, is Year 2000 compliant and, if not, the steps required to make it
Year 2000 compliant. Within thirty-five (35) days hereof, the Company shall
provide to RV Centers in writing an estimate of the total cost of, and the time
required, to make all the Company's Information Technology Year 2000 compliant.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions,
except Section 7.8. The obligations of the Stockholders and the Company with
respect to actions to be taken on the Consummation Date are subject to the
satisfaction or waiver on or prior to the Consummation Date of the conditions
set forth in Sections 7.1, 7.2, 7.3, 7.5, 7.6, 7.7 and 7.8. As of the Closing
Date or, with respect to the conditions set forth in Sections 7.1, 7.2, 7.3,
7.5, 7.6, 7.7 and 7.8, as of the Consummation Date, if any such conditions have
not been satisfied, the Stockholders (acting in unison) shall have the right to
terminate this Agreement, or in the alternative, waive any condition not so
satisfied. Any act or action of the Stockholders in consummating the Closing or
delivering the certificates representing Company Stock as of the Consummation
Date shall constitute a waiver of any conditions not so satisfied. However, no
such waiver shall be deemed to affect the survival of the representations and
warranties of RV Centers contained in Section 5 hereof.
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of RV Centers contained in this Agreement shall
be true and correct in all material respects as of the Closing Date and the
Consummation Date as though such representations and warranties had been made as
of that time; all of the terms, covenants and conditions of this Agreement to be
complied with and performed by RV Centers on or before the Closing Date and the
Consummation Date shall have been duly complied with and performed in all
material respects; and certificates to the foregoing effect dated the Closing
Date and the Consummation Date, respectively, and signed by the President or any
Vice President of RV Centers shall have been delivered to the Stockholders.
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7.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock or the IPO or the
consummation of the Other Agreements in a manner that would have a Material
Adverse Effect upon RV Centers or any of its stockholders or Subsidiaries.
7.3 OPINIONS. The Company shall have received (i) an opinion from
counsel for RV Centers, dated the Closing Date, in the form annexed hereto as
Annex III, and (ii) an opinion, from Ernst & Young LLP, dated the Closing Date,
that the RV Centers Plan of Organization will qualify as a tax-free transfer of
property under Section 351 of the Code and that the Stockholders will not
recognize gain to the extent the Stockholders exchange stock of the Company
Stock for RV Centers Stock (but not cash or other property) pursuant to the RV
Centers Plan of Organization.
7.4 REGISTRATION STATEMENT; MINIMUM VALUE. The Registration Statement
shall have been declared effective by the SEC and not subject to any stop order
proceedings and the underwriters named therein shall have agreed to acquire on a
firm commitment basis, subject to the conditions set forth in the underwriting
agreement, shares of RV Centers Stock on terms such that the aggregate value of
the cash and the shares of RV Centers Stock to be received by the Stockholders
is not less than the Minimum Value set forth on Annex I.
7.5 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the transactions contemplated herein and no governmental agency or body shall
have taken any other action or made any request of the Company as a result of
which the Company deems it inadvisable to proceed with the transactions
hereunder. All consents and approvals of third parties listed on Schedule
4.23(c) shall have been obtained.
7.6 GOOD STANDING CERTIFICATES. RV Centers shall have delivered to the
Company a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which RV Centers is authorized to do business, showing that RV Centers is in
good standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for RV Centers for all periods prior to the Closing
have been filed and paid and RV Centers shall be in good standing in such states
on the Closing Date and the Consummation Date.
7.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance or series of
events shall have occurred with respect to RV Centers which would constitute a
Material Adverse Effect and no change in the disclosures in the Draft
Registration Statement shall have been made which reflects a Material Adverse
Effect on RV Centers.
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7.8 CLOSING OF IPO. The closing of the sale of the RV Centers Stock to
the Underwriters in the IPO shall have occurred on the Consummation Date.
7.9 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of RV Centers, certifying the truth and correctness of attached copies of RV
Centers's Certificate of Incorporation (including amendments thereto), By-Laws
(including amendments thereto), and resolutions of the board of directors and,
if required, the stockholders of RV Centers approving RV Centers's entering into
this Agreement and the consummation of the transactions contemplated herein.
7.10 EMPLOYMENT AGREEMENTS. The Company shall have offered to enter
into an employment agreement, substantially in the form of Annex V, with each of
the persons listed in Schedule 8.11.
7.11 OTHER FOUNDING COMPANIES. A sufficient number of the transactions
contemplated by the Other Agreements with the Other Founding Companies are not
consummated for any reason and as a result (i) RV Centers is unable to list the
RV Centers Stock on the New York Stock Exchange, the American Exchange or The
Nasdaq National Stock Market, subject to official notice of issuance, on or
prior to the Closing Date or (ii) the combined revenue of the Founding Companies
for which the transactions contemplated by this Agreement and the Other
Agreements are consummated is less than $175 million based on the 12-month
period ended December 31, 1998.
7.12 MANAGEMENT LOCK-UP AGREEMENTS. The Chairman, Vice Chairman, other
senior management of RV Centers, J. Christian Baker, III and A. John Kreft shall
have entered into agreements with RV Centers imposing substantially the same
transfer restrictions as provided in Section 14.1 hereof, on seventy-five
percent (75%) of the shares of RV Centers Stock held by such individuals, their
spouses and children and trusts for the benefit of such individuals.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RV CENTERS
The obligations of RV Centers with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions, except Section 8.12. The
obligations of RV Centers with respect to actions to be taken on the
Consummation Date are subject to the satisfaction or waiver on or prior to the
Consummation Date of the conditions set forth in Sections 8.1, 8.2, 8.4 and
8.12. As of the Closing Date or, with respect to the conditions set forth in
Sections 8.1, 8.2, 8.4 and 8.12, as of the Consummation Date, if any such
conditions have not been satisfied, RV Centers shall have the right to terminate
this Agreement, or waive any such condition. Any act or action of RV Centers in
consummating the Closing or delivering the certificates representing RV Centers
Stock as of the Consummation Date shall constitute a waiver of any conditions
not so satisfied. However, no such waiver shall be deemed to affect the survival
of the representations and warranties contained in Section 4 hereof.
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8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the Stockholders and the Company contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date and the Consummation Date with the same effect as though such
representations and warranties had been made on and as of such date; all of the
terms, covenants and conditions of this Agreement to be complied with or
performed by the Stockholders and the Company on or before the Closing Date or
the Consummation Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the Stockholders shall have
delivered to RV Centers certificates dated the Closing Date and the Consummation
Date, respectively, and signed by them to such effect.
8.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock or the IPO.
8.3 SECRETARY'S CERTIFICATE. RV Centers shall have received a
certificate, dated the Closing Date and signed by the secretary of the Company,
certifying the truth and correctness of attached copies of the Company Charter
(including amendments thereto), By-Laws (including amendments thereto), and
resolutions of the board of directors and the Stockholders approving the
Company's entering into this Agreement and the consummation of the transactions
contemplated herein.
8.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
8.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to RV
Centers an instrument dated the Closing Date, which shall be effective only upon
the occurrence of the Consummation Date, releasing the Company and RV Centers
from (i) any and all claims of the Stockholders against the Company and RV
Centers and (ii) obligations of the Company and RV Centers to the Stockholders,
except for (A) continuing obligations to Stockholders relating to their
employment by the Company pursuant to employment agreements entered into as
specified in Section 8.11 hereof, (B) obligations arising under this Agreement
or the transactions contemplated hereby and (C) claims of Stockholders against
the Company for unreimbursed business expenses incurred by the Stockholders on
behalf of the Company (other than expenses related to the transactions
contemplated by this Agreement) prior to the Consummation Date or unreimbursed
medical expenses of the Stockholders incurred prior to the Consummation Date
which are covered by the Company's existing health insurance coverage. In the
event that the Consummation Date does not occur, then the release instrument
referenced herein shall be void and of no further force or effect.
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8.6 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 8.6, all existing agreements between the Company and the Stockholders
(and between the Company and entities controlled by the Stockholders) shall have
been canceled effective prior to or as of the Consummation Date.
8.7 OPINION OF COUNSEL. RV Centers and the Underwriters shall have
received an opinion from Counsel to the Company and the Stockholders, dated the
Closing Date, substantially in the form annexed hereto as Annex IV.
8.8 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 4.23(c), other than
manufacturers of recreational vehicles, shall have been obtained; provided,
however, Company shall have used its best efforts, in cooperation with RV
Centers, to obtain the consent of the recreational vehicle manufacturers listed
in Schedule 4.23(c); and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the purchase and sale of the Company Stock
and no governmental agency or body shall have taken any other action or made any
request of RV Centers as a result of which RV Centers deems it inadvisable to
proceed with the transactions hereunder.
8.9 GOOD STANDING CERTIFICATES. The Company shall have delivered to RV
Centers a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the State
of Incorporation and, unless waived by RV Centers, in each state in which the
Company is authorized to do business, showing the Company is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes for the Company for all periods prior to the Closing have been
filed and paid.
8.10 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex V hereto.
8.12 CLOSING OF IPO. The closing of the sale of the RV Centers Stock to
the Underwriters in the IPO shall have occurred simultaneously with the
Consummation Date hereunder and the Stockholders shall have delivered to the
Underwriters such customary closing documents as they may reasonably request.
8.13 FIRPTA CERTIFICATE. Each Stockholder (other than the stockholders
which are foreign entities or foreign residents) shall have delivered to RV
Centers a certificate to the effect that he is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
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8.14 RESIGNATIONS OF DIRECTORS. Any directors of the Company shall have
resigned as directors of the Company.
8.15 LEASE AGREEMENTS. If the Company leases property from any
Stockholder or Affiliate of a Stockholder, the Company and such Stockholder or
Affiliate shall have entered into a lease agreement, substantially in the form
attached as Annex VI hereto, and the Company shall be released from any
liability for loans used to purchase the property.
9. COVENANTS OF RV CENTERS AND THE STOCKHOLDERS AFTER CLOSING
9.1 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement or the Registration Statement, after the
Consummation Date, RV Centers shall not and shall not permit any of its
Subsidiaries to undertake any act that would jeopardize the tax-free status of
the exchange of Company Stock for RV Centers Stock (but not cash or other
property), including without limitation the retirement or reacquisition,
directly or indirectly, of all or part of the RV Centers Stock issued in
connection with the transactions contemplated herein.
9.2 PREPARATION AND FILING OF TAX RETURNS.
(i) The Company, if possible, or otherwise the Stockholders
shall file or cause to be filed all tax returns (federal, state, local
or otherwise) of any Acquired Party for all taxable periods that end on
or before the Consummation Date, and shall permit RV Centers to review
all such tax returns prior to such filings except with respect to
information pertaining to members of a consolidated group other than
the Company. Unless the Company is a C corporation, the Stockholders
shall pay or cause to be paid all Tax liabilities (in excess of all
amounts already paid with respect thereto or properly accrued or
reserved with respect thereto on the Company's Financial Statements)
shown by such tax returns to be due or otherwise attributable to such
tax returns.
(ii) If the Company is an S corporation, then upon filing the
final tax returns covering the Company's earnings for the year ended
December 31, 1998 and the period from January 1, 1999 to the
Consummation Date, Stockholders shall provide to RV Centers copies of
the Forms 1120S and Schedule K-1s and equivalent state income tax forms
so filed. If the amount of dividends or distributions made pursuant to
Annex I in anticipation of such taxes exceeds the "Calculated Tax
Amount," as defined below, for the applicable period, then Stockholders
shall repay any excess amount to the Company within 10 days of the
filing of the Form 1120S, or equivalent and provide a written
calculation of the Calculated Tax Amount. If the amount of dividends or
distributions made pursuant to Annex I in anticipation of such taxes is
less than the Calculated Tax Amount for the applicable period, then the
Company shall reimburse Stockholders for the amount of such deficiency
within 10 days of receiving a copy of the filed Form 1120S, Schedule
K-1s or equivalent and a written calculation of the Calculated Tax
Amount. The Calculated Tax Amount shall mean the amount of federal and
state income taxes that was owed on each Stockholder's income from
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the Company, for the periods from July 1, 1998 to December 31, 1998 and
from January 1, 1999 to the Consummation Date, assuming a federal tax
rate of 39.6% and the applicable state tax rate (net of federal
benefits).
(iii) RV Centers shall file or cause to be filed all separate
Returns of, or that include, any Acquired Party for all taxable periods
ending after the Consummation Date.
(iv) Each party hereto shall, and shall cause its Subsidiaries
and Affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in
filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any
audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of all relevant portions of
relevant Returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning
the ownership and Tax basis of property, which such party may possess.
Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party
required to file Returns pursuant to this Agreement shall bear all
costs of filing such Returns.
(v) Each of the Company, RV Centers and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the
transaction as a tax-free contribution under Section 351(a) of the Code
subject to gain, if any, recognized on the receipt of cash or other
property under Sections 351(b) or 357(c) of the Code.
9.3 DIRECTORS. Upon execution of this Agreement by the Company and
Stockholders and execution of similar agreements by the Other Founding Companies
and their stockholders, each Founding Company shall vote for five
representatives to become Directors of RV Centers. No cumulative voting is
permitted. RV Centers shall appoint those five persons receiving the most votes
as directors promptly following the Consummation Date. The other six persons
identified in the Registration Statement shall also be appointed Directors at
the same time, if not presently on the RV Centers Board of Directors.
9.4 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. RV
Centers shall use reasonable efforts to have the Stockholders released from any
and all guarantees of the Company's indebtedness, including bond obligations,
identified on Schedule 9.4. Prior to obtaining the release of such guarantees,
RV Centers shall, if requested, provide its guarantee of such indebtedness to
the lenders thereof. In the event that RV Centers cannot obtain such releases
from the lenders of any such guaranteed indebtedness identified on Schedule 9.4
on or prior to 180 days subsequent to the Consummation Date, RV Centers shall
promptly pay off or otherwise refinance or retire such indebtedness such that
the Stockholders' personal liability shall be released. RV
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Centers will indemnify the Stockholders against any loss or damage suffered as a
result of the personal guarantees.
9.5 ACCESS TO RECORDS. RV Centers agrees (i) to hold all of the books
and records of the Company existing on the Consummation Date and not to destroy
or dispose of any such books and records for a period of 5 years from the
Consummation Date or such longer time as may be required by law, and (ii)
following the Consummation Date to afford Stockholders, their accountants and
counsel, during normal business hours, upon reasonable request, access to such
books, records and other data of the Company to the extent that such access may
be requested for a legitimate purpose at no cost to Stockholder (other than for
reasonable out-of-pocket expenses).
10. INDEMNIFICATION
The Stockholders and RV Centers each make the following covenants that
are applicable to them, respectively:
10.1 INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders covenant and
agree that they, jointly and severally, will indemnify, defend, protect and hold
harmless RV Centers and the Company at all times, from and after the date of
this Agreement until the Expiration Date (provided that for purposes of Section
10.1(iii) below, the Expiration Date shall be the date on which the applicable
statute of limitations expires), from and against all claims, damages (including
consequential, punitive or exemplary), actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees, consulting fees and expenses of
investigation and environmental response) incurred by RV Centers and the Company
as a result of or arising from (i) any breach of the representations and
warranties of the Stockholders or the Company set forth herein or on the
schedules or certificates delivered in connection herewith, (ii) any breach of
any agreement on the part of the Stockholders or, prior to the Consummation
Date, the Company under this Agreement, or (iii) any liability under the 1933
Act, the 1934 Act or other Federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to the Company or the Stockholders which
was based upon and in conformity with information provided in writing to RV
Centers or its counsel by the Company or the Stockholders expressly for use in
the Registration Statement or any prospectus forming a part thereof and is
contained in the Registration Statement or any prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of or
based upon any omission or alleged omission to state therein a material fact
relating to the Company or the Stockholders required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading to the extent such omission or alleged
omission is based upon the failure of the Company or the Stockholders to provide
to RV Centers the information containing that fact in any Schedule hereto or
otherwise to provide the information to RV Centers in writing, but such
indemnity shall not apply to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and the
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Stockholders provided, in writing, corrected information to RV Centers counsel
and to RV Centers for inclusion in the final prospectus, and such information
was not so included or properly delivered, and provided further, that no
Stockholder shall be liable for any indemnification obligation pursuant to this
Section 10.1 to the extent solely attributable to a breach of any
representation, warranty or agreement made herein individually by any other
Stockholder.
RV Centers acknowledges and agrees that other than the representations
and warranties of the Company or the Stockholders specifically contained in this
Agreement, there are no representations or warranties of the Company or the
Stockholders, either express or implied, with respect to the transactions
contemplated by this Agreement, the Company or its assets, liabilities and
business.
RV Centers and the Company further acknowledge and agree that their
sole and exclusive remedy with respect to any and all claims for breach of this
Agreement and the transactions contemplated in this Agreement, shall be pursuant
to the indemnification provisions set forth in this Section 10. RV Centers and
the Company hereby waive to the fullest extent permitted under applicable law,
any and all other rights, claims and causes of action they or any indemnified
person may have against the Company or any Stockholder relating to this
Agreement or the transactions arising under or based upon any federal, state,
local or foreign statute, law, rule, regulation or otherwise.
10.2 INDEMNIFICATION BY RV CENTERS. RV Centers covenants and agrees
that it will indemnify, defend, protect and hold harmless the Stockholders at
all times from and after the date of this Agreement until the Expiration Date
(provided that for purposes of Section 10.2(iii) below, the Expiration Date
shall be the date on which the applicable statute of limitations expires), from
and against all claims, damages (including consequential, punitive or
exemplary), actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees, consulting fees and expenses of investigation and environmental
response) incurred by the Stockholders as a result of or arising from (i) any
breach by RV Centers of their representations and warranties set forth herein or
on the schedules or certificates delivered in connection herewith, (ii) any
breach of any agreement on the part of RV Centers under this Agreement; or (iii)
any liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to RV Centers
or any of the Founding Companies contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to RV
Centers, any of the Founding Companies or their respective stockholders,
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading, except to
the extent such statement or omission is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission, made therein in
reliance upon, and in conformity with, the representations and warranties of the
Company or the Stockholders
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specifically contained in this Agreement or other information furnished to RV
Centers by the Company or the Stockholders in writing specifically for inclusion
therein.
10.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 10.1, 10.2, or 10.6
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any such proceeding
without the written consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if counsel to
the Indemnifying Party shall have a conflict of interest that prevents counsel
for the Indemnifying Party from representing Indemnified Party, Indemnified
Party shall have the right to participate in such matter through counsel of its
own choosing and Indemnifying Party will reimburse the Indemnified Party for the
reasonable expenses of its counsel.
After the Indemnifying Party has notified the Indemnified
Party of its intention to undertake to defend or settle any such asserted
liability, and for so long as the Indemnifying Party diligently pursues such
defense, the Indemnifying Party shall not be liable for any additional legal
expenses incurred by the Indemnified Party in connection with any defense or
settlement of such asserted liability, except (i) as set forth in the preceding
sentence and (ii) to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses.
If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim involving only the payment of
money and the Indemnified Party refuses to consent to such settlement, then the
Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person. Upon agreement as to such settlement between said Third Person and
the Indemnifying Party, the Indemnifying Party shall, in exchange for a complete
release from the Indemnified Party, promptly pay to the Indemnified Party the
amount agreed to in such settlement and the Indemnified Party shall, from that
moment on, bear full responsibility for any additional costs of defense which
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it subsequently incurs with respect to such claim and all additional costs of
settlement or judgment. If the Indemnifying Party does not undertake to defend
such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnified Party may settle such matter, and
the Indemnifying Party shall reimburse the Indemnified Party for the settlement
and any other liabilities or expenses incurred by the Indemnified Party in
connection therewith, provided, however, that under no circumstances shall the
Indemnified Party settle any Third Person claim without the written consent of
the Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. All settlements hereunder shall effect a complete release of the
Indemnified Party, unless the Indemnified Party otherwise agrees in writing.
10.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
10 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
10.5 LIMITATIONS ON INDEMNIFICATION. (a) RV Centers and the other
persons or entities indemnified pursuant to Section 10.1 or any other indemnity
hereunder, shall not assert any claim for indemnification pursuant to Section
10.1 against the Stockholders until such time as the aggregate of all claims
which such persons may have against such Stockholders shall exceed an amount
(the "Threshold Amount") equal to one percent of the sum of (x) the cash paid to
the Stockholders on the Consummation Date pursuant to Section 2.1 and (y) the
value of the RV Centers Stock delivered to the Stockholders on the Consummation
Date pursuant to Section 2.1 valued at the initial public offering price as set
forth in the Registration Statement, and then only to the extent of claims in
excess of such sum. Stockholders shall not assert any claim for indemnification
hereunder against RV Centers until such time as the aggregate of all claims
which Stockholders may have against RV Centers shall exceed the Threshold
Amount. The Threshold Amount shall increase to equal one percent of the sum of
(x) plus (y) plus the Additional Consideration, if any, described on Annex I
hereto, upon the payment to the Stockholder of the Additional Consideration,
exclusive of any interest earned on the Additional Cash (as such terms are
defined on Annex I).
(b) No person shall be entitled to indemnification under this Section
10 if and to the extent that such person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement.
(c) Notwithstanding any other term of this Agreement, no Stockholder
shall be liable under this Section 10 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds (including cash and RV Centers Stock)
actually received by such Stockholder (valued as of the Consummation Date) in
connection with the purchase and sale of the Company Stock, exclusive of
interest earned on the Additional Cash. For purposes of this paragraph, the RV
Centers
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Stock shall be valued at the initial public offering price to the public as set
forth in the final prospectus deemed by Rule 430A of the 1933 Act Regulations to
constitute a part of the Registration Statement.
(d) A Stockholder may pay any indemnification obligation under Section
10 by means of the payment of cash or a combination of the payment of cash and
the delivery to RV Centers of shares of RV Centers Stock; provided that the
percentage of the indemnification obligation satisfied by means of the delivery
of shares of RV Centers Stock does not exceed the percentage of RV Centers Stock
comprising the total consideration paid to such Stockholder by RV Centers to
such Stockholder pursuant to Annex I. For the purpose of crediting Stockholders
for payments made to RV Centers by means of delivery of shares of RV Centers
Stock, the RV Centers Stock shall be valued at the average closing price as
reported on the New York Stock Exchange (or other national exchange or quotation
system) on the five trading days immediately preceding delivery of the shares
pursuant to this section.
(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds actually realized by such party
(or, in the case of RV Centers, by RV Centers, the Company or any Subsidiary of
RV Centers or the Company) and such correlative insurance proceeds or other
third party indemnity or reimbursement proceeds shall be net of any insurance
premium or other incremental cost or expense owed or payable to any third party
which becomes due as a result of such claim. RV Centers shall use commercially
reasonable efforts to pursue any available insurance coverage or other rights of
indemnity or reimbursement from third parties with respect to any such loss,
liability or expense.
(f) The limitations on liability set forth in this Section 10.5 shall
not apply to breaches of representations, warranties or covenants set forth in
Sections 4.3, 4.22 and 4.29(c).
(g) Notwithstanding anything contained herein to the contrary, the
Stockholders shall indemnify, defend and hold harmless the Company, RV Centers
and their Affiliates, officers, directors and employees, from and against all
claims, losses, damages of any type, and all expenses, including attorneys fees,
arising from any claims made by James T. Cook or Betty Cook, including those
claims asserted in the action "James T. Cook and Betty Cook v. Aberdeen RV
Center, Inc. And Jayco, Inc." currently in the Northern District of Alabama,
Western Division, Case No. CV-C-1003-W. Such indemnification shall be without
regard to whether the amount of damages exceeds the Threshold Amount.
10.6 TAX INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless RV Centers and the Company from and against the entirety of any
adverse consequences the Company or RV Centers may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any liability of the
Company and its subsidiaries for the unpaid Taxes of any past, current or future
member of the
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consolidated tax group of which the Company is or was a member on or prior to
the Consummation Date pursuant to Reg. ss.1.1502-6 (or any similar provision of
state, local, or foreign law), for any periods prior to the Closing Date, as a
transferee or successor, by contract, or otherwise.
11. TERMINATION OF AGREEMENT
11.1 TERMINATION. This Agreement may be terminated at any time prior to
the Consummation Date solely:
(i) by mutual consent of the boards of directors of RV Centers
and the Company;
(ii) by the Stockholders or the Company (acting through its
board of directors), on the one hand, or by RV Centers (acting through
its board of directors), on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall not
have been consummated by July 31, 1999 unless the failure of such
transactions to be consummated is due to the willful failure of the
party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed
by it prior to or on the Consummation Date;
(iii) by the Stockholders or the Company, on the one hand, or
by RV Centers, on the other hand, if a material breach or default shall
be made by the other party in the observance or in the due and timely
performance of any of the covenants or agreements contained herein, and
the curing of such default shall not have been made on or before the
Consummation Date or by the Stockholders or the Company, if the
conditions set forth in Section 7 hereof have not been satisfied or
waived as of the Closing Date or the Consummation Date, as applicable,
or by RV Centers, if the conditions set forth in Section 8 hereof have
not been satisfied or waived as of the Closing Date or the Consummation
Date, as applicable; or
(iv) pursuant to Section 3 hereof.
11.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section
6.7, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses.
11.3 RETURN OF STOCK CERTIFICATES. If at the time of termination
Stockholders have delivered their Company stock certificates, such certificates
will be promptly returned upon termination.
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12. NONCOMPETITION
12.1 PROHIBITED ACTIVITIES. Except for the activities of the
Stockholders and their Affiliates as set forth in Schedule 12.1 (which shall be
deemed to be permitted activities under this Section 12.1), the Stockholders
will not, without the prior written consent of RV Centers, for a period of five
(5) years following the Consummation Date, for any reason whatsoever, directly
or indirectly, for themselves or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business or operation selling any products or
services in direct competition with any products or services sold by RV
Centers or any Subsidiary thereof, within one hundred (100) miles of
where RV Centers or any Other Founding Company conducted business prior
to the Effective Time (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of RV Centers or any Subsidiary thereof in a
sales or service representative or managerial capacity for the purpose
or with the intent of enticing such employee away from or out of the
employ of RV Centers or any Subsidiary thereof;
(iii) call upon any Person or entity which is, at that time,
or which has been, within one (1) year prior to the Consummation Date,
a customer of RV Centers or any Subsidiary thereof, of the Company or
of any of the Other Founding Companies within the Territory for the
purpose of soliciting or selling products or services in direct
competition with any products or services sold by RV Centers or any
Subsidiary thereof within the Territory;
(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor which candidate
was, to the actual knowledge of such Stockholder after reasonable
inquiry, either called upon by RV Centers or any Subsidiary thereof or
for which RV Centers or any Subsidiary thereof made an acquisition
analysis, for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of
the Company to any person, firm, partnership, corporation or business
for any reason or purpose whatsoever except to the extent that the
Company has in the past disclosed such information to the public for
valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than three percent (3%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or on an
over-the-counter or similar market, or (ii) not more than five percent (5%) of
the capital stock of a competing business whose stock is not publicly traded.
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12.2 DAMAGES. Because of the difficulty of measuring economic losses to
RV Centers as a result of a breach of the covenant set forth in Section 12.1,
and because of the immediate and irreparable damage that could be caused to RV
Centers for which it would have no other adequate remedy, each Stockholder
agrees that the covenant set forth in Section 12.1 may be enforced by RV
Centers, in the event of breach by such Stockholder, by injunctions and
restraining orders.
12.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 12 impose a reasonable restraint on the
Stockholders in light of the activities and business of RV Centers and the
Subsidiaries thereof on the date of the execution of this Agreement and the
current plans of RV Centers; but it is also the intent of RV Centers and the
Stockholders that such covenants be construed and enforced in accordance with
the changing activities, business and locations of RV Centers and its
subsidiaries throughout the term of this covenant, including, with respect to
subparagraph 12.1(i), any new locations in which RV Centers or its subsidiaries
conducts business during the term of this covenant.
12.4 SEVERABILITY; REFORMATION. The covenants in this Section 12 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
12.5 INDEPENDENT COVENANT. All of the covenants in this Section 12
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against RV Centers or any Subsidiary thereof, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by RV
Centers of such covenants. It is specifically agreed that the period of five (5)
years stated at the beginning of this Section 12, during which the agreements
and covenants of each Stockholder made in this Section 12 shall be effective,
shall be computed by excluding from such computation any time during which such
Stockholder is in violation of any provision of this Section 12. The covenants
contained in Section 12 shall not be affected by any breach of any other
provision hereof by any party hereto and shall have no effect if the
transactions contemplated in this Agreement are not consummated.
12.6 MATERIALITY. The Company and the Stockholders hereby agree that
this covenant is a material and substantial part of this transaction.
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13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
13.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, the Other Founding Companies,
and/or RV Centers, such as operational policies, customer lists, and pricing and
cost policies that are valuable, special and unique assets of the Company's, the
Other Founding Companies' and/or RV Centers's respective businesses. The
Stockholders agree that they will not disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of RV Centers,
provided that such representatives agree to the confidentiality provisions of
this Section 13.1, (b) following the Closing, such information may be disclosed
by the Stockholders as is required in the course of performing their duties for
RV Centers or the Company and (c) to counsel and other advisers, provided that
such advisers (other than counsel) agree to the confidentiality provisions of
this Section 13.1, unless (i) such information becomes known to the public
generally through no fault of the Stockholders, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii), the
Stockholders shall, if possible, give prior written notice thereof to RV Centers
and provide RV Centers with the opportunity to contest such disclosure, or (iii)
the disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party. In the
event of a breach or threatened breach by any of the Stockholders of the
provisions of this Section, RV Centers shall be entitled to an injunction
restraining such Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting RV
Centers from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages. In the event the transactions
contemplated in this Agreement are not consummated, Stockholders shall have none
of the above-mentioned restrictions on their ability to disseminate confidential
information with respect to the Company.
13.2 RV CENTERS. RV Centers recognizes and acknowledges that it had in
the past and currently has access to certain confidential information of the
Company and the Stockholders, such as operational policies, and pricing and cost
policies that are valuable, special and unique assets of the Company's business.
RV Centers agrees that, prior to the Closing, or if the transactions
contemplated in this Agreement are not consummated, it will not disclose such
confidential information to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except (a) to authorized
representatives of the Company, provided that such representatives agree to the
confidentiality provisions of this Section 13.2, (b) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 13.2, (c) to the Other Founding
Companies and their representatives pursuant to Section 6.1(a), unless (i) such
information becomes known to the public generally through no fault of RV
Centers, (ii) disclosure is required by law or the order of any governmental
authority under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), RV Centers shall, if possible, give prior written
notice thereof to the Company and the Stockholders and provide the Company and
the Stockholders with the opportunity to contest such disclosure, or (iii)
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the disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, and (d)
to the public to the extent necessary or advisable in connection with the filing
of the Registration Statement and the IPO and the securities laws applicable
thereto. In the event of a breach or threatened breach by RV Centers of the
provisions of this Section, the Company and the Stockholders shall be entitled
to an injunction restraining RV Centers from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
the Company and the Stockholders from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages.
13.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Section 13.1 and 13.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
13.4 SURVIVAL. The obligations of the parties under this Article 13
shall survive the termination of this Agreement.
14. TRANSFER RESTRICTIONS
14.1 TRANSFER RESTRICTIONS. For a period of two years from the Closing
Date, with respect to 80% of the shares of RV Centers Stock received by such
Stockholder pursuant to this Agreement, and for a period of one year from the
Closing Date, with respect to the remaining 20% of such shares, no Stockholder
shall (i) sell, assign, exchange, transfer, pledge, or otherwise dispose of any
such shares of RV Centers Stock or any securities convertible into, exchangeable
or exercisable for any such shares of RV Centers Stock, (ii) grant any option to
purchase, or otherwise enter into any contract or arrangement to sell, assign,
transfer, pledge or otherwise dispose of, any such shares of RV Centers Stock,
or (iii) enter into any swap, collar, short sale or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequences of ownership of the RV Centers Stock, whether any such
swap, collar, short sale, agreement or transaction is to be settled by delivery
of shares of RV Centers Stock or other securities, by the delivery or payment of
cash or otherwise. Provided, however, Stockholder may pledge such shares as
security, subject to the foregoing restrictions, for a loan by a lender who
acknowledges and agrees to such restrictions in writing. The foregoing
restrictions shall not apply, however, to (a) the sale of shares of RV Centers
Stock, and entering into agreements relating to the sale of shares of RV Centers
Stock, pursuant to Section 16 hereof, or (b) transfers to (I) immediate family
members of such Stockholder who agree to be bound by the restrictions set forth
in this Section 14.1, (II) trusts, limited partnerships or other estate planning
entities for the benefit of such Stockholder or family members of such
Stockholder which have agreed, through action taken by the trustees, partners or
other persons having authority to bind the trust, limited partnership or other
estate planning entity, to be bound by such restrictions and to be liable for
the transferring Stockholder's indemnification obligations hereunder, (III) any
charitable organization that qualifies for receipt of charitable contributions
under Section 170(c) of the Code which agrees to be bound by such restrictions
and
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to be liable for the transferring Stockholder's indemnification obligations
hereunder, or (c) for transfers of RV Centers Stock to RV Centers pursuant to
Section 10.5(d).
The certificates evidencing the RV Centers Stock delivered to the
Stockholders pursuant to Section 3 of this Agreement will bear a legend
substantially in the form set forth below and containing such other information
as RV Centers may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF WITHOUT THE WRITTEN
CONSENT OF THE ISSUER OR PURSUANT TO CERTAIN LIMITED EXCEPTIONS CONTAINED IN
SECTION 14.1 TO THAT CERTAIN ACQUISITION AGREEMENT BETWEEN RV CENTERS, INC. AND
AMERICAN RV CENTERS, INC. DATED JANUARY 12, 1999, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO _______ [INSERT THE
ACTUAL SECOND ANNIVERSARY OF CLOSING DATE] EXCEPT FOR THE ABOVE-REFERENCED
LIMITED EXCEPTIONS. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE,
THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED
WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15. FEDERAL SECURITIES ACT REPRESENTATIONS
15.1 COMPLIANCE WITH LAW. The Stockholders acknowledge that the shares
of RV Centers Stock to be delivered to the Stockholders pursuant to this
Agreement have not been and will not be registered under the 1933 Act (except as
provided in Section 16 hereof) and therefore may not be resold without
compliance with the 1933 Act. The RV Centers Stock to be acquired by such
Stockholders pursuant to this Agreement is being acquired solely for their own
respective accounts, for investment purposes only, and with no present intention
of distributing, selling or otherwise disposing of it in connection with a
distribution. The Stockholders covenant, warrant and represent that none of the
shares of RV Centers Stock issued to such Stockholders will be offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of except
after full compliance with all of the applicable provisions of the 1933 Act and
the rules and regulations of the SEC or pursuant to exceptions therefrom. All
the RV Centers Stock shall bear the following legend in addition to the legend
required under Section 14 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE SECURITIES LAW OR SUCH SHARES ARE
SOLD OR TRANSFERRED PURSUANT TO AN EXEMPTION THEREFROM.
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15.2 ECONOMIC RISK; SOPHISTICATION. The Stockholders represent and
warrant that they are able to bear the economic risk of an investment in the RV
Centers Stock to be acquired pursuant to this Agreement and can afford to
sustain a total loss of such investment. Each Stockholder has substantial
knowledge and experience in making investment decisions of this type (or is
relying on qualified purchaser representatives with such knowledge and
experience in making this decision), and is capable, either individually or with
such purchaser representatives, of evaluating the merits and risks of this
investment. The Stockholders who are parties hereto have had an adequate
opportunity to ask questions and receive answers from the officers of RV Centers
concerning any and all matters relating to the transactions described herein
including, without limitation, the background and experience of the current and
proposed officers and directors of RV Centers, the plans for the operations of
the business of RV Centers, the business, operations and financial condition of
the Founding Companies other than the Company, and any plans for additional
acquisitions and the like. The Stockholders have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction. Except as set forth on Schedule 15.2, each
Stockholder is an "accredited investor" as defined in Rule 501 of the 1933 Act.
16. REGISTRATION RIGHTS
16.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the
Consummation Date, whenever RV Centers proposes to register any RV Centers Stock
for its own or others' accounts under the 1933 Act for a public offering, other
than (i) any shelf or other registration of shares to be used as consideration
for acquisitions of additional businesses by RV Centers and (ii) registrations
relating to employee benefit plans, RV Centers shall promptly give each of the
Stockholders written notice of its intent to do so. Upon the written request of
any of the Stockholders given within 10 days after receipt of such notice, RV
Centers shall cause to be included in such registration all of the RV Centers
Stock issued to such Stockholders pursuant to this Agreement (including any
stock issued as or issuable upon the conversion or exchange of any convertible
security, warrant, right or other security which is issued by RV Centers as a
stock split, dividend or other distribution with respect to, or in exchange for,
or in replacement of such RV Centers Stock) which any such Stockholder requests,
other than shares of RV Centers Stock which may be sold under Rule 144(k) (or
any similar or successor provision) promulgated under the 1933 Act, and other
than shares of RV Centers Stock that have been theretofore sold by the
Stockholder in accordance with the 1933 Act, provided that RV Centers shall have
the right to reduce pro rata the number of shares of each selling stockholder
included in such registration to the extent that inclusion of such shares could,
in the written opinion of tax counsel to RV Centers or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as a tax-free organization under Section 351 of the Code.
In addition, if RV Centers is advised in writing in good faith by any managing
underwriter of an underwritten offering of the securities being offered pursuant
to any registration statement under this Section 16.1 that the number of shares
to be sold by persons other than RV Centers is greater than the number of such
shares which can be offered without adversely affecting the success of the
offering, RV Centers may reduce pro rata (among the Stockholders and all other
selling security holders in the offering) the number of shares offered for the
accounts of
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such persons (based upon the number of shares held by such person) to a number
deemed satisfactory by such managing underwriter.
The right to cause RV Centers to register shares of RV
Centers Stock under this Agreement may be assigned to any transferee or assignee
of any Stockholder permitted under Section 14.1.
16.2 REGISTRATION PROCEDURES. Whenever RV Centers is required to
register shares of RV Centers Stock pursuant to Section 16.1, RV Centers will,
as expeditiously as possible:
(i) Prepare and file with the SEC a registration statement
with respect to such shares and use commercially reasonable efforts to
cause such registration statement to become effective (provided that
before filing a registration statement or prospectus or any amendments
or supplements or term sheets thereto, RV Centers will furnish a
representative of the Stockholders with copies of all such documents
proposed to be filed and provide the Stockholders an opportunity to
comment on the information therein relating to the Stockholders) as
promptly as practical;
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and the prospectus correct for a period of not less
than 120 days;
(iii) Furnish to each Stockholder who so requests such number
of copies of such registration statement, each amendment and supplement
thereto and the prospectus included in such registration statement
(including each preliminary prospectus and any term sheet associated
therewith), and such other documents as such Stockholder may reasonably
request in order to facilitate the disposition of the relevant shares;
(iv) Use commercially reasonable efforts to register or
qualify the securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as shall
be reasonably requested by the Stockholders, and to keep such
registration or qualification effective during the period such
registration statement is required to be kept effective, provided that
RV Centers shall not be required to become subject to taxation, to
qualify to do business or to file a general consent to service of
process in any such states or jurisdictions;
(v) Cause all such shares of RV Centers Stock to be listed or
included on any securities exchanges or trading systems on which
similar securities issued by RV Centers are then listed or included;
and
(vi) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that RV Centers is required to
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keep the registration statement effective of the happening of any event
as a result of which the prospectus included in such registration
statement (as then in effect), together with any associated term sheet,
contains an untrue statement of a material fact or omits any fact not
misleading, and, at the request of such Stockholder, RV Centers will
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of the covered shares, such
prospectus will not contain an untrue statement of material fact or
omit to state any fact not misleading.
All expenses incurred in connection with the registration under this
Article 16 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall be
borne by RV Centers.
16.3 INDEMNIFICATION.
(a) In connection with any registration under Section 16.1, RV
Centers shall indemnify, to the extent permitted by law, each selling
Stockholder (an "Indemnified Stockholder") against all losses, claims, damages,
liabilities and expenses arising out of or resulting from any untrue or alleged
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or associated term sheet or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in or omitted from any information furnished in
writing to RV Centers by such Indemnified Stockholder expressly for use therein
or by any Indemnified Stockholder's failure to deliver a copy of the
registration statement or prospectus or any amendment or supplements thereto
after RV Centers has furnished such Indemnified Stockholder with a sufficient
number of copies of the same.
(b) In connection with any registration under Section 16.1,
each Stockholder shall furnish to RV Centers in writing such information as is
reasonably requested by RV Centers for use in any such registration statement or
prospectus and will indemnify, to the extent permitted by law, RV Centers, its
directors and officers and each person who controls RV Centers (within the
meaning of the 1933 Act) against any losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement or material fact
or any omission or alleged omission of a material fact required to be stated in
the registration statement or prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading, but only to the extent
that such untrue or alleged untrue statement or omission or alleged omission is
contained in or omitted from information so furnished in writing by such
Stockholder specifically for use in preparing the registration statement.
Notwithstanding the foregoing, the liability of a Stockholder under this Section
16.3 shall be limited to an amount equal to the net proceeds actually received
by such Stockholder from the sale of the relevant shares covered by the
registration statement.
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(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties' reasonable
judgment, a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Any failure to give prompt notice shall deprive a party of
its right to indemnification hereunder only to the extent that such failure
shall have adversely affected the indemnifying party. If the defense of any
claim is assumed, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party that is not entitled or elects not
to assume the defense of a claim, will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
16.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 16.1 covering an underwritten registered offering, RV
Centers and each participating Stockholder agree to enter into a written
agreement with the managing underwriters in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such managing underwriters and companies of RV Centers's size and
investment stature, including a customary indemnification agreement; provided,
however, that the Stockholders shall be excluded from any indemnification of the
underwriters other than with respect to information provided by the Stockholders
to RV Centers or the managing underwriters specifically for use in the
registration statement.
16.5 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of RV
Centers stock to the public without registration, RV Centers agrees to use
commercially reasonable efforts to:
(i) make and keep public information regarding RV Centers
available as those terms are understood and defined in Rule 144 under
the 1933 Act for a period of four years beginning 90 days following the
effective date of the Registration Statement;
(ii) file with the SEC in a timely manner all reports and
other documents required of RV Centers under the 1933 Act and the 1934
Act at any time after it has become subject to such reporting
requirements; and
(iii) so long as a Stockholder owns any restricted RV Centers
Stock, furnish to each Stockholder forthwith upon written request a
written statement by RV Centers as to its compliance with the current
public information requirements of Rule 144 (at any time from and after
90 days following the effective date of the Registration Statement),
and of the 1933 Act and the 1934 Act (any time after it has become
subject to such reporting requirements), a copy of the most recent
annual or quarterly report of RV Centers, and such other reports
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and documents so filed as a Stockholder may reasonably request in
availing itself of any rule or regulation of the SEC allowing a
Stockholder to sell any such shares without registration.
16.6 AVAILABILITY OF RULE 144. RV Centers shall not be obligated to
register shares of RV Centers Stock held by a Stockholder at any time when the
resale provisions of Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act are available to such Stockholder.
17. GENERAL
17.1 COOPERATION. The Company, the Stockholders and RV Centers shall
each deliver or cause to be delivered to the other on the Consummation Date, and
at such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate with
RV Centers on and after the Consummation Date in furnishing information,
evidence, testimony and other assistance in connection with any tax return
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Consummation
Date.
17.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of RV Centers, and the heirs and legal representatives of the
Stockholders.
17.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company and RV Centers and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and subject to Section 6.7 may be
modified or amended only by a written instrument executed by the Stockholders,
the Company and RV Centers, acting through their respective officers or
trustees, duly authorized by their respective Boards of Directors. Any
disclosure made on any Schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other Schedule required hereby, provided
that the Company shall make a good faith effort to cross reference disclosure,
as necessary or advisable, between related Schedules.
17.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument. A telecopied
facsimile of an executed counterpart of this Agreement shall be sufficient to
evidence the binding agreement of each party to the terms hereof. However, each
party agrees to return to the other parties an original, duly executed
counterpart of this Agreement promptly after delivery of a telecopied facsimile
thereof.
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17.5 BROKERS AND AGENTS. Except as disclosed on Schedule 17.5, each
party represents and warrants that it employed no broker or agent in connection
with this transaction and agrees to indemnify the other parties hereto against
all loss, cost, damages or expense arising out of claims for fees or commission
of brokers employed or alleged to have been employed by such indemnifying party.
17.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, RV Centers will pay or reimburse Baker Kreft Funding I,
L.L.C. and its Affiliates for the fees, expenses and disbursements of RV Centers
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto and the
IPO, including all costs and expenses incurred in the performance and compliance
with all conditions to be performed by RV Centers under this Agreement, the fees
and expenses of Andrews & Kurth L.L.P., and any other person or entity retained
by RV Centers or Baker Kreft Funding I, L.L.C. ("BKF") and the costs of
preparing the Registration Statement. All expenses, including, but not limited
to, all professional fees of accountants, lawyers, tax consultants and others,
incurred by the Stockholders in connection with this Agreement shall be paid by
the Stockholders or the Company; provided, however, that any such amount paid by
the Company shall be disclosed to RV Centers in writing prior to Closing and
deducted from the cash payable to Stockholders pursuant to Part A of Annex I.
Upon consummation of the transactions contemplated herein, BKF will pay up to
$150,000 of the fees charged by Bracewell & Patterson L.P., counsel to Company
and the Other Founding Companies; Stockholders and the stockholders of the Other
Founding Companies shall pay all amounts in excess of $150,000 to be shared pro
rata based upon the relative values of the Founding Companies. Each Stockholder
shall pay all sales, use, transfer, real property transfer, recording, gains,
stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in
connection with the purchase and sale of the Company Stock, other than Transfer
Taxes, if any, imposed by the State of Delaware. Each Stockholder shall file all
necessary documentation and Returns with respect to such Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company or RV
Centers, will pay all taxes due by him upon receipt of the consideration payable
pursuant to Section 3 hereof. Without limiting Stockholders' ability to rely on
the tax opinion, the Stockholders acknowledge that the risks of the transactions
contemplated herein include tax risks, with respect to which the Stockholders
are relying partially on the opinion contemplated by Section 7.3 hereof and
representations by RV Centers.
17.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party.
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(a) If to RV Centers, addressed to:
RV Centers, Inc.
600 Travis, Suite 2100
Houston, Texas 77002
Attention: Chief Executive Officer
with copies to:
Christopher S. Collins
Andrew & Kurth L.L.P.
600 Travis, Suite 4200
Houston, Texas 77002
(b) If to the Stockholders, addressed to them at their addresses set
forth on the signature pages hereto, with copies to:
Austin B. Byrd
Wyatt, Tarrant & Combs
Crescent Center Suite 650
6075 Poplar Avenue
Memphis, Tennessee 38119-4721
(c) If to the Company, addressed to it at:
American RV Centers, Inc.
4050 N. Thomas
Memphis, Tennessee 38127
Attn: President
with copies to:
Austin B. Byrd
Wyatt, Tarrant & Combs
Crescent Center Suite 650
6075 Poplar Avenue
Memphis, Tennessee 38119-4721
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 17.7 from time to time.
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17.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Delaware, excluding any conflicts of law rule or
principle that might refer same to the laws of another jurisdiction.
17.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
17.10 TIME. Time is of the essence with respect to this Agreement.
17.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
17.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
17.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
17.14 AMENDMENTS AND WAIVERS. Subject to Section 6.7, any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived only with the written consent of RV Centers, the Company and Stockholders
who hold or held at least 51% of the Company Stock. Any amendment or waiver
effected in accordance with this Section 17.14 shall be binding upon each of the
parties hereto, any other person receiving RV Centers Stock in connection with
the purchase and sale of the Company Stock and each future holder of such RV
Centers Stock.
17.15 DISPUTE RESOLUTION. Except with respect to disputes involving
parties other than the parties to this Agreement, no party to this Agreement
shall institute a proceeding in any court or administrative agency to resolve a
dispute arising under this Agreement before that party has sought to resolve the
dispute through direct negotiation with the other party or parties. If the
dispute is not resolved within two weeks after a demand for direct negotiation,
the parties shall attempt to resolve the dispute through mediation. If the
parties do not promptly agree on a mediator, the parties shall request the
Association of Attorney Mediators in Harris County, Texas to appoint a mediator
-62-
<PAGE> 71
certified by the Supreme Court of Texas. If the mediator is unable to facilitate
a settlement of the dispute within a reasonable period of time, as determined by
the mediator, the mediator shall issue a written statement to the parties to
that effect and any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in Houston, Texas, in accordance
with the rules promulgated by the American Arbitration Association then in
effect. Each party shall choose one arbitrator and those arbitrators shall agree
upon the third arbitrator; if they cannot agree upon a third arbitrator within
20 days, the American Arbitration Association shall appoint the third
arbitrator. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The costs and expenses, including reasonable attorneys' fees, of
the prevailing party in any dispute arising under this Agreement will be
promptly paid by the other party or parties.
17.16 REFERENCES, GENDER, NUMBER. All references in this Agreement to a
"Section," or "subsection" shall be to a Section, or subsection of this
Agreement, unless the context requires otherwise. Unless the context otherwise
requires, the words "this Agreement," "hereof," "hereunder," "herein," or words
of similar import shall refer to this Agreement as a whole and not to a
particular Section, subsection, clause or other subdivision hereof. Whenever the
context requires, the words used herein shall include the masculine, feminine
and neuter gender, and the singular and the plural.
17.17 SOLE STOCKHOLDER. Notwithstanding anything in this Agreement to
the contrary, if there is only a single Stockholder, all references herein to
"Stockholders," "each of the Stockholders," "any Stockholder" and any other
reference to Stockholders in the plural context, as well as any reference to any
potential liability or obligation of the Stockholders being "joint and several,"
shall be deemed to mean and include only the sole Stockholder of the Company.
17.18 SCHEDULES AND ANNEXES. Each schedule and annex attached to this
Agreement is incorporated herein by reference and made a part hereof. The
disclosures made on any schedule or annex hereto with respect to any
representation or warranty shall be deemed to be made with respect to any other
representation or warranty requiring the same or similar disclosure to the
extent that the relevance of such disclosure to other representations and
warranties is evident from the face of such schedule or annex.
-63-
<PAGE> 72
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
RV CENTERS, INC.
By: /s/ Clayton K. Trier
------------------------------------
Name: Clayton K. Trier
Title: Chairman of the Board,
Chief Executive Officer and
President
AMERICAN RV CENTERS, INC.
By: /s/ Peter A. Albano
------------------------------------
Name: Peter A. Albano
Title: President
-64-
<PAGE> 73
STOCKHOLDERS:
/s/ Peter Albano ###-##-####
- ----------------------------- -----------------------------
Peter Albano Social Security Number
4400 Walnut Grove Road
Memphis, Tennessee 38117
-65-
<PAGE> 74
ANNEX I -
AMERICAN RV CENTERS, INC.
(TENNESSEE)
TO THE ACQUISITION AGREEMENT
DATED AS OF JANUARY 12, 1999
BY AND AMONG
RV CENTERS, INC.
AMERICAN RV CENTERS, INC. (TENNESSEE)
AND ITS STOCKHOLDER
CONSIDERATION TO BE PAID TO THE STOCKHOLDER
A. CONSIDERATION TO BE PAID TO STOCKHOLDER AT CLOSING
One Million Three Hundred Thirty-Nine Thousand Five Hundred Dollars
($1,339,500) in cash and the value of outstanding Common Stock of RV Centers,
Inc. ("RV Centers") (assuming a public offering price of $12.50 per share),
consisting of: (A) Seventy-Nine Thousand Eight Hundred (79,800) shares of RV
Centers Common Stock, and (B) Three Hundred Forty-Two Thousand Dollars
($342,000) cash; provided however, that the aggregate consideration shall not be
less than the minimum value set forth below.
<TABLE>
<CAPTION>
Consideration to be paid to the
STOCKHOLDER:
--------------------------------
Number of
Company Shares of RV Centers
Stockholder Shares Owned Common Stock Cash
- ----------- ------------ -------------------- ---------
<S> <C> <C> <C>
Peter A. Albano 100 79,800 $ 342,000
</TABLE>
MINIMUM VALUE: One Million One Hundred Forty Thousand Dollars ($1,140,000)
ASSETS TO BE REMOVED FROM THE COMPANY: RV Centers and the Stockholder agree
that, after the Balance Sheet Date, no assets other than the following
assets, along with any associated debt, may be removed from the
Company, such assets to become the property of the Stockholder and any
associated debt to become the liability of the Stockholder:
Lease of BMW 540i, as described in Schedules 4.14(z) and 4.25.
Page 1 of Annex I
<PAGE> 75
ANNEX I -
AMERICAN RV CENTERS, INC.
(TENNESSEE)
ALLOWABLE DIVIDENDS: With the exception of the following, no dividends or
distributions will be paid subsequent to June 30, 1998:
1. An amount equal to the reasonably estimated federal
and state (net of federal benefit) income taxes owed
on S-corporation profits of the Company for the
period from July 1, 1998 to December 31, 1998.
2. An amount equal to the reasonably estimated federal
and state (net of federal benefit) income taxes owed
on S-corporation profits of the Company for the
period from January 1, 1999 to the Consummation Date.
3. If Company is an S Corporation at the date of this
Agreement, at any time and from time to time up until
five days prior to the Consummation Date, Company may
distribute to the Stockholder cash up to the lesser
of (A) the amount of such corporation's "accumulated
adjustment account" (as such term is used in the
Internal Revenue Code of 1986, as amended) as of the
Consummation Date, and (B) the total amount of cash
to be paid to the Stockholder as provided above. If
any such distributions are made, Stockholder shall
provide written notice of the amount of such
distributions to RV Centers no later than five days
prior to the Consummation Date, and the total amount
of such distributions shall be deducted from the cash
to be paid to the Stockholder pursuant to this Annex
I.
ALLOWABLE MONTHLY COMPENSATION: The Company has not since June 30, 1998, and
will not after the date hereof, pay or agree to pay salary, bonus, sales
commissions, fees or any other form of compensation, directly or indirectly, to
the Stockholder or any members of his family in excess of an aggregate of Six
Thousand Dollars ($6,000) per month, plus Two Hundred Forty Thousand Dollars
($240,000) in cash as payment for bonuses accrued in the financial statements as
of June 30, 1998. Notwithstanding the foregoing, family members, who are not
Stockholders and who are currently employed by the Company and are disclosed on
Schedule 4.18, may continue to receive their current salary.
B. ADDITIONAL CONSIDERATION TO BE PAID TO STOCKHOLDER
On the Consummation Date, RV Centers shall deposit $176,000 in cash
(the "Additional Cash") in an interest-bearing escrow account of its designation
and shall reserve for issuance 41,000 shares of RV Centers Common Stock (the
"Reserved Shares"). The Reserved Shares shall not be registered under the
Securities Act of 1933 and shall be subject to the restrictions set forth in the
Agreement, including, without limitation, the transfer restrictions set forth in
Section 14 therein. The
Page 2 of Annex I
<PAGE> 76
ANNEX I -
AMERICAN RV CENTERS, INC.
(TENNESSEE)
Additional Cash (and any interest accrued thereon) and Reserved Shares shall
collectively be referred to as the "Additional Consideration". RV Centers shall
pay the Stockholder the Additional Consideration, pursuant to the terms set
forth herein, in the event that the Company and American RV Centers, Inc., a
Mississippi corporation (the "Mississippi Store") (each a "Store" and
collectively the "Stores") achieves either of the following targets for "Pretax
Income" (as hereafter defined) during the first complete twelve (12) months
immediately following the Consummation Date (the "Earn-out Period"):
1. The Mississippi Store earns not less than $100,000 of Pretax Income
and the Company achieves not less than $250,000 of Pretax Income; or
2. The Stores achieve combined Pretax Income of not less than $545,000.
Notwithstanding the foregoing, in the event of (i) any Change in
Control (as such term is defined in the standard RV Centers Founder's Employment
Agreement) of RV Centers that is consummated during the Earn-out Period or (ii)
the termination of the Stockholder's Advisory Agreement by the Company without
Good Cause during the Earn-out Period, the foregoing targets for Pretax Income
shall be deemed to have been met or waived and the Additional Consideration
shall be paid to the Stockholder within thirty (30) days of the Change in
Control or Termination without Good Cause. For purposes of this Annex I, "Good
Cause," shall mean: (i) Stockholder's breach of any material provision of the
Advisory Agreement (continuing for ten (10) days after receipt of written notice
of need to cure); (ii) Stockholder's gross negligence in the performance or
intentional nonperformance (continuing for ten (10) days after receipt of
written notice of need to cure) of any of Stockholder's material duties and
responsibilities under the Advisory Agreement which is harmful or injurious to
the Company, the Mississippi Store or RV Centers; (iii) Stockholder's
dishonesty, fraud or willful misconduct with respect to the business or affairs
of the Company, the Mississippi Store or RV Centers which materially and
adversely affects the operations or reputation of the Company, the Mississippi
Store or RV Centers; (iv) Stockholder's conviction of a felony crime; or (v)
Stockholder's violation of the Company's substance abuse policy that would
result in discharge under such policy as applied to the Company's employees
generally.
DETERMINATION OF PRE-TAX INCOME: For purposes hereof, "Pretax Income" shall be
the net profit of the Company and/or (as applicable) of the Mississippi Store
before federal and state income taxes and extraordinary items, computed in
accordance with generally accepted accounting principles ("GAAP"), consistently
applied, except as follows (to the extent the following matters are not
consistent with GAAP):
a. Pretax Income shall not include gains or losses from the sale of any
fixed assets owned by either or both Stores;
Page 3 of Annex I
<PAGE> 77
ANNEX I -
AMERICAN RV CENTERS, INC.
(TENNESSEE)
b. Revenues and costs of sales shall be allocated to the Company and
the Mississippi Store based on the Store which is in possession of the goods at
the time of the inception of the sale and the location at which services are
provided (or, in the event that services are provided off-site, such services
shall be allocated to the Store from which the request for such services
originated);
c. General and administrative expenses will be charged to the Store
which incurs the cost or which receives the benefit from such expenditure, and
cost incurred for the benefit of both Stores (e.g., advertising, accounting,
travel and entertainment, bulk supplies purchased, and other joint expenditures)
shall be allocated between the Stores based on the ratio of the gross revenues
of the Stores during the Earn-out Period and determined in accordance with GAAP;
d. Employment, consulting and similar expenses shall be charged to the
Store employing or otherwise contracting with such Person; provided, however,
that Marshall Blount's salary, benefits and similar consideration shall be
allocated 100% to the Company, and Peter Albano's salary, benefits and similar
consideration shall be allocated 50% to each Store;
e. Intercompany sales and expenses and those sales and expenses which
are not made on an arms-length basis shall not be included in the determination
of Pretax Income;
f. No corporate overhead from RV Centers shall be allocated to either
Store; and
g. In the event that RV Centers or any of its Affiliates makes advances
to or any payments on indebtedness owed by the Company or the Mississippi Store,
the interest payable on such advances and/or indebtedness shall be charged to
the Store receiving the cash benefit of the advance and/or repayment of
indebtedness as a deemed interest expense at the lesser of (1) the floor plan
borrowing rate of the Store applicable to such indebtedness or (2) the RV
Centers standard intercompany borrowing rate charged to all Subsidiaries, in
effect during the Earn-out Period.
The determination of Pretax Income shall initially be made by each
Store and forwarded to RV Centers on an individual and consolidated basis no
later than thirty (30) days after the Earn-out Period. Such amounts shall then
be subject to audit by the accountants of RV Centers, such audit to be completed
no later than sixty (60) days following receipt of the calculations by RV
Centers. Within thirty (30) days of the completion of the audit of the Stores
and the determination of the Pretax Income by the RV Centers accountants, such
results shall be jointly reviewed by the Stockholder, the Company, the
Mississippi Store and RV Centers. Any disputes over the determination of Pretax
Income shall be resolved in accordance with Section 17.15 of the Agreement. If
neither of the Pretax Income targets are met, the Additional Consideration shall
revert to and become the sole property of RV Centers.
Page 4 of Annex I
<PAGE> 78
ANNEX I -
AMERICAN RV CENTERS, INC.
(TENNESSEE)
ALLOCATION OF ADDITIONAL CONSIDERATION. The Additional Consideration paid to the
Stockholder, if any, shall be allocated 72% to the Company and 28% to the
Mississippi Store.
Page 5 of Annex I
<PAGE> 79
ANNEX III
FORM OF OPINION OF COUNSEL
TO RV CENTERS, INC.
, 1998
- ---------------------------
- ---------------------------
- ---------------------------
Ladies and Gentlemen:
We have acted as counsel to RV Centers, Inc., a Delaware corporation
("RV Centers"), in connection with the transactions contemplated by the
Acquisition Agreement (the "Agreement") dated as of , 1998, among RV Centers,
[Founding Company] and the stockholders named therein (the "Stockholders"). This
opinion is being delivered to you pursuant to Section 8.3 of the Agreement. All
capitalized terms used herein, unless expressly defined herein, shall have the
meanings ascribed to such terms in the Agreement.
We have examined originals, or copies certified or otherwise identified
to our satisfaction, of the Agreement and such documents and records as we
deemed to be necessary as a basis for the opinion hereinafter expressed. With
respect to such examination, we have assumed the genuineness of all signatures
appearing on all documents presented to us as originals, and the conformity to
the originals of all documents presented to us as conformed or reproduced
copies. We also have assumed the due execution and delivery of the Agreement by
all parties thereto other than RV Centers. In addition, we have relied on
certificates of officers of RV Centers and certificates of public officials as
to certain matters of fact relating to this opinion and have made such
investigations of law as we have deemed necessary and relevant as the basis
hereof.
Based upon the foregoing and such consideration of matters of law as we
deemed to be relevant, and subject to the limitations, qualifications and
assumptions set forth herein, we are of the following opinion:
1. RV Centers has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware.
2. The Agreement has been duly authorized, executed and delivered by RV
Centers and constitutes a legal, valid and binding agreement of RV Centers,
enforceable against it in accordance
Page 1 of Annex III
<PAGE> 80
with its terms. RV Centers has taken all corporate action necessary to authorize
the execution, delivery and performance of the Agreement.
3. The authorized capital stock of RV Centers consists of shares
of Common Stock, par value $.01 per share (the "RV Centers Common Stock"); and
shares of Preferred Stock par value $.01 per share (the "Preferred Stock"). As
of , 1998, there were outstanding shares of RV Centers Common Stock [and
no shares of Preferred Stock] which were duly and validly authorized and issued
and, to our knowledge, fully paid and nonassessable and not issued in violation
of the preemptive rights of any stockholder of RV Centers. Each share of RV
Centers Common Stock to be issued to the Stockholders has been duly and validly
authorized and upon issuance on consummation of the transactions set forth in
the Agreement such shares will be validly issued, fully paid and nonassessable
and, to our knowledge, none of such shares will have been issued in violation of
the preemptive rights of any stockholder of RV Centers.
4. To our knowledge, except as set forth in the Prospectus, (a) RV
Centers is not in violation of any order issued by any court or governmental
agency and (b) there is no action, suit or proceeding pending or threatened
against RV Centers before any court, arbitrator or governmental authority.
5. To our knowledge, RV Centers is not in default, nor has it received
any notice of default, under any contract or agreement to which it is a party,
except where such default would not have a material adverse effect on RV
Centers.
6. No notice to, consent, authorization, approval or order of any court
or governmental agency or body or, to our knowledge, any other person is
required in connection with the execution, delivery or performance by RV Centers
of the Agreement, except for such notices, consents, authorizations, approvals
or orders as have already been made or obtained.
7. The execution of the Agreement and the performance by RV Centers of
its obligations thereunder will not violate any of the terms or provisions of
its Certificate of Incorporation or Bylaws or, to our knowledge, conflict with,
violate or result in any breach of or default under any lease, instrument,
license, permit or any other agreement or instrument to which it is a party or
by which it may be bound or to which any of its properties is subject, except
where such violation, breach or default would not have a material adverse effect
on RV Centers and its subsidiaries, taken as a whole.
The opinions expressed herein are, with your concurrence, predicated on
and qualified in their entirety by the following:
(i) This opinion is limited to the laws of the State of Texas, the
General Corporation Law of the State of Delaware and the
relevant law of the United States of America (other than laws
applicable to patents, copyrights and trademarks).
Page 2 of Annex III
<PAGE> 81
(ii) Our opinion in paragraph 2, above regarding the enforceability
of the Agreement is subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights generally and to principles
of equity. Furthermore, the enforceability of any indemnity
and contribution obligations contained in the Agreement may be
limited under applicable law or public policy.
(iii) In rendering the opinion herein related to the absence of any
litigation, suits or proceedings, we express no opinion with
respect to the possible effect of administrative and
legislative actions and proceedings as to which RV Centers is
not a named party.
(iv) Whenever our opinion is based on circumstances "to our
knowledge," we have relied exclusively on certificates of
officers (after discussion of the contents thereof with such
officers) of RV Centers or certificates of others as to the
existence or nonexistence of the circumstances upon which such
opinion is predicated. We have no reason to believe, however,
that any such certificate is untrue or inaccurate in any
material respect.
We understand that we have no obligation to update this opinion to
reflect any facts or circumstances occurring after the date hereof, provided
however, that unless we otherwise notify you on or prior to the Consummation
Date that this opinion may no longer be relied upon, you shall be entitled to
rely on this opinion as of the Consummation Date if it were dated on such date.
This opinion is delivered to you solely as a party to the Agreement and
may not be quoted, circulated or published in whole or in part, or furnished to
any other Person without our express consent. The opinions set forth are limited
to matters expressly set forth and no opinion is to be implied or may be
inferred beyond the matters expressly stated.
Very truly yours,
Page 3 of Annex III
<PAGE> 82
ANNEX IV
FORM OF OPINION OF COUNSEL TO COMPANY
AND STOCKHOLDERS
,1998
RV Centers, Inc.
Houston, Texas 77002
[Underwriters]
[International Underwriters, if any]
Ladies and Gentlemen:
We have acted as counsel to ____________________________, a
___________________ corporation (the "Company"), in connection with the
transactions contemplated by the Acquisition Agreement (the "Agreement"), dated
as of , 1998, among RV Centers, Inc., a Delaware corporation, the Company and
the stockholders named therein (the "Stockholders"). This opinion is being
delivered to you pursuant to Section 9.7 of the Agreement. All capitalized terms
used herein, unless expressly defined herein, shall have the meanings ascribed
to such terms in the Agreement.
We have examined originals, or copies certified or otherwise identified
to our satisfaction of the Agreement and such documents and records as we deemed
to be necessary as the basis for the opinion hereinafter expressed. [Documents
and records may be listed.] With respect to such examination, we have assumed
the genuineness of all signatures appearing on all documents presented to us as
originals, and the conformity to the originals of all documents presented to us
as conformed or reproduced copies. We also have assumed the due execution and
delivery of the Agreement by all parties thereto other than the Company. In
addition, we have relied without independent inquiry on the representations and
warranties of the Company and the Stockholders contained in the Agreement, the
certificate of officers of the Company and certificates of public officials as
to certain matters of fact relating to this opinion.
Based upon the foregoing and such consideration of matters of law as we
deemed to be relevant, and subject to the limitations, qualifications and
assumptions set forth herein, we are of the following opinion:
Page 1 of Annex IV
<PAGE> 83
1. The Company has been duly incorporated and is validly existing and
has all requisite corporate power and authority to own and operate its
properties, to lease the properties it operates under lease and to conduct its
business as currently conducted. The Company has no subsidiaries.
2. The authorized capital stock of the Company is as represented in the
Agreement and, based solely on our review of the stock records of the Company,
the outstanding capital stock of the Company is as represented in the Agreement.
Each share of such stock has been duly and validly authorized and issued and, to
our knowledge, is fully paid and nonassessable and was not issued in violation
of the preemptive rights of any stockholder.
3. To our knowledge, there are no outstanding securities of the Company
convertible into or exercisable or exchangeable for or evidencing the right to
purchase or subscribe for any shares of capital stock of the Company and there
are no outstanding or authorized options, warrants or rights of any character
obligating the Company to issue or sell any shares of its capital stock or any
securities convertible into or exercisable or exchangeable for or evidencing the
right to purchase or subscribe for any shares of such stock.
4. The Agreement has been duly authorized, executed and delivered by
the Company and the Stockholder and constitutes a legal, valid and binding
agreement of the Company and the Stockholder, enforceable against the Company
and such Stockholder in accordance with its terms. The Company and its
Stockholders have taken all corporate action necessary to authorize the
execution, delivery and performance by the Company of the Agreement and the
consummation by the Company of the transactions contemplated thereby.
5. To our knowledge, and except as is set forth in the Schedules to the
Agreement, the Company is not in material default, nor has it received any
notice of default, in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any other agreement, indenture or instrument material to the conduct of the
business of the Company, to which the Company is a party or by which the Company
or its property is bound.
6. To our knowledge, except to the extent set forth in the Schedules to
the Agreement, the Company is not in violation of any order issued by any court
or governmental agency and there is no action, suit or proceeding pending or
threatened against the Company before any court, arbitrator or governmental
authority.
7. To our knowledge, no notice to, consent, authorization, approval or
order of or filings with any court or governmental agency or body or, to our
knowledge, any other person is required in connection with the execution,
delivery or performance of the Agreement, or the consummation of the
transactions therein contemplated, by the Company or any of the Stockholders,
except for such notices, consents, authorizations, approvals, orders or filings
as have already been made or obtained, as applicable.
Page 2 of Annex IV
<PAGE> 84
8. The execution of the Agreement and the performance by the Company
and the Stockholders of their respective obligations thereunder do not and will
not violate any of the terms or provisions of the Company's Articles of
Incorporation or By-laws or, to our knowledge, conflict with, violate or result
in any breach of or default under any lease, instrument, license, permit or any
other agreement or instrument to which the Company is a party or by which the
Company may be bound or to which any of the properties of the Company is
subject.
9. To our knowledge, there is no pending or threatened action, suit or
proceeding that (a) questions the validity of the Agreement or the Employment
Agreement or any action taken or to be taken by the Company or any Stockholder
in connection with the Agreement or the Employment Agreement, at law or in
equity, before or by any governmental authority or before any court or
arbitrator or (b) if adversely determined, would have a material adverse effect
(i) on the condition (financial or other), earnings, business, operations or
prospects of the Company, (ii) on the ability of the Company to perform its
obligations under the Agreement or (iii) on the ability of any Stockholder to
perform his obligations under the Agreement or the Employment Agreement.
The opinions expressed herein are, with your concurrence, predicated on
and qualified in their entirety by the following:
(A) This opinion is limited to the laws of the State of Tennessee
and the relevant law of the United States of America (other
than laws applicable to patents, copyrights and trademarks),
and we express no opinion as to the application or effect of
the law of any other jurisdiction. Moreover, we express no
opinion with respect to any of the following:
(i) federal or state antitrust laws and regulations
(including without limitation, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976);
(ii) federal or state securities laws and regulations;
(iii) federal or state labor or employee benefit laws and
regulations;
(iv) compliance with fiduciary duty requirements;
(v) federal or state tax laws and regulations;
(vi) federal patent, copyright and trademark, state
trademark and other federal or state intellectual
property laws and regulations;
(vii) federal or state racketeering laws and regulations;
(viii) federal or state health and safety laws and
regulations;
(ix) federal or state criminal laws of general
application;
Page 3 of Annex IV
<PAGE> 85
(x) federal or state nondiscrimination laws and
regulations of general application; or
(xi) federal, state or local environmental, zoning or
building codes, land use or other similar laws,
ordinances, rules or regulations.
We note that the agreement is, by its express terms, to be governed by
the laws of Delaware. We express no opinion how a court sitting in Delaware
would apply or interpret Tennessee law nor how a court in Tennessee would apply
or interpret Delaware law. Accordingly, for the purpose of this opinion, we have
assumed that the Agreement will be governed by the laws of Tennessee
notwithstanding these express terms.
(B) Our opinion relating to validity, binding effect and
enforceability in Paragraph 4 above is subject to: (i)
limitations imposed by any applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, preferential transfer,
moratorium and similar laws affecting creditors' rights
generally, (ii) the effect of general principles of equity
(regardless of whether considered in a proceeding in equity or
at law), including concepts of good faith, fair dealing,
commercial reasonableness and unconscionability, and (iii)
limitations imposed by public policy under certain
circumstances on the enforceability of provisions indemnifying
a party against liability for its own wrongful or negligent
acts and limitations on the enforceability of indemnification
provisions required by applicable state or federal securities
law. We express no opinion concerning (x) the enforceability
of the choice of Delaware law to govern the Agreement, if an
action arising out of the Agreement or its performance were
commenced in a court sitting in Tennessee, (y) the
enforceability of provisions relating to the waiver or rights,
remedies and defenses, or (z) the enforceability of the
noncompetition covenants set forth in the Agreement.
(C) Whenever our opinion is based on circumstances "to our
knowledge," we have relied exclusively on certificates of
officers (after the discussion of the contents thereof with
such officers) of the Company or certificates of others as to
the existence or nonexistence of the circumstances upon which
such opinion is predicated. Nothing has come to the attention
of the attorneys of the Firm in the course of our
representation of the Company in connection with the Agreement
which causes us to believe that any such certificate is untrue
or inaccurate in any material respect.
This opinion is delivered to you solely and may not be quoted,
circulated or published in whole or in part or delivered to any other person
without our express written consent. The Underwriters [and International
Underwriters] are entitled to rely upon this opinion.
Very truly yours,
Page 4 of Annex IV
<PAGE> 1
EXHIBIT 2.4
- --------------------------------------------------------------------------------
ACQUISITION AGREEMENT
dated as of the 12th day of January, 1999
by and among
RV CENTERS, INC.
CASEY MOTORS, INC.
and all of
the STOCKHOLDERS of CASEY MOTORS, INC.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
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RECITALS .........................................................................................................1
1. ACQUISITION OF STOCK.....................................................................................5
1.1 Acquisition.....................................................................................5
1.2 Consideration...................................................................................5
1.3 Certain Information With Respect to the Capital Stock of the Company
and RV Centers..................................................................................5
2. DELIVERY OF CONSIDERATION................................................................................6
2.1 Stockholders' Consideration.....................................................................6
2.2 Stockholders' Deliveries........................................................................6
3. CLOSING..................................................................................................6
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.......................................................7
4.1 Due Organization................................................................................7
4.2 Authorization...................................................................................7
4.3 Capital Stock of the Company....................................................................8
4.4 Transactions in Capital Stock; Organization Accounting..........................................8
4.5 No Bonus Shares.................................................................................8
4.6 Subsidiaries; Ownership in Other Entities.......................................................8
4.7 Predecessor Status; etc.........................................................................9
4.8 Spin-off by the Company.........................................................................9
4.9 Financial Statements............................................................................9
4.10 Liabilities and Obligations....................................................................10
4.11 Accounts and Notes Receivable..................................................................10
4.12 Permits and Intangibles........................................................................11
4.13 Environmental Matters..........................................................................11
4.14 Personal Property..............................................................................13
4.15 Significant Customers and Suppliers; Material Contracts
and Commitments................................................................................13
4.16 Real Property..................................................................................14
4.17 Insurance......................................................................................15
4.18 Compensation; Employment Agreements; Labor Matters.............................................15
4.19 Employee Plans.................................................................................16
4.20 Compliance with ERISA..........................................................................16
4.21 Conformity with Law; Litigation................................................................17
4.22 Taxes..........................................................................................18
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4.23 No Violations; No Consent Required, Etc........................................................19
4.24 Government Contracts...........................................................................20
4.25 Absence of Changes.............................................................................20
4.26 Deposit Accounts; Powers of Attorney...........................................................22
4.27 Validity of Obligations........................................................................22
4.28 Relations with Governments.....................................................................22
4.29 Disclosure.....................................................................................22
4.30 Prohibited Activities..........................................................................23
4.31 No Warranties or Insurance.....................................................................23
4.32 Interest in Customers and Suppliers and Related Party Transactions.............................23
4.33 Registration Statement.........................................................................24
4.34 Inventory......................................................................................24
4.35 Year 2000......................................................................................24
4.36 Authority; Ownership...........................................................................25
4.37 Preemptive Rights..............................................................................25
5. REPRESENTATIONS OF RV CENTERS...........................................................................25
5.1 Due Organization...............................................................................25
5.2 Authorization..................................................................................25
5.3 Capital Stock of RV Centers....................................................................26
5.4 Transactions in Capital Stock; Organization Accounting.........................................26
5.5 Subsidiaries...................................................................................26
5.6 No Violations..................................................................................26
5.7 Validity of Obligations........................................................................27
5.8 RV Centers Stock...............................................................................27
5.9 Business; Real Property; Material Agreements...................................................28
5.10 Investment Representations.....................................................................28
5.11 Authorization of Other Agreements..............................................................28
5.12 Financial Statements...........................................................................28
5.13 Liabilities and Obligations....................................................................29
5.14 Conformity with Law; Litigation................................................................29
5.15 No Side Agreements.............................................................................29
5.16 Relations with Governments.....................................................................29
5.17 Other Agreements...............................................................................29
5.18 Registration Statement.........................................................................30
5.19 Disclosure.....................................................................................30
6. COVENANTS PRIOR TO CLOSING..............................................................................30
6.1 Access and Cooperation; Due Diligence..........................................................30
6.2 Conduct of Business Pending Closing............................................................31
6.3 Prohibited Activities..........................................................................32
6.4 No Shop........................................................................................33
6.5 Agreements.....................................................................................34
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6.6 Notification of Certain Matters................................................................34
6.7 Amendment of Schedules.........................................................................34
6.8 Cooperation in Preparation of Registration Statement...........................................35
6.9 Final Financial Statements.....................................................................36
6.10 Further Assurances.............................................................................36
6.11 Compliance with the Hart-Scott Act.............................................................36
6.12 Transfers of Permits and Intangibles...........................................................36
6.13 Dividends......................................................................................36
6.14 Authorized Capital.............................................................................36
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY.............................................................................................37
7.1 Representations and Warranties; Performance of Obligations.....................................37
7.2 No Litigation..................................................................................38
7.3 Opinions.......................................................................................38
7.4 Registration Statement; Minimum Value..........................................................38
7.5 Consents and Approvals.........................................................................38
7.6 Good Standing Certificates.....................................................................38
7.7 No Material Adverse Change.....................................................................38
7.8 Closing of IPO.................................................................................39
7.9 Secretary's Certificate........................................................................39
7.10 Employment Agreements..........................................................................39
7.11 Other Founding Companies.......................................................................39
7.12 Management Lock-Up Agreements..................................................................39
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RV CENTERS.......................................................39
8.1 Representations and Warranties; Performance of Obligations.....................................40
8.2 No Litigation..................................................................................40
8.3 Secretary's Certificate........................................................................40
8.4 No Material Adverse Effect.....................................................................40
8.5 Stockholders' Release..........................................................................40
8.6 Termination of Related Party Agreements........................................................41
8.7 Opinion of Counsel.............................................................................41
8.8 Consents and Approvals.........................................................................41
8.9 Good Standing Certificates.....................................................................41
8.10 Registration Statement.........................................................................41
8.11 Employment Agreements..........................................................................41
8.12 Closing of IPO.................................................................................41
8.13 FIRPTA Certificate.............................................................................41
8.14 Resignations of Directors......................................................................42
8.15 Lease Agreements...............................................................................42
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9. COVENANTS OF RV CENTERS AND THE STOCKHOLDERS
AFTER CLOSING...........................................................................................42
9.1 Preservation of Tax and Accounting Treatment...................................................42
9.2 Preparation and Filing of Tax Returns..........................................................42
9.3 Directors......................................................................................43
9.4 Release From Guarantees; Repayment of Certain Obligations......................................43
9.5 Access to Records..............................................................................44
10. INDEMNIFICATION.........................................................................................44
10.1 Indemnification by the Stockholders............................................................44
10.2 Indemnification by RV Centers..................................................................45
10.3 Third Person Claims............................................................................46
10.4 Exclusive Remedy...............................................................................47
10.5 Limitations on Indemnification.................................................................47
10.6 Tax Indemnification by the Stockholders........................................................48
11. TERMINATION OF AGREEMENT................................................................................48
11.1 Termination....................................................................................48
11.2 Liabilities in Event of Termination............................................................49
11.3 Return of Stock Certificates...................................................................49
12. NONCOMPETITION..........................................................................................49
12.1 Prohibited Activities..........................................................................49
12.2 Damages........................................................................................50
12.3 Reasonable Restraint...........................................................................50
12.4 Severability; Reformation......................................................................51
12.5 Independent Covenant...........................................................................51
12.6 Materiality....................................................................................51
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................51
13.1 Stockholders...................................................................................51
13.2 RV Centers.....................................................................................52
13.3 Damages........................................................................................52
13.4 Survival.......................................................................................52
14. TRANSFER RESTRICTIONS...................................................................................53
14.1 Transfer Restrictions..........................................................................53
15. FEDERAL SECURITIES ACT REPRESENTATIONS..................................................................54
15.1 Compliance with Law............................................................................54
15.2 Economic Risk; Sophistication..................................................................54
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16. REGISTRATION RIGHTS.....................................................................................55
16.1 Piggyback Registration Rights..................................................................55
16.2 Registration Procedures........................................................................55
16.3 Indemnification................................................................................56
16.4 Underwriting Agreement.........................................................................58
16.5 Rule 144 Reporting.............................................................................58
16.6 Availability of Rule 144.......................................................................58
17. GENERAL.................................................................................................58
17.1 Cooperation....................................................................................58
17.2 Successors and Assigns.........................................................................59
17.3 Entire Agreement...............................................................................59
17.4 Counterparts...................................................................................59
17.5 Brokers and Agents.............................................................................59
17.6 Expenses.......................................................................................59
17.7 Notices........................................................................................60
17.8 Governing Law..................................................................................61
17.9 Exercise of Rights and Remedies................................................................61
17.10 Time...........................................................................................61
17.11 Reformation and Severability...................................................................62
17.12 Remedies Cumulative............................................................................62
17.13 Captions.......................................................................................62
17.14 Amendments and Waivers.........................................................................62
17.15 Dispute Resolution.............................................................................62
17.16 References, Gender, Number.....................................................................63
17.17 Sole Stockholder...............................................................................63
17.18 Schedules and Annexes..........................................................................63
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ANNEXES
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Annex I - Consideration to Be Paid to Stockholders
Annex II - Certificate of Incorporation and By-Laws of RV Centers
Annex III - Form of Opinion of Counsel to RV Centers
Annex IV - Form of Opinion of Counsel to Company and Stockholders
Annex V - Form of Founder Employment Agreement
Annex VI - Form of Lease Agreement
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SCHEDULES
4.1 Due Organization
4.2 Authorization
4.3 Capital Stock of the Company
4.4 Transactions in Capital Stock; Organization Accounting
4.5 No Bonus Shares
4.6 Subsidiaries; Ownership in Other Entities
4.7 Predecessor Status; etc
4.8 Spin-off by the Company
4.9 Financial Statements
4.10(a) Liabilities and Obligations
4.10(b) Trade Account Payables etc. and Copies of Loan Agreements
4.11 Accounts and Notes Receivable
4.12 Permits and Intangibles
4.13 Environmental Matters
4.14 Personal Property
4.15(a) Significant Customers and Suppliers
4.15(b) Material Contracts and Commitments
4.16 Real Property
4.17 Insurance
4.18 Compensation; Employment Agreements; Labor Matters
4.19 Employee Plans
4.20 Compliance with ERISA
4.21 Conformity with Law; Litigation
4.22 Taxes
4.23(a) Defaults
4.23(b) Violations or Defaults Arising From This Agreement
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4.23(c) Notices Required By Material Documents
4.23(e) Restrictions Imposed By Material Documents
4.24 Government Contracts
4.25 Absence of Changes
4.26 Deposit Accounts; Powers of Attorney
4.30 Prohibited Activities
4.31 No Warranties or Insurance
4.32 Interest in Customers and Suppliers and Related Party Transactions
4.34 Inventory in Interim Financial Statements
5.2 Authorization
5.3 Authorized Capital Stock of RV Centers
5.17 Unique Terms in Other Agreements
6.2 Conduct of Business Pending Closing
6.3 Prohibited Activities
6.5 Agreements
8.6 Termination of Related Party Agreements
8.11 Employment Agreements
9.4 Release From Guarantees; Repayment of Certain Obligations
12.1 Prohibited Activities
15.2 Non-accredited Investors
17.5 Brokers and Agents
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 12th day
of January, 1999, by and among RV Centers, Inc., a Delaware corporation ("RV
Centers"), Casey Motors, Inc., a Colorado corporation (the "Company") and the
stockholders listed on the signature pages of this Agreement (the
"Stockholders"), who are all the stockholders of the Company.
RECITALS
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Consummation Date the Stockholders will own, all of the issued and outstanding
capital stock of the Company (the "Company Stock");
WHEREAS, RV Centers is entering into other separate agreements
substantially similar to this Agreement (the "Other Agreements") with each of
the Other Founding Companies (as defined herein) and their respective
stockholders in order to acquire additional recreational vehicle dealership
companies;
WHEREAS, this Agreement and the Other Agreements constitute the "RV
Centers Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of RV Centers and each of the Other Founding Companies that are
parties to the Other Agreements have approved and adopted the RV Centers Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the Other Founding Companies (as defined herein) will
transfer the capital stock of each of the Founding Companies to RV Centers and
the stockholders of each of the Founding Companies will acquire shares of RV
Centers Stock (as defined herein);
WHEREAS, it is the intent of the parties that the transfer to RV
Centers of stock of the Company by the Stockholders in consideration for stock
of RV Centers qualify as a tax-free transfer of property under Section 351 of
the Code (as hereinafter defined);
WHEREAS, the Board of Directors of the Company has approved this
Agreement as part of the RV Centers Plan of Organization in order to transfer
the capital stock of the Company to RV Centers;
WHEREAS, unless the context otherwise requires, capitalized terms used
in this Agreement or in any schedule attached hereto and not otherwise defined
shall have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
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"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the Company, any Subsidiary of the Company and
any member of a Relevant Group.
"Acquisition Consideration" means the cash and RV Centers Stock paid to
the Stockholders as consideration for the shares of Company Stock.
"Affiliate" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"Balance Sheet Date" means June 30, 1998.
"Charter" means the certificate of incorporation or articles of
incorporation of the Company, as the case may be.
"Charter Documents" has the meaning set forth in Section 4.1.
"Closing" has the meaning set forth in Section 3.
"Closing Date" has the meaning set forth in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the first recital of this
Agreement.
"Consummation Date" has the meaning set forth in Section 3.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Draft Registration Statement" means the draft of the Registration
Statement as included in the Private Placement Memorandum for RV Centers dated
January 5, 1999, and any corrections thereto and supplemental information
delivered by RV Centers to the Company for delivery to the Stockholders prior to
the time this Agreement is delivered by the Stockholders to RV Centers.
"Effective Time" means the effective time of the consummation of the
purchase and sale of the Company Stock, which shall occur on the Consummation
Date.
"Environmental Law" has the meaning set forth in Section 4.13(c).
"Expiration Date" has the meaning set forth in Section 4(A).
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"Founding Companies" means: Ace Fogdall, Inc., an Iowa corporation,
American RV Centers, Inc., a Tennessee corporation, American RV Centers, Inc., a
Mississippi corporation, Casey Motors, Inc., a Colorado corporation, County Line
Select Cars, Inc., a Florida corporation, Dusty's Camper World of Bartow, Inc.,
a Florida corporation, Emerald Coast RV Center, Inc., a Florida corporation,
Hall Enterprises, Inc., a Kentucky corporation, Little Valley Auto & RV Sales,
Inc., a West Virginia corporation, Growth Ventures, Inc., a Texas corporation,
RVs Northwest, Inc., a Washington corporation, Saddleback Recreational Vehicles,
Inc., a California corporation, Scott Motor Coach Sales, Inc., a New Jersey
corporation, Stoltzfus Trailer Sales, Inc., a Pennsylvania corporation, Roy B.
Padgett d/b/a Young's RV Center, a sole proprietorship operating in California.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 4.13(d).
"Information Technology" has the meaning set forth in section 4.35.
"IPO" means the initial public offering of RV Centers Stock pursuant to
the Registration Statement.
"known," "knowledge" or "best knowledge," when used in reference to a
statement regarding the existence or absence of facts in this Agreement, is
intended by the parties to mean that the only information to be attributed to
such person is information actually known to (a) the person in the case of an
individual or (b) in the case of a corporation or other entity, an officer,
director or member. With respect to the "knowledge" of the Stockholders who are
officers, directors, employees, consultants or agents of the Company, such term
is also intended to mean that such Stockholder has made inquiry of the officers
and directors of the Company and its Affiliates, and with respect to the
representations made in Section 4.13, the Company's management.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its Subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 4.23(a).
"Minimum Value" has the meaning set forth in Annex I.
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"Other Agreements" has the meaning set forth in the second recital of
this Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Person" means an individual, partnership, joint venture, corporation,
limited liability company, bank, trust, unincorporated organization or other
entity.
"Plans" has the meaning set forth in Section 4.19.
"Pricing" means the date of determination by RV Centers and the
Underwriters of the public offering price of the shares of RV Centers Stock in
the IPO.
"Qualified Plans" has the meaning set forth in Section 4.20.
"RV Centers" has the meaning set forth in the first paragraph of this
Agreement.
"RV Centers Charter Documents" has the meaning set forth in Section
5.1.
"RV Centers Documents" has the meaning set forth in Section 5.6.
"RV Centers Plan of Organization" has the meaning set forth in the
fourth recital of this Agreement.
"RV Centers Stock" means the common stock, par value $.01 per share, of
RV Centers.
"Registration Statement" means that certain registration statement on
Form S-1 to be filed with the SEC covering the shares of RV Centers Stock to be
issued in the IPO, including the prospectus and all amendments and supplements
thereto.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto (as amended or
supplemented pursuant to Section 6.7), which shall reference the relevant
sections of this Agreement, on which parties hereto disclose information as part
of their respective representations, warranties and covenants.
"SEC" means the United States Securities and Exchange Commission.
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"State of Incorporation" means, as it relates to a referenced
corporation, the state of incorporation for such corporation.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiaries" means with respect to a Person, any corporation or other
entity in which such Person owns a 50% or greater ownership interest.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, payroll, excise, property, deed, stamp,
alternative or add-on minimum, or other taxes, assessments, duties, fees, levies
or other governmental charges, whether disputed or not, together with any
interest, penalties, additions to tax or additional amounts with respect
thereto.
"Underwriters" means the prospective underwriters identified in the
Draft Registration Statement and any additional or substitute underwriter
appointed by RV Centers as identified in writing to the Stockholders.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. ACQUISITION OF STOCK
1.1 ACQUISITION. Upon the terms and subject to the conditions
contained in this Agreement and in reliance upon the representations,
warranties, covenants and agreements contained in this Agreement, on the
Consummation Date, the Stockholders shall transfer to RV Centers and RV Centers
shall acquire from the Stockholders, all of the issued and outstanding shares of
capital stock of the Company as set forth in Annex I hereto.
1.2 CONSIDERATION. The consideration for the Company Stock shall be
as set forth on Annex I to this Agreement.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND RV CENTERS. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of the
Company and RV Centers as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding capital stock of the Company is as set forth on Schedule
4.3 hereto; and
(ii) immediately prior to the Closing Date and the Consummation
Date, the authorized capital stock of RV Centers will consist of
20,000,000 shares of RV Centers
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Stock, of which the number of issued and outstanding shares will be set
forth in the Registration Statement, and 5,000,000 shares of preferred
stock, $.01 par value, of which no shares will be issued and
outstanding, all of which will be issued and outstanding except as
otherwise set forth in the Registration Statement.
2. DELIVERY OF CONSIDERATION
2.1 STOCKHOLDERS' CONSIDERATION. On the Consummation Date, the
Stockholders, who are now and on the Consummation Date will be, the holders of
all of the outstanding capital stock of the Company, shall, upon surrender of
certificates evidencing that capital stock, receive from RV Centers the
respective number of shares of RV Centers Stock and the amount of cash described
on Annex I hereto, which shall be payable by certified check or wire transfer.
The number of shares of RV Centers Stock in Annex I has been adjusted for the
stock split provided for in the Draft Registration Statement and will not be
adjusted upon the occurrence of such split.
2.2 STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
3. CLOSING
At or prior to the Pricing and subject to the satisfaction or waiver of
the conditions in Sections 7 and 8, the parties shall take all actions necessary
to effect the delivery of shares referred to in Section 2 hereof; provided, that
such actions shall not include the actual completion of the purchase and sale of
the Company Stock or the delivery of the RV Centers Stock and cash referred to
in Section 2 hereof, each of which actions shall only be taken upon the
Consummation Date as herein provided. The delivery of the Company Stock, which
shall occur at or prior to the Pricing (the "Closing"), shall take place on the
closing date (the "Closing Date") at the offices of Andrews & Kurth L.L.P, 600
Travis, Suite 4200, Houston, Texas 77002. All Company Stock shall be delivered
at the Closing to Andrews & Kurth L.L.P., to be held in trust for the
Stockholders until the Consummation Date, and shall be returned immediately to
the Stockholders upon any termination of this Agreement prior to the
Consummation Date. Within 20 days after the Pricing (x) all transactions
contemplated by this Agreement, including the delivery of shares and cash which
the Stockholders are entitled to receive pursuant to Annex I hereof, shall be
completed, and (y) the closing with respect to the IPO shall occur and be
completed. The date on which the actions described in the preceding clauses (x)
and (y) occur shall be referred to as the "Consummation Date." During the period
from the Closing Date to the Consummation Date, this Agreement may only be
terminated by the Company if the underwriting agreement in respect of the IPO is
terminated pursuant to the terms of such underwriting agreement. This Agreement
shall in any event terminate
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if the Consummation Date does not occur within 20 days of the Pricing or the
Closing Date, whichever occurs first. Time is of the essence with respect to the
performance hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
(A) Representations and Warranties of the Stockholders.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, each of the Stockholders, jointly and
severally, represents and warrants that all of the following representations and
warranties in this Section 4(A) are true at the date of this Agreement, and that
such representations and warranties shall survive the Consummation Date until
June 30, 2000 (the "Expiration Date"), except that the warranties and
representations set forth in Sections 4.3 and 4.22 hereof shall survive until
such time as the applicable limitations period has run, which shall be deemed to
be the Expiration Date for Sections 4.3 and 4.22. For purposes of this Section
4, the term "Company" shall mean and refer to the Company and all of its
Subsidiaries, if any.
4.1 DUE ORGANIZATION. The Company is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the State
of Incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified or
authorized to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or authorization necessary except where the failure to be so
qualified or authorized would not have a Material Adverse Effect on the Company.
Schedule 4.1 sets forth a list of all states in which the Company is authorized
or qualified to do business. True, complete and correct copies of (i) the
Charter and By-laws, each as amended, of the Company (the "Charter Documents"),
and (ii) the stock records of the Company, are all attached to Schedule 4.1. The
Company has delivered to RV Centers complete and correct copies of all minutes
of meetings, written consents and other evidence, if any, of deliberations of or
actions taken by the Company's Board of Directors, any committees of the Board
of Directors and stockholders during the last three years.
4.2 AUTHORIZATION. (i) The officers or other representatives of the
Company executing this Agreement have the authority to enter into and bind the
Company to the terms of this Agreement and (ii) the Company has the full legal
right, power and authority to enter into this Agreement and consummate the
transactions contemplated herein. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions adopted
by the Stockholders, which approve this Agreement and the transactions
contemplated herein in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 4.2.
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4.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company is as set forth on Schedule 4.3. All of the issued and outstanding
shares of the capital stock of the Company are owned by the Stockholders in the
amounts set forth in Schedule 4.3, other than any treasury shares listed on
Schedule 4.3. Each Stockholder, severally, represents and warrants that except
as set forth on Schedule 4.3, the shares of capital stock of the Company owned
by such Stockholder are owned free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the issued and outstanding shares of the capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by the Stockholders and
further, such shares were offered, issued, sold and delivered by the Company in
compliance with all applicable state and Federal laws concerning the issuance of
securities. Further, none of such shares were issued in violation of any
preemptive rights of any past or present stockholder.
4.4 TRANSACTIONS IN CAPITAL STOCK; ORGANIZATION ACCOUNTING. Except as
set forth on Schedule 4.4, the Company has not acquired or redeemed any Company
Stock since January 1, 1995. Except as set forth on Schedule 4.4, (i) no option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Company to issue any of its authorized but unissued capital stock; (ii) the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof; and (iii) neither
the voting stock structure of the Company nor the relative ownership of shares
among any of its respective Stockholders has been altered or changed in
contemplation of the transactions contemplated herein and/or the RV Centers Plan
of Organization. There are no voting trusts, proxies or other agreements or
understandings to which the Company or any of the Stockholders is a party or is
bound with respect to the voting of any shares of capital stock of the Company.
Schedule 4.4 also includes complete and accurate copies of all stock option or
stock purchase plans, including a list of all outstanding options, warrants or
other rights to acquire shares of the Company's stock and the material terms of
such outstanding options, warrants or other rights.
4.5 NO BONUS SHARES. Except as set forth on Schedule 4.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the RV Centers Plan of Organization.
4.6 SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set forth on
Schedule 4.6, the Company has no Subsidiaries. Except as set forth in Schedule
4.6, the Company does not presently own, of record or beneficially, or control,
directly or indirectly, any capital stock, securities convertible into capital
stock or any other equity interest in any corporation, association or business
entity nor is the Company, directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity.
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4.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 4.7 is a listing
of all predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger or otherwise) or owned by the
Company or from whom the Company previously acquired assets which are material
to the Company, in any case, from the earliest date upon which any Stockholder
acquired his or her stock in any Company. Except as disclosed on Schedule 4.7,
the Company has not been, within such period of time, a subsidiary or division
of another corporation or a part of an acquisition which was later rescinded,
nor, within such period of time, has the Company had any substantial operations
that have been discontinued or any operating plants or facilities that have been
discontinued, sold or spun off.
4.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 4.8,
there has not been any sale, spin-off or split-up of material assets of the
Company since January 1, 1995.
4.9 FINANCIAL STATEMENTS. Copies of the following financial
statements are attached hereto as Schedule 4.9:
(i) the balance sheets of the Company as of December 31, 1996
and 1997 and the related statements of operations, stockholder's equity
and cash flows for the two-year period ended December 31, 1997,
together with the related notes and schedules (such balance sheets, the
related statements of operations, stockholder's equity and cash flows
and the related notes and schedules are referred to herein as the
"Year-end Financial Statements"); and
(ii) the balance sheet of the Company as of the Balance Sheet
Date and the related statements of operations, stockholder's equity and
cash flows for the six-month period ended June 30, 1998 and on the
Balance Sheet Date, together with the related notes and schedules (such
balance sheets, the related statements of operations, stockholder's
equity and cash flows and the related notes and schedules are referred
to herein as the "Interim Financial Statements").
The Year-end Financial Statements and the Interim
Financial Statements are collectively referred to herein as the
"Financial Statements". The Financial Statements have been, and the
financial statements to be delivered pursuant to Section 6.9 will be,
prepared in accordance with GAAP applied on a consistent basis and
fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and
changes in financial position for the periods then ended. The Company's
books of account have been kept accurately in all material respects,
the transactions entered therein represent bona fide transactions, and
the revenues, expenses, assets and liabilities of the Company have been
properly recorded in such books in all material respects.
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4.10 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule
4.10(a), as of the Balance Sheet Date, the Company has no liabilities or
obligations of any kind, character or description, whether accrued, absolute,
secured or unsecured, contingent or otherwise, which are not reflected in the
Company Interim Financial Statements at the Balance Sheet Date. In addition,
except as set forth on Schedule 4.10(a), since the Balance Sheet Date, the
Company has not incurred any material liabilities or obligations of any kind,
character or description whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business and consistent with past operating practices. For each contingent
liability or other liability for which the amount is not fixed or is contested,
the Company has included on Schedule 4.10(a) the following information:
(i) a summary description of the liability together with the
following:
(A) copies of the principal documentation in the
possession of the Company or its directors,
officers, management, stockholders or key
employees relating thereto;
(B) amounts claimed and any other action or relief
sought; and (C) name of claimant and all other
parties to the claim, suit or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending; and
(iii) the date such claim, suit or proceeding was instituted.
Schedule 4.10(b) sets forth an accurate list of all trade
accounts payable, accrued liabilities, indebtedness and other liabilities of the
Company as reflected in the Company Interim Financial Statements as of the
Balance Sheet Date. Schedule 4.10(b) also includes copies of all loan
agreements, floor plan financing agreements, warranty, indemnity or guarantee
agreements, bonds, mortgages, pledges or other security agreements to which the
Company is a party or by which its properties may be bound.
4.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 4.11 sets forth an
accurate list of the accounts and notes receivable of the Company, as of the
Balance Sheet Date, including any such amounts which are not reflected in the
balance sheet as of the Balance Sheet Date, and including all receivables from
and advances to employees and the Stockholders, which are identified as such.
Schedule 4.11 also sets forth an accurate aging of all accounts and notes
receivable as of the Balance Sheet Date showing amounts due in 30-day aging
categories. Except to the extent reflected on Schedule 4.11, such accounts,
notes and other receivables arose in connection with bona fide transactions, the
reserves reflected in the balance sheet as of the Balance Sheet Date are
adequate and such accounts, notes and other receivables are, subject to the
stated reserves, collectible.
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4.12 PERMITS AND INTANGIBLES. The Company holds all licenses,
franchises, permits and other governmental authorizations ("Licenses") necessary
to conduct the business of the Company, and the Company has delivered to RV
Centers a list that is accurate and a summary description (which is set forth on
Schedule 4.12) of all such Licenses, including any trademarks, trade names,
patents, patent applications and copyrights owned or held by the Company or any
of its employees (including interests in software or other technology systems,
programs and intellectual property) the absence of which would have a Material
Adverse Effect on the Company. Except as set forth on Schedule 4.12, the
Licenses and other rights listed on Schedule 4.12 are valid, held by the Company
and the Company has not received any notice that any Person intends to cancel,
terminate or not renew any such License or other right. Except as set forth on
Schedule 4.12, the Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the Licenses and other rights listed on Schedule 4.12 and is not in violation
of any of the foregoing. Except as specifically provided in Schedule 4.12, the
consummation by the Company of the transactions contemplated in this Agreement
will not result in a default under or a breach or violation of, or adversely
affect the rights and benefits afforded to the Company by, any such Licenses or
other rights.
4.13 ENVIRONMENTAL MATTERS. (a) Except as specifically set forth in
Schedule 4.13 attached hereto, (i) the Company has conducted and is conducting
its businesses in compliance with all applicable Environmental Laws, including,
without limitation, having all environmental permits, licenses and other
approvals and authorizations required by Environmental Laws for the operation of
its business as presently conducted, (ii) none of the properties now or
previously owned or occupied by the Company contain any Hazardous Substance, the
existence of which imposes a requirement under Environmental Laws to remove,
remediate, reduce the levels of Hazardous Substances to levels below regulatory
action levels, or otherwise perform any response, corrective or preventive
measure or pay for any environmental response costs ("Environmental Response
Measures"), (iii) the Company has not received any written notices, demand
letters or requests for information from any Federal, state, local or foreign
governmental entity or third party indicating that the Company may be in
violation of, or liable for any Environmental Response Measures under, any
Environmental Law in connection with the ownership or operation of its business,
and has no reason to believe that any such written documentation may be
forthcoming, (iv) there have been and are no civil, criminal or administrative
actions, suits, demands, claims, hearings, consent orders, investigations or
proceedings pending or, to the knowledge of the Stockholders, threatened,
against the Company relating to any Environmental Law, (v) no reports have been
filed, or are required to be filed, by the Company concerning the release of any
Hazardous Substance or the threatened or actual violation of any Environmental
Law, (vi) no Hazardous Substance has been disposed of, released or transported
in violation of any applicable Environmental Law from any properties owned,
leased or operated by the Company as a result of any activity of the Company
during the time such properties were owned, leased or operated by the Company,
(vii) there have been and are no environmental investigations, studies, audits,
tests, reviews or other analyses regarding compliance or non-compliance with any
applicable Environmental Law conducted by or which are in the possession of the
Company relating to the activities of the Company prior to the date hereof,
(viii) there are no underground storage tanks on, in or under any properties
owned by the Company,
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<PAGE> 20
there were no underground storage tanks owned or used by the Company on
properties formerly owned, leased or operated by the Company, and no underground
storage tanks have been closed or removed from any of such properties during the
time such properties were owned, leased or operated by the Company, (ix) there
is no asbestos or asbestos-containing material present in any of the properties
owned, leased or operated by the Company that is required to be removed or
otherwise abated under Environmental Laws, and no asbestos was removed from any
properties now or formerly owned, leased or operated during the time such
properties were owned, leased or operated by the Company, except in compliance
with Environmental Laws, (x) neither the Company nor any of its respective
properties are subject to any liabilities or expenditures (fixed or contingent)
relating to any suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any Environmental Law,
(xi) there are no environmental liabilities at sites not owned, operated or
leased by the Company, for which the Company could, in whole or in part, be
liable, and (xii) the Company has not been a contractee under any tolling
agreement, processing agreement or netback agreement with a third party.
(b) With respect to any past direct or indirect Subsidiaries or
Affiliates of the Company, the representations contained in Section 4.13(a)
shall apply to the assets and activities conducted by such entity while owned,
directly or indirectly, by the Company or affiliated therewith to the extent
that a failure of such representations to be true and correct could subject the
Company to liability.
(c) As used herein, "Environmental Law" means any federal, state, or
local, statute, ordinance, rule, regulation, code, license, permit,
authorization, order, judgment, decree, injunction, restriction or agreement
with any governmental entity, relating to (x) the protection, preservation or
restoration of the environment or to human health or safety or (y) the exposure
to, or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as in effect on the Closing Date. The
term Environmental Law includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Toxic Substances Control Act,
the Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970, and similar law, regulation or requirement of any
governmental authority or agency having jurisdiction over the Company or its
property, each as amended and as in effect on the Closing Date, and (ii) any
common law or equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
(d) As used herein, "Hazardous Substance" means any substance
regulated under any Environmental Law or the exposure to which is regulated by
any Environmental Law, and shall include, without limitation, any industrial
substance, petroleum or any derivative or by-product thereof, radon, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead, fibers or
polychlorinated biphenyls.
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<PAGE> 21
4.14 PERSONAL PROPERTY. Schedule 4.14 sets forth an accurate list of
(x) all personal property material to the operations of the Company included in
"plant, property and equipment" on the balance sheet of the Company, (y) all
other personal property owned by the Company with an individual net book value
in excess of $5,000 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date and (z) all material leases and agreements in respect of
personal property, including, in the case of each of (x), (y) and (z), (1) true,
complete and correct copies of all such leases and agreements and (2) an
indication as to which assets are currently owned, or were formerly owned, by
Stockholders, relatives of Stockholders, or Affiliates of the Company. Except as
set forth on Schedule 4.14, (i) all personal property material to, and used by,
the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 4.14, (ii) all of the personal
property listed on Schedule 4.14 or replacement property thereof is in working
order and condition, ordinary wear and tear excepted and (iii) all leases and
agreements included on Schedule 4.14 are in full force and effect and constitute
valid and binding agreements of the Company and (to the knowledge of the
Stockholders) the other parties thereto (or their successors) in accordance with
their respective terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium, liquidation or
other similar laws and equity principles relating to creditors' rights
generally. For the purposes of this Section 4.14, "personal property" shall be
deemed to exclude personal property addressed by Sections 4.11 and 4.12 and
inventory of the Company.
4.15 SIGNIFICANT CUSTOMERS AND SUPPLIERS; MATERIAL CONTRACTS AND
COMMITMENTS
(a) Schedule 4.15(a) sets forth an accurate list of (i) all customers
(persons or entities) representing 5% or more of the Company's annual revenues
for fiscal year 1997, showing the approximate total sales to each such customer,
and (ii) all suppliers (persons or entities) representing 5% or more of the
Company's annual purchases of supplies for fiscal year 1997, showing the
approximate total purchases of supplies from each such supplier. Except to the
extent set forth on Schedule 4.15(a), none of such customers or suppliers has
canceled or substantially reduced or is currently attempting or threatening to
cancel a contract or substantially reduce utilization of the services provided
by the Company.
(b) The Company has listed on Schedule 4.15(b) all material
contracts, commitments and similar agreements to which the Company is a party or
by which it or any of its properties is bound (including, but not limited to,
contracts with significant customers or suppliers, joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land), other than agreements listed on Schedules 4.10, 4.14
or 4.16, (i) in existence as of the Balance Sheet Date and (ii) entered into
since the Balance Sheet Date, and in each case has delivered true, complete and
correct copies of such agreements to RV Centers. Except as set forth on Schedule
4.15(b), the Company has complied with all commitments and obligations
pertaining to it and is not in default in any material respect under any
contracts or agreements listed on Schedules 4.10, 4.14, 4.15(b) or 4.16 and has
not received notice of a default under any such contract or agreement. Where
required prior to the execution of this Agreement under such contracts or
agreements, the Company has furnished notice of the Agreement to third parties
and has, where
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<PAGE> 22
required prior to the execution of this Agreement, obtained consent from third
parties to enter into the transactions contemplated in this Agreement. The
Company has also indicated on Schedule 4.15(b) a list of all plans or projects
involving the opening of new operations, expansion of existing operations, or
the acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the Company.
(c) Except as set forth on Schedule 4.15(b), since January 1, 1997,
the Company has not experienced any difficulties in obtaining any inventory
items necessary to the operation of its business, and, to the knowledge of the
Stockholders, no such shortage of supply of inventory items is threatened or
pending. Except as set forth in Schedule 4.15(b), to the knowledge of the
Stockholders, no customer or supplier of the Company has indicated that it will
cease to do business with, or substantially reduce its purchases from or sales
to, the Company by reason of or after the consummation of the transactions
contemplated hereby.
(d) Except as set forth on Schedule 4.15(b), the Company is not
required to provide any bonding or other financial security arrangements in any
amount in connection with any contract listed on Schedule 4.15(b).
4.16 REAL PROPERTY. Schedule 4.16 includes a list of all real property
owned or leased by the Company at the date hereof and all other real property,
if any, used by the Company in the conduct of its business. The Company has good
title to any real property owned by it that is shown on Schedule 4.16, and all
real property so owned is subject to no mortgage, pledge, lien, conditional
sales agreement, encumbrance, lease, possessory rights of third parties or
charge, except for:
(i) liens reflected on Schedules 4.10 or 4.16 as securing
specified liabilities (with respect to which no material default
exists);
(ii) liens for current taxes not yet payable and assessments
not in default and other inchoate liens for amounts not yet payable and
assessments not in default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions
to title which do not adversely affect the current or contemplated use
of the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct, are attached to
Schedule 4.16, and an indication as to which such properties, if any, are
currently owned, or were formerly owned, by Stockholders or Affiliates of the
Company is included in Schedule 4.16. Copies of all title reports and title
insurance policies with respect to such real property owned by the Company and
in its possession or reasonably accessible to it are attached to Schedule 4.16.
Except as set forth on Schedule 4.16, all of such leases included on Schedule
4.16 are in full force and effect and constitute valid and binding agreements of
the Company and to the knowledge of the Stockholders the other parties thereto
in accordance
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with their respective terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium, liquidation or
other similar laws and equity principles relating to creditors' rights
generally.
4.17 INSURANCE. The Company has delivered to RV Centers (i) an
accurate list as of the Balance Sheet Date and as of the date hereof of all
insurance policies carried by the Company, (ii) an accurate list of all
insurance loss runs or workers compensation claims received by the Company for
the past three policy years and (iii) true, complete and correct copies of all
insurance policies currently in effect. Such insurance policies evidence all of
the insurance the Company is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws. Except as set forth on
Schedule 4.17, all of such insurance policies are currently in full force and
effect and shall remain in full force and effect through the Consummation Date.
Since January 1, 1996, no insurance carried by the Company has been canceled by
the insurer and the Company has not been denied coverage.
4.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to RV Centers an accurate list (which
is set forth on Schedule 4.18) showing all officers, directors and key employees
of the Company, listing all employment, compensation, change in control and
severance agreements with such officers, directors and key employees (the
"Agreements") and the rate of compensation, and sales commissions, (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of (i) the Balance Sheet Date and (ii)
the date hereof. The Company has provided to RV Centers true, complete and
correct copies of all Agreements. Since the Balance Sheet Date, except as
disclosed on Schedule 4.18, there have been no increases in the compensation
payable or any special bonuses to any officer, director, key employee or other
employee, except ordinary salary increases implemented on a basis and in amounts
consistent with past practices.
(b) Except as set forth on Schedule 4.18, (i) the Company is not
bound by or subject to (and none of its respective assets or properties is bound
by or subject to) any arrangement with any labor union, (ii) no campaign to
establish such arrangement is in progress and (iii) to the knowledge of the
Stockholders, there is no pending or threatened labor dispute involving the
Company and any group of its employees nor has the Company experienced any labor
interruptions over the past three years. Except as set forth on Schedule 4.18,
the Stockholders believe that the Company's relationship with its employees is
good.
(c) Except as set forth in Schedule 4.18 attached hereto, (i) there
are no significant controversies pending or, to the knowledge of the
Stockholders, threatened between the Company and any of its employees, (ii) the
Company has complied in all material respects with all applicable laws relating
to the employment of labor, including, without limitation, any provisions
thereof relating to wages, hours, collective bargaining, and the payment of
social security and similar taxes, and (iii) the Company has not received notice
from any person asserting that the Company is liable for any arrears of wages or
any taxes or penalties for failure to comply with any of the foregoing.
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4.19 EMPLOYEE PLANS. Schedule 4.19 lists all employee benefit plans
and compensation plans, programs or arrangements (the "Plans") which are
maintained by, contributed to or with respect to which there is or would be any
obligation or liability of the Company, including all employment agreements and
other agreements or arrangements containing "golden parachute" or other similar
provisions, incentive compensation agreements, and deferred compensation
agreements, together with true, complete and correct copies of such plans,
agreements and any trusts related thereto, and classifications of employees
covered thereby as of the Balance Sheet Date and as of the date of this
Agreement. Except for the Plans, if any, described on Schedule 4.19, the Company
does not sponsor, maintain or contribute to any plan, program, fund or
arrangement that constitutes an "employee benefit plan," and the Company does
not have any obligation to contribute to or accrue or pay any benefits under any
deferred compensation or retirement arrangement on behalf of any current or
former employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")). For the purposes of this Agreement, the term "employee
benefit plan" shall have the same meaning as is given that term in Section 3(3)
of ERISA. The Company has not sponsored, maintained or contributed to any
employee benefit plan other than the Plans set forth on Schedule 4.19, and the
Company is not or could not be required to contribute to any Plan pursuant to
the provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the Company's employees.
Except as set forth on Schedule 4.19, the Company is not now, and will
not as a result of its past activities become, liable to the Pension Benefit
Guaranty Corporation or to any multiemployer employee pension benefit plan under
the provisions of Title IV of ERISA.
All Plans listed on Schedule 4.19 and the administration thereof are in
compliance in all material respects with their terms and all applicable
provisions of ERISA and the regulations issued thereunder, as well as with all
other applicable federal, state and local statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any Plan listed on Schedule 4.19 have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company included in the Interim Financial Statements. All accrued contribution
obligations of the Company since the Balance Sheet Date with respect to any Plan
listed on Schedule 4.19 have been fulfilled or will be fully reflected on the
balance sheets delivered pursuant to Section 6.9.
4.20 COMPLIANCE WITH ERISA. All such Plans listed on Schedule 4.19
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code are, and have been from their inception, so qualified and are the subject
of a determination letter or notification letter issued by the Internal Revenue
Service, which letter covers the status of such Qualified Plans under the
provisions of the Tax Reform Act of 1986, and copies of such letters are
attached to Schedule 4.19. Except as disclosed on Schedule 4.20, all reports and
other documents required to be filed with any
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<PAGE> 25
governmental agency or distributed to plan participants or beneficiaries
(including, but not limited to, actuarial reports, audits or tax returns) have
been timely filed or distributed. Neither the Stockholders, any such Plan listed
in Schedule 4.19, nor the Company or, to the knowledge of the Stockholders, any
other person has engaged in any transaction with any Plan which is prohibited
under the provisions of Section 4975 of the Code or Section 406 of ERISA, and to
which no exemption under the Code or ERISA applies. No such Plan listed in
Schedule 4.19 has incurred an accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(l) of ERISA, whether or not waived;
and neither the Company nor, to the knowledge of the Stockholders, any other
person has incurred any liability for excise tax or penalty due to the Internal
Revenue Service or any liability to the Pension Benefit Guaranty Corporation
("PBGC") with respect to any Plan or breached any fiduciary duty with respect to
any Plan. The Company further represents that except as set forth on Schedule
4.20 hereto:
(i) With respect to any plan year for which the applicable
statutes of limitations has not expired, there have been no
terminations, partial terminations or discontinuations of contributions
to any Qualified Plan intended to qualify under Section 401(a) of the
Code without notice to and approval by the Internal Revenue Service;
(ii) no Plan listed in Schedule 4.19 is subject to the
provisions of Title IV of ERISA;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan listed in
Schedule 4.19;
(iv) the Company has not incurred liability under Section 4062
or Section 4069 of ERISA;
(v) no circumstances exist pursuant to which the Company could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise tax
or penalty, or being subject to any statutory lien to secure payment of
any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that
is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company; and
(vi) each Plan may be unilaterally terminated at any time by
the Company without material liability to the Company.
4.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
on Schedule 4.21 or 4.13, the Company is not in violation of any law or
regulation or any order of any court or Federal, state, local or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it other than violations that would not have a Material
Adverse Effect on the Company and except to the extent set forth on Schedules
4.10, 4.13 or 4.21,
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there are no claims, actions, suits or proceedings, pending or, to the knowledge
of the Stockholders, threatened against, the Company, at law or in equity, or
before or by any Federal, state, local or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
any of them and no written notice of any claim, action, suit or proceeding,
whether pending or threatened, has been received by the Company. Except as set
forth in Schedule 4.21, the Company has conducted and is now conducting its
business in compliance in all material respects with the requirements,
standards, criteria and conditions set forth in applicable Federal, state and
local statutes, ordinances, orders, approvals, variances, rules and regulations.
4.22 TAXES.
(a) The Company has timely filed all requisite Federal, state, local
and other income and payroll tax returns or extension requests for all fiscal
periods ended on or before the Balance Sheet Date; and except as set forth on
Schedule 4.22, there are no examinations in progress or claims pending against
the Company for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for Taxes, whether pending or threatened, has
been received. All Taxes, including interest and penalties (whether or not shown
on any tax return), owed by the Company has been paid or reflected as accrued as
of the Balance Sheet Date. The amounts shown as accruals for Taxes on the
Company's Financial Statements are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date. Copies of (i) any tax examinations, (ii)
extensions of statutory limitations and (iii) the federal and local income tax
returns and franchise tax returns of Company for their last three (3) fiscal
years, or such shorter period of time as any of them shall have existed, are
attached hereto as Schedule 4.22 or have otherwise been delivered to RV Centers.
The Company has a taxable year ended as of the year end date in the Year-end
Financial Statements in Schedule 4.9. Except as set forth on Schedule 4.22, the
Company uses the accrual method of accounting for income tax purposes, and the
Company's methods of accounting have not changed in the past five years. The
Company is not an Investment Company as defined in Section 351(e)(1) of the
Code. Except as set forth on Schedule 4.22, the Company is not and has not been
a party to any tax sharing agreement or agreement of similar effect. Except as
set forth on Schedule 4.22, the Company is not and has not been a member of any
consolidated group. The Company has not received, been denied, or applied for
any private letter ruling during the last ten years.
(b) The Company has timely filed all requisite Federal, state, local
and other income and payroll tax returns or extension requests for all fiscal
periods ended on or prior to the date hereof; and except as set forth on
Schedule 4.22, there are no examinations in progress or claims pending against
the Company for federal, state, local and other Taxes (including penalties and
interest) for any period or periods ended on or prior to the date hereof and no
notice of any claim for Taxes, whether pending or threatened, has been received.
All Taxes, including interest and penalties (whether or not shown on any tax
return), owed by the Company have been paid or reflected as accrued. The amounts
shown as accruals for Taxes on the Company's Financial Statements are
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sufficient for the payment of all Taxes of the kinds indicated (including
penalties and interest) for all fiscal periods ended on or before that date.
(c) If the Company is an S corporation, the Company makes the
representations and warranties in this subsection 4.22(c). Except as disclosed
in the Year-end Financial Statements, the Company has been a validly existing S
corporation within the meaning of Sections 1361 and 1362 of the Code at all
times during its existence and the Company will be an S corporation up to and
including the day before the Closing Date. The Company would not be liable for
any tax under Section 1374 of the Code if its assets were sold for their fair
market value as of the Closing Date. Neither the Company nor any qualified
subchapter S subsidiary of the Company has, in the past 10 years, (A) acquired
assets from another corporation in a transaction in which the Company's tax
basis in the acquired assets was determined, in whole or part, by reference to
the tax basis of the acquired assets in the hands of the transferor or (B)
acquired the stock of any corporation which is a qualified subchapter S
subsidiary. The Stockholders shall pay, and they hereby indemnify RV Centers and
the Company against, all income taxes payable with respect to the Company's
operations for all periods through and including the Consummation Date.
4.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document. Except
as set forth on Schedule 4.23(a), neither the Company nor, to the knowledge of
the Stockholders, any other party thereto, is in default under any lease,
instrument, agreement, license, or permit set forth on Schedule 4.10(b), 4.12,
4.14, 4.15(b) or 4.16 (the "Material Documents").
(b) Except as set forth on Schedule 4.23(b), the execution and
delivery of this Agreement by each of the Company and the Stockholders do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any of the
terms, conditions or provisions of (i) the Charter Documents of the Company,
(ii) any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its properties or assets, or (iii) any
Material Document to which the Company or any of the Stockholders is now a party
or by which any of the Stockholders or the Company or any of its properties or
assets may be bound or affected. The consummation by the Company and the
Stockholders of the transactions contemplated herein will not result in any
material violation, conflict, breach, right of termination or acceleration or
creation of liens under any of the terms, conditions or provisions of the items
described in clauses (i) through (iii) of the preceding sentence, subject, in
the case of the terms, conditions or provisions of the items described in clause
(iii) above, to obtaining (prior to the Effective Time) such consents as may be
required from commercial lenders, lessors or other third parties.
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(c) Except as set forth on Schedule 4.23(c) and except for
requirements under the Hart- Scott Act, none of the Material Documents requires
notice to, or the consent or approval of, any governmental agency or other third
party with respect to the consummation by the Company and the Stockholders of
any of the transactions contemplated herein in order to remain in full force and
effect, and consummation by the Company and the Stockholders of the transactions
contemplated herein will not give rise to any right to termination, cancellation
or acceleration or loss of any right or benefit.
(d) Except for (i) the filing of the Registration Statement, (ii) the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities and (iii) any filing required under the Hart-Scott
Act in connection with the purchase and sale of the Company Stock, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Company and
the Stockholders or the consummation by the Company and the Stockholders of the
transactions contemplated herein.
(e) Except as set forth on Schedule 4.23(e), none of the Material
Documents prohibits the use or publication by the Company or RV Centers of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from providing services or selling
products to any other customer or potential customer of the Company, RV Centers
or any Other Founding Company.
4.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 4.24, the
Company is not a party to any governmental contract subject to price
redetermination or renegotiation.
4.25 ABSENCE OF CHANGES. Since June 30, 1998, except as set forth on
Schedule 4.25 or as otherwise contemplated herein, there has not been:
(i) any Material Adverse Change in the Company;
(ii) any material damage, destruction or loss to any property
or asset of the Company (whether or not covered by insurance) which has
caused a Material Adverse Effect on the Company;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the
Company except for distributions that are described in Annex I;
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(v) any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by the Company to any
of its officers, directors, Stockholders, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases
for employees in accordance with past practice; notwithstanding the
foregoing, the Company has not paid or agreed to pay salary, bonus,
sales commissions, fees or any other form of compensation, directly or
indirectly, to the Stockholders or any members of their family in
excess of the aggregate monthly compensation provided for in Annex I
hereto.
(vi) any work interruptions, labor grievances or claims filed,
or any similar event or condition of any character which has caused a
Material Adverse Effect on the Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to any
Person, including, without limitation, the Stockholders and their
Affiliates, except inventory sold in the ordinary course of business;
(viii) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to the Company, including without limitation
any indebtedness or obligation of any Stockholders or any Affiliate
thereof;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
material assets, property or rights of the Company or requiring consent
of any party to the transfer and assignment of any such assets,
property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a
party;
(xiii) any transaction by the Company outside the ordinary course
of its business;
(xiv) any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date other
than in the ordinary course of business of the Company and of which
notice has been given to RV Centers;
(xv) any other distribution of property or assets by the
Company other than in the ordinary course of business and other than
distributions of real estate and other assets as permitted by this
Agreement (including the Schedules hereto); or
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(xvi) any occurrence that is reasonably likely to give rise to a
contingent liability which would have a Material Adverse Effect on the
Company excluding occurrences due to general economic conditions,
legislative or regulatory developments or occurrences affecting the
recreational vehicle industry generally.
4.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered
to RV Centers an accurate schedule (which is set forth on Schedule 4.26) as of
the date of the Agreement of:
(i) the name of each financial institution in which the
Company has accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
All of the cash indicated on the Company's balance sheet as of June 30,
1998, was held in the accounts listed on Schedule 4.26, and as of the
Consummation Date, the Company will have no other accounts. Schedule 4.26 also
sets forth the name of each person, corporation, firm or other entity holding a
general or special power of attorney from the Company and a description of the
terms of such power.
4.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance by the Company of the transactions
contemplated herein have been duly and validly authorized by the Board of
Directors and the Stockholders of the Company and this Agreement has been duly
and validly authorized by all necessary corporate action and is a valid and
binding obligation of the Company, subject to the effect of applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium,
liquidation or other similar laws and equity principles relating to creditors'
rights generally.
4.28 RELATIONS WITH GOVERNMENTS. None of the Company, any of the
Stockholders, nor any Affiliate of any of them has given or offered anything of
value to any governmental official, political party or candidate for government
office nor has it or any of them otherwise taken any action which would in any
case cause the Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
4.29 DISCLOSURE. (a) The representations and warranties of the
Stockholders as set forth in this Agreement, including the Annexes and Schedules
hereto, to the extent such representations and warranties relate to the Company
and the Stockholders, and the completed Director and Officer Questionnaires,
with respect to any Stockholder who has completed such Questionnaires do not
contain an untrue statement of a material fact concerning the Company or the
Stockholders or omit
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to state a material fact concerning the Company or the Stockholders necessary to
make the statements herein and therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the foregoing does
not apply to statements contained in or omitted from any of such documents made
or omitted in reliance upon information furnished in writing by the Other
Founding Companies, RV Centers and its Affiliates or any representatives or
agents of RV Centers and its Affiliates.
(b) The Stockholders acknowledge and agree that (i) there exists no
firm commitment, binding agreement, or promise or other assurance of any kind,
whether express or implied, oral or written, that a Registration Statement will
become effective or that the IPO pursuant thereto will occur; (ii) neither RV
Centers nor Baker Kreft Funding I, L.L.C. or any of their officers, directors,
agents or representatives nor any Underwriter shall have any liability to the
Company, the Stockholders or any other person affiliated or associated with the
Company for any failure of the Registration Statement to become effective, the
IPO to occur at a particular price or within a particular range of prices or to
occur at all, the transactions contemplated by this Agreement to be successful
or the prospects for RV Centers described in the Registration Statement to be
realized; and (iii) the decision of Stockholders to enter into this Agreement,
or to vote in favor of or consent to the proposed purchase of RV Centers Stock
and sale of the Company Stock, has been or will be made independent of, and
without reliance upon, any statements, opinions or other communications, or due
diligence investigations which have been or will be made or performed by any
prospective Underwriter, relative to RV Centers or the prospective IPO.
(c) No Stockholder has any present plan, intention, commitment or
binding agreement or arrangement to dispose of any shares of RV Centers Stock to
be received by such Stockholder as a result of the transactions contemplated in
this Agreement, except for transfers permitted pursuant to Sections 14 and 15
hereof.
4.30 PROHIBITED ACTIVITIES. Except as set forth on Schedule 4.30, the
Company has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 6.3.
4.31 NO WARRANTIES OR INSURANCE. Except as set forth on Schedule 4.31,
the Company has no liability to any person under any warranty relating to goods
sold or services provided by the Company and the Company does not offer or sell
insurance or consumer protection plans or other arrangements that could result
in the Company being required to make any payment to or perform any service for
any person.
4.32 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 4.32, no Stockholder, officer,
director or Affiliate of the Company (i) possesses, directly or indirectly, any
financial interest in, or is a director, officer, employee or Affiliate of, any
corporation, firm, association or business organization that is a client,
supplier, customer, lessor, lessee or competitor of the Company, or (ii) is a
party to an agreement or
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<PAGE> 32
relationship, that involves the receipt by such person of compensation or
property from the Company other than through a customary employment
relationship.
4.33 REGISTRATION STATEMENT. None of the information supplied by the
Company in writing for inclusion in the Registration Statement contains any
untrue statement of a material fact concerning the Company or the Stockholders
or has omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein concerning the Company or the
Stockholders, in light of the circumstances under which they are made, not
misleading. The Stockholders will have the right to review and approve in
advance any statements made about the Company in the Registration Statement.
4.34 INVENTORY. Except as provided in Schedule 4.34, all of the
Company's inventories at June 30, 1998 are reflected on the Interim Financial
Statements. The values at which inventories are carried on the Interim Financial
Statements reflect the normal inventory valuation policies of the Company in
conformity with GAAP consistently applied. The inventories reflected on the
Interim Financial Statements or arising since the date thereof are currently
marketable and substantially all of such inventories can reasonably be
anticipated to be sold at normal mark-ups within 180 days after the date hereof
in the ordinary course of business (subject to any reserve for obsolete,
off-grade or slow-moving items that is reflected in the Interim Financial
Statements) except for spare parts inventory which inventory is good and usable.
4.35 YEAR 2000. Except and to the extent described in Schedule 4.35,
the "Information Technology" (as defined below in this Section 4.35) of the
Company and its Subsidiaries is Year 2000 compliant. "Year 2000 compliant" means
that the Information Technology is designed to be used prior to, during and
after the calendar Year 2000 A.D. and the Information Technology used during
each such time period will accurately receive, provide and process date/time
data (including, but not limited to, calculating, comparing and sequencing)
from, into and between the 20th and 21st centuries, including the years 1999 and
2000, and leap-year calculations and will not malfunction, cease to function, or
provide invalid or incorrect results as a result of date/time data.
For purposes hereof, "Information Technology," means all computer
operated or micro processor controlled equipment, including, but not limited to
computer software, computer hardware and related software, all central
processing units, terminals, disk drives, tape drives, electronic memory units,
printers, keyboards, screens, peripherals (and other input/output devices),
modems and other communication controllers, and any and all parts and
appurtenances thereto, together with all intellectual property used in the
operation of such computer equipment and hardware, and other similar or related
items of automated, computerized, or software system(s) that are used or relied
on by the Company or its Subsidiaries in the conduct of their business.
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<PAGE> 33
(B) Individual Representations and Warranties of Stockholders.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement, and that the representations and warranties set forth in Section 4(B)
shall survive the Consummation Date.
4.36 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement. Such Stockholder owns
beneficially and of record all of the shares of the Company Stock identified on
Schedule 4.3 hereto as being owned by such Stockholder, and such Company Stock
is owned free and clear of all liens, encumbrances and claims of every kind.
4.37 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock that
such Stockholder has or may have had. Nothing herein, however, shall limit or
restrict the rights of any Stockholder to acquire RV Centers Stock pursuant to
(i) this Agreement or (ii) any outstanding option, warrant or other rights
granted by RV Centers.
5. REPRESENTATIONS OF RV CENTERS
Except as set forth in the disclosure schedules attached hereto and
except otherwise qualified below, RV Centers represents and warrants that all of
the following representations and warranties in this Section 5 are true at the
date of this Agreement, and that such representations and warranties, except for
those in Section 5.3, shall survive the Consummation Date until June 30, 2000
(the "Expiration Date"). The representations and warranties set forth in Section
5.3 shall survive until the date on which the applicable statute of limitations
expires, which date shall be the "Expiration Date" for purposes of Section 5.3.
5.1 DUE ORGANIZATION. RV Centers is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the State
of Delaware, and it has the requisite power and authority to carry on its
business as it is now being conducted and as contemplated in the RV Centers Plan
of Organization. RV Centers is duly qualified or authorized to do business and
is in good standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification or
authorization necessary, except where the failure to be so qualified or
authorized to do business would not have a Material Adverse Effect. True,
complete and correct copies of the Certificate of Incorporation and By-laws, as
proposed to be amended, of RV Centers (the "RV Centers Charter Documents") are
attached hereto as Annex II.
5.2 AUTHORIZATION. (i) The officers of RV Centers executing this
Agreement have the authority to enter into and bind RV Centers to the terms of
this Agreement and (ii) RV Centers has the full legal right, power and authority
to enter into and perform this Agreement and consummate the transactions
contemplated herein. All corporate acts and other proceedings required to have
been taken by RV Centers to authorize the execution, delivery and performance of
this Agreement
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and all the transactions contemplated hereby have been duly and properly
authorized. Copies of the most recent resolutions adopted by the Board of
Directors of RV Centers, which approve this Agreement and the transactions
contemplated herein in all respects, certified by the Secretary or an Assistant
Secretary of RV Centers, as the case may be, as being in full force and effect
on the date hereof, are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF RV CENTERS. As of the date of this Agreement,
the authorized capital stock of RV Centers is as set forth on Schedule 5.3.
Immediately prior to the Closing Date and the Consummation Date, all of the
issued and outstanding shares of the capital stock of RV Centers will be as set
forth in the Registration Statement, free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind other than any restrictions described in the Registration
Statement. All of the issued and outstanding shares of the capital stock of RV
Centers has been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by RV
Centers in compliance with all applicable state and Federal laws concerning the
issuance of securities. Further, none of such shares were issued in violation of
the preemptive rights of any past or present stockholder of RV Centers.
5.4 TRANSACTIONS IN CAPITAL STOCK; ORGANIZATION ACCOUNTING. Except
for the Other Agreements and except as set forth in the Draft Registration
Statement, (i) no option, warrant, call, conversion right or commitment of any
kind exists which obligates RV Centers to issue any of its authorized but
unissued capital stock; and (ii) RV Centers has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof. The outstanding options, warrants or other rights to acquire
shares of the stock of RV Centers will be as described in the Registration
Statement.
5.5 SUBSIDIARIES. RV Centers has no subsidiaries. RV Centers does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, and RV Centers,
directly or indirectly, is not a participant in any joint venture, partnership
or other non-corporate entity.
5.6 NO VIOLATIONS. (a) RV Centers is not in violation of any RV
Centers Charter Document. Neither RV Centers nor, to the best knowledge of RV
Centers, any other party thereto, is in default under any lease, instrument,
agreement, license, or permit to which RV Centers is a party, or by which RV
Centers, or any of its properties, is bound (collectively, the "RV Centers
Documents").
(b) The execution and delivery of this Agreement by RV Centers does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or
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<PAGE> 35
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of RV Centers under any of the terms,
conditions or provisions of (i) the RV Centers Charter Documents, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to RV
Centers or any of its properties or assets, or (iii) any RV Centers Document.
The consummation by RV Centers of the transactions contemplated herein will not
result in any material violation, conflict, breach, right of termination or
acceleration or creation of liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the preceding
sentence, subject, in the case of the terms, conditions or provisions of the
items described in clause (iii) above, to obtaining (prior to the Effective
Time) such consents as may be required from commercial lenders, lessors or other
third parties.
(c) Except for (i) the filings with the SEC pursuant to the 1933 Act
in connection with the IPO and the purchase and sale of the Company Stock, (ii)
the declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities, and (iii) any filings required under the Hart-Scott
Act in connection with the transactions contemplated by the RV Centers Plan of
Organization, none of the RV Centers Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by RV Centers of any of the transactions
contemplated herein, and consummation by RV Centers of the transactions
contemplated herein will not give rise to any right to termination, cancellation
or acceleration or loss of any material right or benefit under any of the RV
Centers Documents.
(d) Except for (i) the filings with the SEC pursuant to the 1933 Act
in connection with the IPO and the purchase and sale of the Company Stock, (ii)
the declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities, and (iii) any filings required under the Hart-Scott
Act in connection with the transactions contemplated in the RV Centers Plan of
Organization, no declaration, filing or registration with, notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by RV
Centers or the consummation by RV Centers of the transactions contemplated
herein.
5.7 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by RV Centers and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of RV
Centers and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of RV Centers.
5.8 RV CENTERS STOCK. At the time of issuance thereof and delivery to
the Stockholders, the RV Centers Stock to be delivered to the Stockholders
pursuant to this Agreement will constitute valid, duly authorized and legally
issued shares of RV Centers, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 14 and 15 hereof,
will be identical in all substantive respects (which do not include the form of
certificate upon which it is printed or the presence or absence of a CUSIP
number on any such certificate) to the RV Centers Stock issued
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<PAGE> 36
and outstanding as of the date hereof by reason of the provisions of the
Delaware GCL. The RV Centers Stock issued and delivered to the Stockholders
shall at the time of such issuance and delivery be free and clear of any liens,
claims or encumbrances of any kind or character. The shares of RV Centers Stock
to be issued to the Stockholders pursuant to this Agreement will not be
registered under the 1933 Act, except as provided in Section 16 hereof.
5.9 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. RV Centers was
formed in May, 1998 and has conducted only limited operations since that time.
RV Centers has not conducted any material business since the date of its
inception, except in connection with this Agreement, the Other Agreements and
the IPO. Except as described in the Draft Registration Statement, RV Centers
does not own and has not at any time owned any real property or any material
personal property and is not a party to any other material agreement other than
the Other Agreements, the agreements contemplated hereby and such agreements as
will be filed as Exhibits to the Registration Statement. Except as set forth in
the Registration Statement, RV Centers has not entered into any material
agreement with any of the Founding Companies or any of the stockholders of the
Founding Companies other than the Other Agreements and the agreements
contemplated in each of the Other Agreements and the Registration Statement,
including the employment agreements and leases referred to herein or entered
into in connection with the transactions contemplated herein and therein.
5.10 INVESTMENT REPRESENTATIONS. RV Centers represents that the
Company Stock is being acquired by RV Centers for its own account for investment
purposes only and not with a view to the distribution thereof within the meaning
of the 1933 Act.
5.11 AUTHORIZATION OF OTHER AGREEMENTS. The Other Agreements have been
duly authorized, executed and delivered by RV Centers and constitute the legal,
valid and binding obligation of RV Centers enforceable against RV Centers in
accordance with their respective terms, subject to the effect of applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium,
liquidation or other similar laws and equity principles relating to creditors'
rights generally.
5.12 FINANCIAL STATEMENTS. The unaudited pro forma financial
statements of RV Centers included in the Draft Registration Statement comply as
to form in all material respects to the applicable accounting requirements of
the 1933 Act and the regulations promulgated under the 1933 Act. Management of
RV Centers believes that the assumptions underlying the pro forma adjustments
utilized in the preparation of such pro forma financial statements are
reasonable, and such pro forma adjustments have been properly applied to the
historical financial amounts in the compilation of the pro forma financial
statements. Based on the representations in Section 4.9 of this Agreement and in
Section 4.9 of each of the Other Agreements, to the knowledge of RV Centers, the
pro forma financial information of RV Centers fairly presents the pro forma
financial position, results of operations and other information purported to be
shown therein at the respective dates and for the respective periods specified.
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5.13 LIABILITIES AND OBLIGATIONS. Except as set forth in the Draft
Registration Statement, as of the date of this Agreement, RV Centers has no
material liabilities or obligations of any kind, character or description,
whether accrued, absolute, secured or unsecured, contingent or otherwise, other
than liabilities incurred in the ordinary course of business and consistent with
past practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
5.14 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
in the Draft Registration Statement, RV Centers is not in violation of any law
or regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of RV Centers,
threatened against or affecting, RV Centers, at law or in equity, or before or
by any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. RV Centers has conducted and is conducting its businesses in
compliance in all material respects with the requirements, standards, criteria
and conditions set forth in applicable Federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation, in any material respect, of any of the
foregoing.
5.15 NO SIDE AGREEMENTS. RV Centers has not entered into any agreement
with any of the Founding Companies or any of the stockholders of the Founding
Companies other than the Other Agreements and the agreements referred to in the
Other Agreements or the Draft Registration Statement, including the employment
agreements and/or advisory agreements and leases referred to herein or entered
into in connection with the transactions contemplated hereby and thereby. RV
Centers has not entered into any agreements providing for rights to register
shares of RV Centers Stock under the 1933 Act except as provided in Section 16
of this Agreement, in Section 16 of the Other Agreements and the Exhibits to the
Draft Registration Statement.
5.16 RELATIONS WITH GOVERNMENTS. Neither RV Centers nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor has
RV Centers, any of its directors, officers or Affiliates of any of them
otherwise taken any action, which would cause RV Centers to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.17 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by RV Centers and constitute the legal, valid and binding
obligation of RV Centers enforceable against RV Centers in accordance with their
respective terms. Except as disclosed on Schedule 5.17 or the Draft Registration
Statement, the terms and conditions of the Other Agreements and the employment
agreements, advisory agreements and leases attached as annexes thereto
(excluding the terms relating to the consideration payable by RV Centers
thereunder) are identical in all material respects to the terms and conditions
in this Agreement and its comparable Annexes.
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5.18 REGISTRATION STATEMENT. On the date of each filing of the
Registration Statement with the SEC the Registration Statement will comply, as
to form in all material respects with the requirements of the Form S-1
Registration Statement and applicable requirements under Federal laws and
regulations (except for the inclusion of all exhibits required to be filed
therewith with respect to the Draft Registration Statement and the Registration
Statement prior to its effective date), provided that the foregoing does not
apply to any information that the Company and the Stockholders have furnished to
RV Centers in writing specifically for inclusion in the Registration Statement.
5.19 DISCLOSURE. The Draft Registration Statement delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted in
reliance upon, and in conformity with, information furnished to RV Centers by
the Company or the Stockholders in writing specifically for inclusion in the
Registration Statement. The Registration Statement, when it becomes effective,
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and each prospectus included therein, on the date of
filing thereof with the SEC and at the Closing Date and the Consummation Date,
will not include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that the
foregoing shall not apply to statements in or omissions from any such document
in reliance upon, and in conformity with, information furnished to RV Centers by
the Company or the Stockholders in writing specifically for inclusion therein.
6. COVENANTS PRIOR TO CLOSING
6.1 ACCESS AND COOPERATION; DUE DILIGENCE.
(a) Between the date of this Agreement and the Consummation Date, the
Company will afford to the officers and authorized representatives of RV Centers
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish RV Centers with such additional
financial and operating data and other information as to the business and
properties of the Company as RV Centers may from time to time reasonably
request. The Company will cooperate with RV Centers, its representatives,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by this
Agreement. RV Centers will treat all information obtained in connection with the
negotiation and performance of this Agreement or the due diligence
investigations conducted with respect to the Company as confidential in
accordance with the provisions of Section 13 hereof.
(b) Between the date of this Agreement and the Consummation Date, RV
Centers will afford to the officers and authorized representatives of the
Company and/or the Stockholder access
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to all of RV Centers's sites, properties, books and records and will furnish the
Company and/or the Stockholder with such additional financial and operating data
and other information as to the business and properties of RV Centers as the
Company and/or the Stockholder may from time to time reasonably request. RV
Centers will cooperate with the Company and/or the Stockholder, their
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. The Company and/or the Stockholder will
cause all information obtained in connection with the negotiation and
performance of this Agreement (including information regarding each of the Other
Founding Companies) to be treated as confidential in accordance with the
provisions of Section 13 hereof.
6.2 CONDUCT OF BUSINESS PENDING CLOSING. Except as set forth on
Schedule 6.2, between the date of this Agreement and the Consummation Date, the
Company will:
(i) carry on its respective businesses in the ordinary course,
consistent with past practice, and not introduce any material new
method or changes in operation or accounting;
(ii) use all commercially reasonable efforts to maintain its
respective properties, equipment and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its obligations under agreements relating
to or affecting its assets, properties, equipment or rights, the
nonperformance of which could have a Material Adverse Effect on the
Company;
(iv) use all reasonable efforts to keep in full force and
effect present insurance policies or other comparable insurance
coverage;
(v) use reasonable efforts to maintain and preserve its
business organization intact, retain its respective key employees and
maintain its respective material relationships with suppliers,
customers and others having business relations with the Company;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, the
noncompliance with which could have a Material Adverse Effect on the
Company;
(vii) maintain present debt and lease instruments in accordance
with their terms and not enter into new or amended debt or lease
instruments without the knowledge and written consent of RV Centers
(which consent shall not be unreasonably withheld) provided that debt
or lease instruments may be replaced without the consent of RV Centers
if the replacement instruments are on terms at least as favorable to
the Company as the instruments being replaced;
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(viii) maintain or reduce present salaries and commission levels
for all officers, directors, employees and agents except for ordinary
and customary bonus and salary increases for employees in accordance
with past practices; notwithstanding the foregoing, the Company will
not pay or agree to pay salary, bonus, sales commissions, fees or any
other form of compensation, directly or indirectly, to the Stockholders
or any members of their family in excess of the aggregate monthly
compensation provided for in Annex I hereto; and
(ix) pay all of its obligations, including but not limited to
taxes, loans and manufacturers' invoices, as they become due and
payable and not prepay any of its obligations.
6.3 PROHIBITED ACTIVITIES. Except as set forth on Schedule 6.3 or on
Annex I to this Agreement, between the date hereof and the Consummation Date,
the Company will not, without prior written consent of RV Centers:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than
in connection with the exercise of options or warrants listed in
Schedule 4.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its
stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is
in the normal course of business (consistent with past practice) or
involves an amount per contract, commitment, liability or expenditure,
in the aggregate, not in excess of $100,000 except for purchases and
sales of recreational vehicles inventory in the ordinary course of
business;
(v) create or assume to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment, (excluding
rolling stock inventory) with an aggregate cost, per item, not in
excess of $25,000 necessary or desirable for the conduct of the
businesses of the Company, (2) (A) liens for taxes either not yet due
or being contested in good faith and by appropriate proceedings (and
for which contested taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary
course of business (the liens set forth in clause (2) being referred to
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herein as "Statutory Liens"), or (3) liens set forth on Schedule
4.10(b), 4.15(b) and/or 4.16 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment with a net book value in excess of $25,000
except in the normal course of business;
(vii) consummate or enter into any commitment for the
acquisition of any business or the start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust bills and accounts
in the course of good faith disputes with customers in a manner
consistent with past practice, provided, further, that such adjustments
shall not be deemed to be included in Schedule 4.11 unless specifically
listed thereon;
(x) commit a material breach of or amend or terminate any
material agreement, permit, license or other right of the Company;
(xi) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder; or
(xii) pay or agree to pay salary, bonus, sales commissions, fees
or any other form of compensation, directly or indirectly, to the
Stockholders or any members of their family in excess of the aggregate
monthly compensation provided for in Annex I hereto.
6.4 NO SHOP. None of the Stockholders or the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Consummation Date or the termination of this Agreement
in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than RV
Centers or its authorized agents relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation, share exchange or
business combination of the Company.
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6.5 AGREEMENTS. Except as disclosed on Schedule 6.5, the Stockholders
and the Company shall terminate (i) any stockholders agreements, voting
agreements, voting trusts, options, warrants and employment agreements between
the Company and any employee listed on Schedule 8.11 hereto and (ii) except as
otherwise provided in this Agreement, any existing agreement between the Company
and any Stockholder, on or prior to the Consummation Date, provided that nothing
herein shall prohibit or prevent the Company from paying (either prior to or on
the Closing Date) notes or other obligations from the Company to the
Stockholders in accordance with the terms thereof, which terms have been
disclosed to RV Centers. Such termination agreements are listed on Schedule 6.5
and copies thereof are attached thereto.
6.6 NOTIFICATION OF CERTAIN MATTERS. The Stockholders and the Company
shall give prompt notice to RV Centers of the Company's or any Stockholder's
knowledge of (i) the occurrence or non-occurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
of the Company or the Stockholders contained herein to be untrue or inaccurate
in any material respect at or prior to the Closing and (ii) any material failure
of any Stockholder or the Company to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such person
hereunder. RV Centers shall give prompt notice to the Company of RV Centers's
knowledge of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of RV Centers contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing and (ii) any material failure of RV Centers
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder. The delivery of any notice pursuant to this
Section 6.6 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 6.7, (ii) modify the conditions set forth in Sections 7
and 8, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
6.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until 24 hours prior
to the anticipated effectiveness of the Registration Statement to supplement or
amend promptly the Schedules hereto with respect to any matter hereafter arising
or discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or described in the Schedules or which may
have been omitted from the schedules previously provided by the Company;
provided however, that supplements and amendments to Schedules 4.10(b), 4.11,
4.14, 4.15(a), and 4.15(b) shall only have to be delivered at the Closing Date,
unless such Schedule is to be amended to reflect an event occurring other than
in the ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the Company that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect on
the Company may be made unless RV Centers consents to such amendment or
supplement; and provided further, that no amendment or supplement to a Schedule
prepared by RV Centers that constitutes or reflects an event or occurrence that
would have a Material Adverse Effect on RV Centers may be made unless a majority
of the Founding Companies consent to such amendment or supplement. For all
purposes of this
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Agreement, including without limitation for purposes of determining whether the
conditions set forth in Sections 7.1 and 8.1 have been fulfilled, the Schedules
hereto shall be deemed to be the Schedules as amended or supplemented pursuant
to this Section 6.7. In the event that the Company seeks to amend or supplement
a Schedule pursuant to this Section 6.7 to reflect an item not known to the
Company or the Stockholders at the time of entering into this Agreement or an
event occurring after the date of this Agreement, and RV Centers does not
consent, in its reasonable discretion, to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
11.1(i) hereof. In the event that RV Centers seeks to amend or supplement a
Schedule pursuant to this Section 6.7 and a majority of the Founding Companies
do not consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 11.1(i) hereof. No party to
this Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of this Section 6.7 with respect to an
attempt to supplement or amend a Schedule to reflect an item not known to RV
Centers or the Company or Stockholders, as applicable, at the time of execution
or occurring after the date of execution of this Agreement. No amendment of or
supplement to a Schedule shall be made later than 24 hours prior to the
anticipated effectiveness of the Registration Statement, subject to the proviso
in the first sentence.
6.8 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The Company
and the Stockholders shall furnish or use reasonable efforts to cause to be
furnished to RV Centers and the Underwriters all of the information concerning
the Company and the Stockholders and their Affiliates as RV Centers may
reasonably request required for inclusion in, and will cooperate with RV Centers
and the Underwriters in the preparation of, the Registration Statement and the
prospectus included therein (including audited and unaudited financial
statements, prepared in accordance with GAAP, in form suitable for inclusion in
the Registration Statement). The parties hereto agree that the disclosure of
information with respect to the Company and the Stockholders and their
affiliates in the Registration Statement and while marketing the securities of
RV Centers in the IPO shall not be a violation of any confidentiality agreement,
including Article 13 of this Agreement, among the parties hereto or their
officers or stockholders. The Company and the Stockholders agree promptly to
advise RV Centers if at any time during the period in which a prospectus
relating to the offering is required to be delivered under the 1933 Act, any
information contained in the prospectus concerning the Company or the
Stockholders or their Affiliates becomes incorrect or incomplete in any material
respect and to provide the information needed to correct such inaccuracy.
Subject to the Company's right to review and approve such information in the
Registration Statement set forth in Section 4.33 above, only insofar as the
information relates solely to the Company or the Stockholders or their
affiliates, the Company represents and warrants as to such information with
respect to itself, and each Stockholder represents and warrants, as to such
information with respect to the Company and himself or herself, that the
Registration Statement will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
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6.9 FINAL FINANCIAL STATEMENTS. The Company shall provide at least
five (5) business days prior to the Consummation Date the consolidated balance
sheets of the Company, audited as of December 31, 1998 and unaudited as of the
end of all fiscal months following December 31, 1998 and ending at least 25 days
prior to the Consummation Date, and the consolidated statement of income, cash
flows and retained earnings of the Company, audited for the quarter ending
December 31, 1998 and unaudited for the same months as the balance sheets. Such
financial statements shall have been prepared in accordance with GAAP applied on
a consistent basis throughout the periods indicated (except as noted therein),
and will present fairly the financial position and results of operations of the
Company for the periods indicated therein.
6.10 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated herein.
6.11 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act, (ii) such compliance by
the Stockholders and the Company shall be deemed a condition precedent in
addition to the conditions precedent set forth in Section 8 of this Agreement,
and such compliance by RV Centers shall be deemed a condition precedent in
addition to the conditions precedent set forth in Section 7 of this Agreement,
and (iii) the parties agree to cooperate and use their best efforts to cause all
filings required under the Hart- Scott Act to be made. If filings under the
Hart-Scott Act are required, the costs and expenses thereof (including filing
fees) shall be borne by RV Centers. The obligation of each party to consummate
the transactions contemplated in this Agreement is subject to the expiration or
termination of the waiting period under the Hart-Scott Act, if applicable.
6.12 TRANSFERS OF PERMITS AND INTANGIBLES. The Stockholders shall use
commercially reasonable efforts to cause all trademarks, trade names, patents,
patent applications, copyrights and other intellectual property owned or held by
employees of the Company which are material to the operations of the business of
the Company to be assigned or licensed to the Company for no additional
consideration.
6.13 DIVIDENDS. The Company may, after the Balance Sheet Date and
before the Consummation Date, pay to the Stockholder only the dividends or
distributions expressly permitted by Annex I hereto.
6.14 AUTHORIZED CAPITAL. Prior to the Consummation Date, RV Centers
shall maintain its authorized capital stock as set forth in the Registration
Statement filed with the SEC except for stock splits, such changes in authorized
capital stock as are made to respond to comments made by the SEC or requirements
of any exchange or automated trading system for which application is made
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to register the RV Centers Stock and any changes necessary or advisable in order
to permit the delivery of the opinion contemplated by Section 7.3 hereof.
6.15 YEAR 2000 COMPLIANCE COST ESTIMATES. Promptly upon execution
hereof, the Company and its Subsidiaries will undertake an investigation of all
Information Technology suppliers and vendors to determine whether all
Information Technology products purchased, leased, licensed or used by or in
connection with the Company or its Subsidiaries, or their respective Information
Technology, is Year 2000 compliant and, if not, the steps required to make it
Year 2000 compliant. Within thirty-five (35) days hereof, the Company shall
provide to RV Centers in writing an estimate of the total cost of, and the time
required, to make all the Company's Information Technology Year 2000 compliant.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions,
except Section 7.8. The obligations of the Stockholders and the Company with
respect to actions to be taken on the Consummation Date are subject to the
satisfaction or waiver on or prior to the Consummation Date of the conditions
set forth in Sections 7.1, 7.2, 7.3, 7.5, 7.6, 7.7 and 7.8. As of the Closing
Date or, with respect to the conditions set forth in Sections 7.1, 7.2, 7.3,
7.5, 7.6, 7.7 and 7.8, as of the Consummation Date, if any such conditions have
not been satisfied, the Stockholders (acting in unison) shall have the right to
terminate this Agreement, or in the alternative, waive any condition not so
satisfied. Any act or action of the Stockholders in consummating the Closing or
delivering the certificates representing Company Stock as of the Consummation
Date shall constitute a waiver of any conditions not so satisfied. However, no
such waiver shall be deemed to affect the survival of the representations and
warranties of RV Centers contained in Section 5 hereof.
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of RV Centers contained in this Agreement shall
be true and correct in all material respects as of the Closing Date and the
Consummation Date as though such representations and warranties had been made as
of that time; all of the terms, covenants and conditions of this Agreement to be
complied with and performed by RV Centers on or before the Closing Date and the
Consummation Date shall have been duly complied with and performed in all
material respects; and certificates to the foregoing effect dated the Closing
Date and the Consummation Date, respectively, and signed by the President or any
Vice President of RV Centers shall have been delivered to the Stockholders.
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7.2 NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the purchase and sale of the Company Stock or the IPO or
the consummation of the Other Agreements in a manner that would have a Material
Adverse Effect upon RV Centers or any of its stockholders or Subsidiaries.
7.3 OPINIONS. The Company shall have received (i) an opinion from
counsel for RV Centers, dated the Closing Date, in the form annexed hereto as
Annex III, and (ii) an opinion, from Ernst & Young LLP, dated the Closing Date,
that the RV Centers Plan of Organization will qualify as a tax-free transfer of
property under Section 351 of the Code and that the Stockholders will not
recognize gain to the extent the Stockholders exchange stock of the Company
Stock for RV Centers Stock (but not cash or other property) pursuant to the RV
Centers Plan of Organization.
7.4 REGISTRATION STATEMENT; MINIMUM VALUE. The Registration Statement
shall have been declared effective by the SEC and not subject to any stop order
proceedings and the underwriters named therein shall have agreed to acquire on a
firm commitment basis, subject to the conditions set forth in the underwriting
agreement, shares of RV Centers Stock on terms such that the aggregate value of
the cash and the shares of RV Centers Stock to be received by the Stockholders
is not less than the Minimum Value set forth on Annex I.
7.5 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the transactions contemplated herein and no governmental agency or body shall
have taken any other action or made any request of the Company as a result of
which the Company deems it inadvisable to proceed with the transactions
hereunder. All consents and approvals of third parties listed on Schedule
4.23(c) shall have been obtained.
7.6 GOOD STANDING CERTIFICATES. RV Centers shall have delivered to
the Company a certificate, dated as of a date no later than ten days prior to
the Closing Date, duly issued by the Delaware Secretary of State and in each
state in which RV Centers is authorized to do business, showing that RV Centers
is in good standing and authorized to do business and that all state franchise
and/or income tax returns and taxes for RV Centers for all periods prior to the
Closing have been filed and paid and RV Centers shall be in good standing in
such states on the Closing Date and the Consummation Date.
7.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance or series of
events shall have occurred with respect to RV Centers which would constitute a
Material Adverse Effect and no change in the disclosures in the Draft
Registration Statement shall have been made which reflects a Material Adverse
Effect on RV Centers.
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7.8 CLOSING OF IPO. The closing of the sale of the RV Centers Stock
to the Underwriters in the IPO shall have occurred on the Consummation Date.
7.9 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of RV Centers, certifying the truth and correctness of attached copies of RV
Centers's Certificate of Incorporation (including amendments thereto), ByLaws
(including amendments thereto), and resolutions of the board of directors and,
if required, the stockholders of RV Centers approving RV Centers's entering into
this Agreement and the consummation of the transactions contemplated herein.
7.10 EMPLOYMENT AGREEMENTS. The Company shall have offered to enter
into an employment agreement, substantially in the form of Annex V, with each of
the persons listed in Schedule 8.11.
7.11 OTHER FOUNDING COMPANIES. A sufficient number of the transactions
contemplated by the Other Agreements with the Other Founding Companies are
consummated and (i) RV Centers is able to list the RV Centers Stock on the New
York Stock Exchange, the American Exchange or The Nasdaq National Stock Market,
subject to official notice of issuance, on or prior to the Closing Date and (ii)
the combined revenue of the Founding Companies for which the transactions
contemplated by this Agreement and the Other Agreements are consummated is at
least $175 million based on the 12-month period ended December 31, 1998.
7.12 MANAGEMENT LOCK-UP AGREEMENTS. The Chairman, Vice Chairman, other
senior management of RV Centers, J. Christian Baker, III and A. John Kreft shall
have entered into agreements with RV Centers imposing substantially the same
transfer restrictions as provided in Section 14.1 hereof, on seventy-five
percent (75%) of the shares of RV Centers Stock held by such individuals, their
spouses and children and trusts for the benefit of such individuals.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RV CENTERS
The obligations of RV Centers with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions, except Section 8.12. The
obligations of RV Centers with respect to actions to be taken on the
Consummation Date are subject to the satisfaction or waiver on or prior to the
Consummation Date of the conditions set forth in Sections 8.1, 8.2, 8.4 and
8.12. As of the Closing Date or, with respect to the conditions set forth in
Sections 8.1, 8.2, 8.4 and 8.12, as of the Consummation Date, if any such
conditions have not been satisfied, RV Centers shall have the right to terminate
this Agreement, or waive any such condition. Any act or action of RV Centers in
consummating the Closing or delivering the certificates representing RV Centers
Stock as of the Consummation Date shall constitute a waiver of any conditions
not so satisfied. However, no such waiver shall be deemed to affect the survival
of the representations and warranties contained in Section 4 hereof.
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8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
the representations and warranties of the Stockholders and the Company contained
in this Agreement shall be true and correct in all material respects as of the
Closing Date and the Consummation Date with the same effect as though such
representations and warranties had been made on and as of such date; all of the
terms, covenants and conditions of this Agreement to be complied with or
performed by the Stockholders and the Company on or before the Closing Date or
the Consummation Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the Stockholders shall have
delivered to RV Centers certificates dated the Closing Date and the Consummation
Date, respectively, and signed by them to such effect.
8.2 NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the purchase and sale of the Company Stock or the IPO.
8.3 SECRETARY'S CERTIFICATE. RV Centers shall have received a
certificate, dated the Closing Date and signed by the secretary of the Company,
certifying the truth and correctness of attached copies of the Company Charter
(including amendments thereto), By-Laws (including amendments thereto), and
resolutions of the board of directors and the Stockholders approving the
Company's entering into this Agreement and the consummation of the transactions
contemplated herein.
8.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
8.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to
RV Centers an instrument dated the Closing Date, which shall be effective only
upon the occurrence of the Consummation Date, releasing the Company and RV
Centers from (i) any and all claims of the Stockholders against the Company and
RV Centers and (ii) obligations of the Company and RV Centers to the
Stockholders, except for (A) continuing obligations to Stockholders relating to
their employment by the Company pursuant to employment agreements entered into
as specified in Section 8.11 hereof, (B) obligations arising under this
Agreement or the transactions contemplated hereby and (C) claims of Stockholders
against the Company for unreimbursed business expenses incurred by the
Stockholders on behalf of the Company (other than expenses related to the
transactions contemplated by this Agreement) prior to the Consummation Date or
unreimbursed medical expenses of the Stockholders incurred prior to the
Consummation Date which are covered by the Company's existing health insurance
coverage. In the event that the Consummation Date does not occur, then the
release instrument referenced herein shall be void and of no further force or
effect.
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8.6 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 8.6, all existing agreements between the Company and the Stockholders
(and between the Company and entities controlled by the Stockholders) shall have
been canceled effective prior to or as of the Consummation Date.
8.7 OPINION OF COUNSEL. RV Centers and the Underwriters shall have
received an opinion from Counsel to the Company and the Stockholders, dated the
Closing Date, substantially in the form annexed hereto as Annex IV.
8.8 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 4.23(c), other than
manufacturers of recreational vehicles, shall have been obtained; provided,
however, Company shall have used its best efforts, in cooperation with RV
Centers, to obtain the consent of the recreational vehicle manufacturers listed
in Schedule 4.23(c); and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the purchase and sale of the Company Stock
and no governmental agency or body shall have taken any other action or made any
request of RV Centers as a result of which RV Centers deems it inadvisable to
proceed with the transactions hereunder.
8.9 GOOD STANDING CERTIFICATES. The Company shall have delivered to
RV Centers a certificate, dated as of a date no earlier than ten days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
State of Incorporation and, unless waived by RV Centers, in each state in which
the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
8.10 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule
8.11 shall have entered into an employment agreement substantially in the form
of Annex V hereto.
8.12 CLOSING OF IPO. The closing of the sale of the RV Centers Stock
to the Underwriters in the IPO shall have occurred simultaneously with the
Consummation Date hereunder and the Stockholders shall have delivered to the
Underwriters such customary closing documents as they may reasonably request.
8.13 FIRPTA CERTIFICATE. Each Stockholder (other than the stockholders
which are foreign entities or foreign residents) shall have delivered to RV
Centers a certificate to the effect that he is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
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8.14 RESIGNATIONS OF DIRECTORS. Any directors of the Company shall
have resigned as directors of the Company.
8.15 LEASE AGREEMENTS. If the Company leases property from any
Stockholder or Affiliate of a Stockholder, the Company and such Stockholder or
Affiliate shall have entered into a lease agreement, substantially in the form
attached as Annex VI hereto, and the Company shall be released from any
liability for loans used to purchase the property.
9. COVENANTS OF RV CENTERS AND THE STOCKHOLDERS AFTER CLOSING
9.1 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement or the Registration Statement, after the
Consummation Date, RV Centers shall not and shall not permit any of its
Subsidiaries to undertake any act that would jeopardize the tax-free status of
the exchange of Company Stock for RV Centers Stock (but not cash or other
property), including without limitation the retirement or reacquisition,
directly or indirectly, of all or part of the RV Centers Stock issued in
connection with the transactions contemplated herein.
9.2 PREPARATION AND FILING OF TAX RETURNS.
(i) The Company, if possible, or otherwise the Stockholders
shall file or cause to be filed all tax returns (federal, state, local
or otherwise) of any Acquired Party for all taxable periods that end on
or before the Consummation Date, and shall permit RV Centers to review
all such tax returns prior to such filings except with respect to
information pertaining to members of a consolidated group other than
the Company. Unless the Company is a C corporation, the Stockholders
shall pay or cause to be paid all Tax liabilities (in excess of all
amounts already paid with respect thereto or properly accrued or
reserved with respect thereto on the Company's Financial Statements)
shown by such tax returns to be due or otherwise attributable to such
tax returns.
(ii) If the Company is an S corporation, then upon filing the
final tax returns covering the Company's earnings for the year ended
December 31, 1998 and the period from January 1, 1999 to the
Consummation Date, Stockholders shall provide to RV Centers copies of
the Forms 1120S and Schedule K-1s and equivalent state income tax forms
so filed. If the amount of dividends or distributions made pursuant to
Annex I in anticipation of such taxes exceeds the "Calculated Tax
Amount," as defined below, for the applicable period, then Stockholders
shall repay any excess amount to the Company within 10 days of the
filing of the Form 1120S, or equivalent and provide a written
calculation of the Calculated Tax Amount. If the amount of dividends or
distributions made pursuant to Annex I in anticipation of such taxes is
less than the Calculated Tax Amount for the applicable period, then the
Company shall reimburse Stockholders for the amount of such deficiency
within 10 days of receiving a copy of the filed Form 1120S, Schedule
K-1s or equivalent and a written calculation of the Calculated Tax
Amount. The Calculated Tax Amount shall mean the amount of federal and
state income taxes that was owed on each Stockholder's income from
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the Company, for the periods from July 1, 1998 to December 31, 1998
and from January 1, 1999 to the Consummation Date, assuming a federal
tax rate of 39.6% and the applicable state tax rate (net of federal
benefits).
(iii) RV Centers shall file or cause to be filed all separate
Returns of, or that include, any Acquired Party for all taxable periods
ending after the Consummation Date.
(iv) Each party hereto shall, and shall cause its Subsidiaries
and Affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in
filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any
audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of all relevant portions of
relevant Returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning
the ownership and Tax basis of property, which such party may possess.
Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party
required to file Returns pursuant to this Agreement shall bear all
costs of filing such Returns.
(v) Each of the Company, RV Centers and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the
transaction as a tax-free contribution under Section 351(a) of the Code
subject to gain, if any, recognized on the receipt of cash or other
property under Sections 351(b) or 357(c) of the Code.
9.3 DIRECTORS. Upon execution of this Agreement by the Company and
Stockholders and execution of similar agreements by the Other Founding Companies
and their stockholders, each Founding Company shall vote for five
representatives to become Directors of RV Centers. No cumulative voting is
permitted. RV Centers shall appoint those five persons receiving the most votes
as directors promptly following the Consummation Date. The other six persons
identified in the Registration Statement shall also be appointed Directors at
the same time, if not presently on the RV Centers Board of Directors.
9.4 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. RV
Centers shall use reasonable efforts to have the Stockholders released from any
and all guarantees of the Company's indebtedness, including bond obligations,
identified on Schedule 9.4. Prior to obtaining the release of such guarantees,
RV Centers shall, if requested, provide its guarantee of such indebtedness to
the lenders thereof. In the event that RV Centers cannot obtain such releases
from the lenders of any such guaranteed indebtedness identified on Schedule 9.4
on or prior to 180 days subsequent to the Consummation Date, RV Centers shall
promptly pay off or otherwise refinance or retire such indebtedness such that
the Stockholders' personal liability shall be released. RV
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Centers will indemnify the Stockholders against any loss or damage suffered as a
result of the personal guarantees.
9.5 ACCESS TO RECORDS. RV Centers agrees (i) to hold all of the books
and records of the Company existing on the Consummation Date and not to destroy
or dispose of any such books and records for a period of 5 years from the
Consummation Date or such longer time as may be required by law, and (ii)
following the Consummation Date to afford Stockholders, their accountants and
counsel, during normal business hours, upon reasonable request, access to such
books, records and other data of the Company to the extent that such access may
be requested for a legitimate purpose at no cost to Stockholder (other than for
reasonable out-of-pocket expenses).
10. INDEMNIFICATION
The Stockholders and RV Centers each make the following covenants that
are applicable to them, respectively:
10.1 INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless RV Centers and the Company at all times, from and after the date
of this Agreement until the Expiration Date (provided that for purposes of
Section 10.1(iii) below, the Expiration Date shall be the date on which the
applicable statute of limitations expires), from and against all claims, damages
(including consequential, punitive or exemplary), actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees, consulting fees and expenses
of investigation and environmental response) incurred by RV Centers and the
Company as a result of or arising from (i) any breach of the representations and
warranties of the Stockholders or the Company set forth herein or on the
schedules or certificates delivered in connection herewith, (ii) any breach of
any agreement on the part of the Stockholders or, prior to the Consummation
Date, the Company under this Agreement, or (iii) any liability under the 1933
Act, the 1934 Act or other Federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to the Company or the Stockholders which
was based upon and in conformity with information provided in writing to RV
Centers or its counsel by the Company or the Stockholders expressly for use in
the Registration Statement or any prospectus forming a part thereof and is
contained in the Registration Statement or any prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of or
based upon any omission or alleged omission to state therein a material fact
relating to the Company or the Stockholders required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading to the extent such omission or alleged
omission is based upon the failure of the Company or the Stockholders to provide
to RV Centers the information containing that fact in any Schedule hereto or
otherwise to provide the information to RV Centers in writing, but such
indemnity shall not apply to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and the
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Stockholders provided, in writing, corrected information to RV Centers counsel
and to RV Centers for inclusion in the final prospectus, and such information
was not so included or properly delivered, and provided further, that no
Stockholder shall be liable for any indemnification obligation pursuant to this
Section 10.1 to the extent solely attributable to a breach of any
representation, warranty or agreement made herein individually by any other
Stockholder.
RV Centers acknowledges and agrees that other than the representations
and warranties of the Company or the Stockholders specifically contained in this
Agreement, there are no representations or warranties of the Company or the
Stockholders, either express or implied, with respect to the transactions
contemplated by this Agreement, the Company or its assets, liabilities and
business.
RV Centers and the Company further acknowledge and agree that their
sole and exclusive remedy with respect to any and all claims for breach of this
Agreement and the transactions contemplated in this Agreement, shall be pursuant
to the indemnification provisions set forth in this Section 10. RV Centers and
the Company hereby waive to the fullest extent permitted under applicable law,
any and all other rights, claims and causes of action they or any indemnified
person may have against the Company or any Stockholder relating to this
Agreement or the transactions arising under or based upon any federal, state,
local or foreign statute, law, rule, regulation or otherwise.
10.2 INDEMNIFICATION BY RV CENTERS. RV Centers covenants and agrees
that it will indemnify, defend, protect and hold harmless the Stockholders at
all times from and after the date of this Agreement until the Expiration Date
(provided that for purposes of Section 10.2(iii) below, the Expiration Date
shall be the date on which the applicable statute of limitations expires), from
and against all claims, damages (including consequential, punitive or
exemplary), actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees, consulting fees and expenses of investigation and environmental
response) incurred by the Stockholders as a result of or arising from (i) any
breach by RV Centers of their representations and warranties set forth herein or
on the schedules or certificates delivered in connection herewith, (ii) any
breach of any agreement on the part of RV Centers under this Agreement; or (iii)
any liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to RV Centers
or any of the Founding Companies contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to RV
Centers, any of the Founding Companies or their respective stockholders,
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading, except to
the extent such statement or omission is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission, made therein in
reliance upon, and in conformity with, the representations and warranties of the
Company or the Stockholders
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specifically contained in this Agreement or other information furnished to RV
Centers by the Company or the Stockholders in writing specifically for inclusion
therein.
10.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 10.1, 10.2, or 10.6
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any such proceeding
without the written consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if counsel to
the Indemnifying Party shall have a conflict of interest that prevents counsel
for the Indemnifying Party from representing Indemnified Party, Indemnified
Party shall have the right to participate in such matter through counsel of its
own choosing and Indemnifying Party will reimburse the Indemnified Party for the
reasonable expenses of its counsel.
After the Indemnifying Party has notified the Indemnified Party
of its intention to undertake to defend or settle any such asserted liability,
and for so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested by the Indemnifying
Party, in which event the Indemnified Party shall be reimbursed by the
Indemnifying Party for reasonable additional legal expenses and out-of-pocket
expenses.
If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim involving only the payment of money
and the Indemnified Party refuses to consent to such settlement, then the
Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person. Upon agreement as to such settlement between said Third Person and
the Indemnifying Party, the Indemnifying Party shall, in exchange for a complete
release from the Indemnified Party, promptly pay to the Indemnified Party the
amount agreed to in such settlement and the Indemnified Party shall, from that
moment on, bear full responsibility for any additional costs of defense which
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it subsequently incurs with respect to such claim and all additional costs of
settlement or judgment. If the Indemnifying Party does not undertake to defend
such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnified Party may settle such matter, and
the Indemnifying Party shall reimburse the Indemnified Party for the settlement
and any other liabilities or expenses incurred by the Indemnified Party in
connection therewith, provided, however, that under no circumstances shall the
Indemnified Party settle any Third Person claim without the written consent of
the Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. All settlements hereunder shall effect a complete release of the
Indemnified Party, unless the Indemnified Party otherwise agrees in writing.
10.4 EXCLUSIVE REMEDY. The indemnification provided for in this
Section 10 shall (except as prohibited by ERISA) be the exclusive remedy in any
action seeking damages or any other form of monetary relief brought by any party
to this Agreement against another party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
10.5 LIMITATIONS ON INDEMNIFICATION. (a) RV Centers and the other
persons or entities indemnified pursuant to Section 10.1 or any other indemnity
hereunder, shall not assert any claim for indemnification pursuant to Section
10.1 against the Stockholders until such time as the aggregate of all claims
which such persons may have against such Stockholders shall exceed an amount
(the "Threshold Amount") equal to one percent of the sum of (x) the cash paid to
the Stockholders pursuant to Section 2.1 and (y) the value of the RV Centers
Stock delivered to the Stockholders pursuant to Section 2.1 valued at the
initial public offering price as set forth in the Registration Statement, and
then only to the extent of claims in excess of such sum. Stockholders shall not
assert any claim for indemnification hereunder against RV Centers until such
time as the aggregate of all claims which Stockholders may have against RV
Centers shall exceed the Threshold Amount.
(b) No person shall be entitled to indemnification under this Section
10 if and to the extent that such person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement.
(c) Notwithstanding any other term of this Agreement, no Stockholder
shall be liable under this Section 10 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds (including cash and RV Centers Stock)
received by such Stockholder (valued as of the Consummation Date) in connection
with the purchase and sale of the Company Stock. For purposes of this paragraph,
the RV Centers Stock shall be valued at the initial public offering price to the
public as set forth in the final prospectus deemed by Rule 430A of the 1933 Act
Regulations to constitute a part of the Registration Statement.
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(d) A Stockholder may pay any indemnification obligation under
Section 10 by means of the payment of cash or a combination of the payment of
cash and the delivery to RV Centers of shares of RV Centers Stock; provided that
the percentage of the indemnification obligation satisfied by means of the
delivery of shares of RV Centers Stock does not exceed the percentage of RV
Centers Stock comprising the total consideration paid to such Stockholder by RV
Centers to such Stockholder pursuant to Annex I. For the purpose of crediting
Stockholders for payments made to RV Centers by means of delivery of shares of
RV Centers Stock, the RV Centers Stock shall be valued at the average closing
price as reported on the New York Stock Exchange (or other national exchange or
quotation system) on the five trading days immediately preceding delivery of the
shares pursuant to this section.
(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds actually realized by such party
(or, in the case of RV Centers, by RV Centers, the Company or any Subsidiary of
RV Centers or the Company) and such correlative insurance proceeds or other
third party indemnity or reimbursement proceeds shall be net of any insurance
premium or other incremental cost or expense owed or payable to any third party
which becomes due as a result of such claim. RV Centers shall use commercially
reasonable efforts to pursue any available insurance coverage or other rights of
indemnity or reimbursement from third parties with respect to any such loss,
liability or expense.
(f) The limitations on liability set forth in this Section 10.5 shall
not apply to breaches of representations, warranties or covenants set forth in
Sections 4.3, 4.22 and 4.29(c).
10.6 TAX INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders
covenant and agree that they, jointly and severally, will indemnify, defend,
protect and hold harmless RV Centers and the Company from and against the
entirety of any adverse consequences the Company or RV Centers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by any
liability of the Company and its subsidiaries for the unpaid Taxes of any past,
current or future member of the consolidated tax group of which the Company is
or was a member on or prior to the Consummation Date pursuant to Reg.
ss.1.1502-6 (or any similar provision of state, local, or foreign law), for any
periods prior to the Closing Date, as a transferee or successor, by contract, or
otherwise.
11. TERMINATION OF AGREEMENT
11.1 TERMINATION. This Agreement may be terminated at any time prior
to the Consummation Date solely:
(i) by mutual consent of the boards of directors of RV Centers
and the Company;
(ii) by the Stockholders or the Company (acting through its
board of directors), on the one hand, or by RV Centers (acting through
its board of directors), on the other hand,
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if the transactions contemplated by this Agreement to take place at the
Closing shall not have been consummated by July 31, 1999 unless the
failure of such transactions to be consummated is due to the willful
failure of the party seeking to terminate this Agreement to perform any
of its obligations under this Agreement to the extent required to be
performed by it prior to or on the Consummation Date;
(iii) by the Stockholders or the Company, on the one hand, or by
RV Centers, on the other hand, if a material breach or default shall be
made by the other party in the observance or in the due and timely
performance of any of the covenants or agreements contained herein, and
the curing of such default shall not have been made on or before the
Consummation Date or by the Stockholders or the Company, if the
conditions set forth in Section 7 hereof have not been satisfied or
waived as of the Closing Date or the Consummation Date, as applicable,
or by RV Centers, if the conditions set forth in Section 8 hereof have
not been satisfied or waived as of the Closing Date or the Consummation
Date, as applicable; or
(iv) pursuant to Section 3 hereof.
11.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in
Section 6.7, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
11.3 RETURN OF STOCK CERTIFICATES. If at the time of termination
Stockholders have delivered their Company stock certificates, such certificates
will be promptly returned upon termination.
12. NONCOMPETITION
12.1 PROHIBITED ACTIVITIES. Except for the activities of the
Stockholders and their Affiliates as set forth in Schedule 12.1 (which shall be
deemed to be permitted activities under this Section 12.1), the Stockholders
will not, without the prior written consent of RV Centers, for a period of five
(5) years following the Consummation Date, for any reason whatsoever, directly
or indirectly, for themselves or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business or operation selling any products or
services in direct competition with any products or services sold by RV
Centers or any Subsidiary thereof, within one hundred (100) miles of
where RV Centers or any Other Founding Company conducted business prior
to the Effective Time (the "Territory");
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(ii) call upon any person who is, at that time, within the
Territory, an employee of RV Centers or any Subsidiary thereof in a
sales or service representative or managerial capacity for the purpose
or with the intent of enticing such employee away from or out of the
employ of RV Centers or any Subsidiary thereof;
(iii) call upon any Person or entity which is, at that time, or
which has been, within one (1) year prior to the Consummation Date, a
customer of RV Centers or any Subsidiary thereof, of the Company or of
any of the Other Founding Companies within the Territory for the
purpose of soliciting or selling products or services in direct
competition with any products or services sold by RV Centers or any
Subsidiary thereof within the Territory;
(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor which candidate
was, to the actual knowledge of such Stockholder after reasonable
inquiry, either called upon by RV Centers or any Subsidiary thereof or
for which RV Centers or any Subsidiary thereof made an acquisition
analysis, for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of
the Company to any person, firm, partnership, corporation or business
for any reason or purpose whatsoever except to the extent that the
Company has in the past disclosed such information to the public for
valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than three percent (3%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or on an
over-the-counter or similar market, or (ii) not more than five percent (5%) of
the capital stock of a competing business whose stock is not publicly traded.
12.2 DAMAGES. Because of the difficulty of measuring economic losses
to RV Centers as a result of a breach of the covenant set forth in Section 12.1,
and because of the immediate and irreparable damage that could be caused to RV
Centers for which it would have no other adequate remedy, each Stockholder
agrees that the covenant set forth in Section 12.1 may be enforced by RV
Centers, in the event of breach by such Stockholder, by injunctions and
restraining orders.
12.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 12 impose a reasonable restraint on the
Stockholders in light of the activities and business of RV Centers and the
Subsidiaries thereof on the date of the execution of this Agreement and the
current plans of RV Centers; but it is also the intent of RV Centers and the
Stockholders that such covenants be construed and enforced in accordance with
the changing activities, business and locations of RV Centers and its
subsidiaries throughout the term of this covenant, including, with respect to
subparagraph 12.1(i), any new locations in which RV Centers or its subsidiaries
conducts business during the term of this covenant.
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12.4 SEVERABILITY; REFORMATION. The covenants in this Section 12 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
12.5 INDEPENDENT COVENANT. All of the covenants in this Section 12
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against RV Centers or any Subsidiary thereof, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by RV
Centers of such covenants. It is specifically agreed that the period of five (5)
years stated at the beginning of this Section 12, during which the agreements
and covenants of each Stockholder made in this Section 12 shall be effective,
shall be computed by excluding from such computation any time during which such
Stockholder is in violation of any provision of this Section 12. The covenants
contained in Section 12 shall not be affected by any breach of any other
provision hereof by any party hereto and shall have no effect if the
transactions contemplated in this Agreement are not consummated.
12.6 MATERIALITY. The Company and the Stockholders hereby agree that
this covenant is a material and substantial part of this transaction.
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
13.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that
they had in the past, currently have, and in the future may possibly have,
access to certain confidential information of the Company, the Other Founding
Companies, and/or RV Centers, such as operational policies, customer lists, and
pricing and cost policies that are valuable, special and unique assets of the
Company's, the Other Founding Companies' and/or RV Centers's respective
businesses. The Stockholders agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of RV
Centers, provided that such representatives agree to the confidentiality
provisions of this Section 13.1, (b) following the Closing, such information may
be disclosed by the Stockholders as is required in the course of performing
their duties for RV Centers or the Company and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 13.1, unless (i) such information
becomes known to the public generally through no fault of the Stockholders, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, that prior to disclosing any information pursuant to
this clause (ii), the Stockholders shall, if possible, give prior written notice
thereof to RV Centers and provide RV Centers with the opportunity to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any of the
Stockholders of the provisions of this Section, RV Centers shall be
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entitled to an injunction restraining such Stockholders from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting RV Centers from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. In the
event the transactions contemplated in this Agreement are not consummated,
Stockholders shall have none of the above-mentioned restrictions on their
ability to disseminate confidential information with respect to the Company.
13.2 RV CENTERS. RV Centers recognizes and acknowledges that it had in
the past and currently has access to certain confidential information of the
Company and the Stockholders, such as operational policies, and pricing and
cost policies that are valuable, special and unique assets of the Company's
business. RV Centers agrees that, prior to the Closing, or if the transactions
contemplated in this Agreement are not consummated, it will not disclose such
confidential information to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except (a) to authorized
representatives of the Company, provided that such representatives agree to the
confidentiality provisions of this Section 13.2, (b) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 13.2, (c) to the Other Founding
Companies and their representatives pursuant to Section 6.1(a), unless (i) such
information becomes known to the public generally through no fault of RV
Centers, (ii) disclosure is required by law or the order of any governmental
authority under color of law, provided, that prior to disclosing any
information pursuant to this clause (ii), RV Centers shall, if possible, give
prior written notice thereof to the Company and the Stockholders and provide
the Company and the Stockholders with the opportunity to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, and (d) to the public to the extent necessary or advisable in
connection with the filing of the Registration Statement and the IPO and the
securities laws applicable thereto. In the event of a breach or threatened
breach by RV Centers of the provisions of this Section, the Company and the
Stockholders shall be entitled to an injunction restraining RV Centers from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the Company and the Stockholders from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
13.3 DAMAGES. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants in Section 13.1 and 13.2,
and because of the immediate and irreparable damage that would be caused for
which they would have no other adequate remedy, the parties hereto agree that,
in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against the other parties by injunctions and
restraining orders.
13.4 SURVIVAL. The obligations of the parties under this Article 13
shall survive the termination of this Agreement.
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14. TRANSFER RESTRICTIONS
14.1 TRANSFER RESTRICTIONS. For a period of two years from the Closing
Date, with respect to 80% of the shares of RV Centers Stock received by such
Stockholder pursuant to this Agreement, and for a period of one year from the
Closing Date, with respect to the remaining 20% of such shares, no Stockholder
shall (i) sell, assign, exchange, transfer, pledge, or otherwise dispose of any
such shares of RV Centers Stock or any securities convertible into,
exchangeable or exercisable for any such shares of RV Centers Stock, (ii) grant
any option to purchase, or otherwise enter into any contract or arrangement to
sell, assign, transfer, pledge or otherwise dispose of, any such shares of RV
Centers Stock, or (iii) enter into any swap, collar, short sale or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequences of ownership of the RV Centers Stock,
whether any such swap, collar, short sale, agreement or transaction is to be
settled by delivery of shares of RV Centers Stock or other securities, by the
delivery or payment of cash or otherwise. Provided, however, Stockholder may
pledge such shares as security, subject to the foregoing restrictions, for a
loan by a lender who acknowledges and agrees to such restrictions in writing.
The foregoing restrictions shall not apply, however, to (a) the sale of shares
of RV Centers Stock, and entering into agreements relating to the sale of
shares of RV Centers Stock, pursuant to Section 16 hereof, or (b) transfers to
(I) immediate family members of such Stockholder who agree to be bound by the
restrictions set forth in this Section 14.1, (II) trusts, limited partnerships
or other estate planning entities for the benefit of such Stockholder or family
members of such Stockholder which have agreed, through action taken by the
trustees, partners or other persons having authority to bind the trust, limited
partnership or other estate planning entity, to be bound by such restrictions
and to be liable for the transferring Stockholder's indemnification obligations
hereunder, (III) any charitable organization that qualifies for receipt of
charitable contributions under Section 170(c) of the Code which agrees to be
bound by such restrictions and to be liable for the transferring Stockholder's
indemnification obligations hereunder, or (c) for transfers of RV Centers Stock
to RV Centers pursuant to Section 10.5(d).
The certificates evidencing the RV Centers Stock delivered to the
Stockholders pursuant to Section 3 of this Agreement will bear a legend
substantially in the form set forth below and containing such other information
as RV Centers may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF WITHOUT
THE WRITTEN CONSENT OF THE ISSUER OR PURSUANT TO CERTAIN LIMITED EXCEPTIONS
CONTAINED IN SECTION 14.1 TO THAT CERTAIN ACQUISITION AGREEMENT BETWEEN RV
CENTERS, INC. AND CASEY MOTORS, INC. DATED JANUARY 12, 1999, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
_______ [INSERT THE ACTUAL SECOND ANNIVERSARY OF CLOSING DATE] EXCEPT FOR THE
ABOVE-REFERENCED LIMITED EXCEPTIONS. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
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15. FEDERAL SECURITIES ACT REPRESENTATIONS
15.1 COMPLIANCE WITH LAW. The Stockholders acknowledge that the shares
of RV Centers Stock to be delivered to the Stockholders pursuant to this
Agreement have not been and will not be registered under the 1933 Act (except
as provided in Section 16 hereof) and therefore may not be resold without
compliance with the 1933 Act. The RV Centers Stock to be acquired by such
Stockholders pursuant to this Agreement is being acquired solely for their own
respective accounts, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution. The Stockholders covenant, warrant and represent that none
of the shares of RV Centers Stock issued to such Stockholders will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the 1933
Act and the rules and regulations of the SEC or pursuant to exceptions
therefrom. All the RV Centers Stock shall bear the following legend in addition
to the legend required under Section 14 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE SECURITIES LAW OR SUCH SHARES ARE
SOLD OR TRANSFERRED PURSUANT TO AN EXEMPTION THEREFROM.
15.2 ECONOMIC RISK; SOPHISTICATION. The Stockholders represent and
warrant that they are able to bear the economic risk of an investment in the RV
Centers Stock to be acquired pursuant to this Agreement and can afford to
sustain a total loss of such investment. Each Stockholder has substantial
knowledge and experience in making investment decisions of this type (or is
relying on qualified purchaser representatives with such knowledge and
experience in making this decision), and is capable, either individually or
with such purchaser representatives, of evaluating the merits and risks of this
investment. The Stockholders who are parties hereto have had an adequate
opportunity to ask questions and receive answers from the officers of RV
Centers concerning any and all matters relating to the transactions described
herein including, without limitation, the background and experience of the
current and proposed officers and directors of RV Centers, the plans for the
operations of the business of RV Centers, the business, operations and
financial condition of the Founding Companies other than the Company, and any
plans for additional acquisitions and the like. The Stockholders have asked any
and all questions in the nature described in the preceding sentence and all
questions have been answered to their satisfaction. Except as set forth on
Schedule 15.2, each Stockholder is an "accredited investor" as defined in Rule
501 of the 1933 Act.
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16. REGISTRATION RIGHTS
16.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the
Consummation Date, whenever RV Centers proposes to register any RV Centers
Stock for its own or others' accounts under the 1933 Act for a public offering,
other than (i) any shelf or other registration of shares to be used as
consideration for acquisitions of additional businesses by RV Centers and (ii)
registrations relating to employee benefit plans, RV Centers shall promptly
give each of the Stockholders written notice of its intent to do so. Upon the
written request of any of the Stockholders given within 10 days after receipt
of such notice, RV Centers shall cause to be included in such registration all
of the RV Centers Stock issued to such Stockholders pursuant to this Agreement
(including any stock issued as or issuable upon the conversion or exchange of
any convertible security, warrant, right or other security which is issued by
RV Centers as a stock split, dividend or other distribution with respect to, or
in exchange for, or in replacement of such RV Centers Stock) which any such
Stockholder requests, other than shares of RV Centers Stock which may be sold
under Rule 144(k) (or any similar or successor provision) promulgated under the
1933 Act, and other than shares of RV Centers Stock that have been theretofore
sold by the Stockholder in accordance with the 1933 Act, provided that RV
Centers shall have the right to reduce pro rata the number of shares of each
selling stockholder included in such registration to the extent that inclusion
of such shares could, in the written opinion of tax counsel to RV Centers or
its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Registration Statement as a tax-free
organization under Section 351 of the Code. In addition, if RV Centers is
advised in writing in good faith by any managing underwriter of an underwritten
offering of the securities being offered pursuant to any registration statement
under this Section 16.1 that the number of shares to be sold by persons other
than RV Centers is greater than the number of such shares which can be offered
without adversely affecting the success of the offering, RV Centers may reduce
pro rata (among the Stockholders and all other selling security holders in the
offering) the number of shares offered for the accounts of such persons (based
upon the number of shares held by such person) to a number deemed satisfactory
by such managing underwriter.
The right to cause RV Centers to register shares of
RV Centers Stock under this Agreement may be assigned to any transferee or
assignee of any Stockholder permitted under Section 14.1.
16.2 REGISTRATION PROCEDURES. Whenever RV Centers is required to
register shares of RV Centers Stock pursuant to Section 16.1, RV Centers will,
as expeditiously as possible:
(i) Prepare and file with the SEC a registration statement with
respect to such shares and use commercially reasonable efforts to
cause such registration statement to become effective (provided that
before filing a registration statement or prospectus or any amendments
or supplements or term sheets thereto, RV Centers will furnish a
representative of the Stockholders with copies of all such documents
proposed to be filed and provide the Stockholders an opportunity to
comment on the information therein relating to the Stockholders) as
promptly as practical;
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(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and the prospectus correct for a period of not
less than 120 days;
(iii) Furnish to each Stockholder who so requests such number of
copies of such registration statement, each amendment and supplement
thereto and the prospectus included in such registration statement
(including each preliminary prospectus and any term sheet associated
therewith), and such other documents as such Stockholder may
reasonably request in order to facilitate the disposition of the
relevant shares;
(iv) Use commercially reasonable efforts to register or qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be
reasonably requested by the Stockholders, and to keep such
registration or qualification effective during the period such
registration statement is required to be kept effective, provided that
RV Centers shall not be required to become subject to taxation, to
qualify to do business or to file a general consent to service of
process in any such states or jurisdictions;
(v) Cause all such shares of RV Centers Stock to be listed or
included on any securities exchanges or trading systems on which
similar securities issued by RV Centers are then listed or included;
and
(vi) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that RV Centers is required to keep the registration
statement effective of the happening of any event as a result of which
the prospectus included in such registration statement (as then in
effect), together with any associated term sheet, contains an untrue
statement of a material fact or omits any fact not misleading, and, at
the request of such Stockholder, RV Centers will prepare a supplement
or amendment to such prospectus so that, as thereafter delivered to
the purchasers of the covered shares, such prospectus will not contain
an untrue statement of material fact or omit to state any fact not
misleading.
All expenses incurred in connection with the registration under this
Article 16 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall
be borne by RV Centers.
16.3 INDEMNIFICATION.
(a) In connection with any registration under Section 16.1, RV
Centers shall indemnify, to the extent permitted by law, each selling
Stockholder (an "Indemnified Stockholder") against all losses, claims, damages,
liabilities and expenses arising out of or resulting from any
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untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or associated term
sheet or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading except insofar as the same are caused by or contained in or omitted
from any information furnished in writing to RV Centers by such Indemnified
Stockholder expressly for use therein or by any Indemnified Stockholder's
failure to deliver a copy of the registration statement or prospectus or any
amendment or supplements thereto after RV Centers has furnished such
Indemnified Stockholder with a sufficient number of copies of the same.
(b) In connection with any registration under Section 16.1, each
Stockholder shall furnish to RV Centers in writing such information as is
reasonably requested by RV Centers for use in any such registration statement
or prospectus and will indemnify, to the extent permitted by law, RV Centers,
its directors and officers and each person who controls RV Centers (within the
meaning of the 1933 Act) against any losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement or material fact
or any omission or alleged omission of a material fact required to be stated in
the registration statement or prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading, but only to the extent
that such untrue or alleged untrue statement or omission or alleged omission is
contained in or omitted from information so furnished in writing by such
Stockholder specifically for use in preparing the registration statement.
Notwithstanding the foregoing, the liability of a Stockholder under this
Section 16.3 shall be limited to an amount equal to the net proceeds actually
received by such Stockholder from the sale of the relevant shares covered by
the registration statement.
(C) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties'
reasonable judgment, a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. Any failure to give prompt notice shall
deprive a party of its right to indemnification hereunder only to the extent
that such failure shall have adversely affected the indemnifying party. If the
defense of any claim is assumed, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party that is not entitled
or elects not to assume the defense of a claim, will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party, a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim.
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16.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 16.1 covering an underwritten registered offering, RV
Centers and each participating Stockholder agree to enter into a written
agreement with the managing underwriters in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such managing underwriters and companies of RV Centers's size and
investment stature, including a customary indemnification agreement; provided,
however, that the Stockholders shall be excluded from any indemnification of
the underwriters other than with respect to information provided by the
Stockholders to RV Centers or the managing underwriters specifically for use in
the registration statement.
16.5 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of RV
Centers stock to the public without registration, RV Centers agrees to use
commercially reasonable efforts to:
(i) make and keep public information regarding RV Centers
available as those terms are understood and defined in Rule 144 under
the 1933 Act for a period of four years beginning 90 days following
the effective date of the Registration Statement;
(ii) file with the SEC in a timely manner all reports and other
documents required of RV Centers under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting
requirements; and
(iii) so long as a Stockholder owns any restricted RV Centers
Stock, furnish to each Stockholder forthwith upon written request a
written statement by RV Centers as to its compliance with the current
public information requirements of Rule 144 (at any time from and
after 90 days following the effective date of the Registration
Statement), and of the 1933 Act and the 1934 Act (any time after it
has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of RV Centers, and such other
reports and documents so filed as a Stockholder may reasonably request
in availing itself of any rule or regulation of the SEC allowing a
Stockholder to sell any such shares without registration.
16.6 AVAILABILITY OF RULE 144. RV Centers shall not be obligated to
register shares of RV Centers Stock held by a Stockholder at any time when the
resale provisions of Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act are available to such Stockholder.
17. GENERAL
17.1 COOPERATION. The Company, the Stockholders and RV Centers shall
each deliver or cause to be delivered to the other on the Consummation Date,
and at such other times and places as shall be reasonably agreed to, such
additional instruments as the other may reasonably request for the purpose of
carrying out this Agreement. The Company will cooperate and use its reasonable
efforts to have the present officers, directors and employees of the Company
cooperate with RV Centers on and after the Consummation Date in furnishing
information, evidence, testimony and
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other assistance in connection with any tax return filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Consummation Date.
17.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of RV Centers, and the heirs and legal representatives of the
Stockholders.
17.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the
Stockholders, the Company and RV Centers and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and subject to Section 6.7 may be
modified or amended only by a written instrument executed by the Stockholders,
the Company and RV Centers, acting through their respective officers or
trustees, duly authorized by their respective Boards of Directors. Any
disclosure made on any Schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other Schedule required hereby,
provided that the Company shall make a good faith effort to cross reference
disclosure, as necessary or advisable, between related Schedules.
17.4 COUNTERPARTS. This Agreement may be executed simultaneously in
two (2) or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument. A
telecopied facsimile of an executed counterpart of this Agreement shall be
sufficient to evidence the binding agreement of each party to the terms hereof.
However, each party agrees to return to the other parties an original, duly
executed counterpart of this Agreement promptly after delivery of a telecopied
facsimile thereof.
17.5 BROKERS AND AGENTS. Except as disclosed on Schedule 17.5, each
party represents and warrants that it employed no broker or agent in connection
with this transaction and agrees to indemnify the other parties hereto against
all loss, cost, damages or expense arising out of claims for fees or commission
of brokers employed or alleged to have been employed by such indemnifying
party.
17.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, RV Centers will pay or reimburse Baker Kreft Funding I,
L.L.C. and its Affiliates for the fees, expenses and disbursements of RV
Centers and its agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto
and the IPO, including all costs and expenses incurred in the performance and
compliance with all conditions to be performed by RV Centers under this
Agreement, the fees and expenses of Andrews & Kurth L.L.P., and any other
person or entity retained by RV Centers or Baker Kreft Funding I, L.L.C.
("BKF") and the costs of preparing the Registration Statement. All expenses,
including, but not limited to, all professional fees of accountants, lawyers,
tax consultants and others,
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incurred by the Stockholders in connection with this Agreement shall be paid by
the Stockholders or the Company; provided, however, that any such amount paid
by the Company shall be disclosed to RV Centers in writing prior to Closing and
deducted from the cash payable to Stockholders pursuant to Annex I. Upon
consummation of the transactions contemplated herein, BKF will pay up to
$150,000 of the fees charged by Bracewell & Patterson L.P., counsel to Company
and the Other Founding Companies; Stockholders and the stockholders of the
Other Founding Companies shall pay all amounts in excess of $150,000 to be
shared pro rata based upon the relative values of the Founding Companies. Each
Stockholder shall pay all sales, use, transfer, real property transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") imposed in connection with the purchase and sale of the Company Stock,
other than Transfer Taxes, if any, imposed by the State of Delaware. Each
Stockholder shall file all necessary documentation and Returns with respect to
such Transfer Taxes. In addition, each Stockholder acknowledges that he, and
not the Company or RV Centers, will pay all taxes due by him upon receipt of
the consideration payable pursuant to Section 3 hereof. Without limiting
Stockholders' ability to rely on the tax opinion, the Stockholders acknowledge
that the risks of the transactions contemplated herein include tax risks, with
respect to which the Stockholders are relying partially on the opinion
contemplated by Section 7.3 hereof and representations by RV Centers.
17.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the
same in person to an officer or agent of such party.
(a) If to RV Centers, addressed to:
RV Centers, Inc.
600 Travis, Suite 2100
Houston, Texas 77002
Attention: Chief Executive Officer
with copies to:
Christopher S. Collins
Andrew & Kurth L.L.P.
600 Travis, Suite 4200
Houston, Texas 77002
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(b) If to the Stockholders, addressed to them at their addresses set
forth on the signature pages hereto, with copies to:
James F. Wood
Sherman and Howard L.L.C.
633 17th Street
3000 First Interstate Tower N.
Denver, Colorado 80202
(c) If to the Company, addressed to it at:
Casey Motors, Inc.
4120 Youngfield
Wheatridge, Colorado 80033
Attn: President
with copies to:
James F. Wood
Sherman and Howard L.L.C.
633 17th Street
3000 First Interstate Tower N.
Denver, Colorado 80202
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 17.7 from time to time.
17.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Delaware, excluding any conflicts of law rule or
principle that might refer same to the laws of another jurisdiction.
17.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or
of any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
17.10 TIME. Time is of the essence with respect to this Agreement.
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17.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
17.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
17.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
17.14 AMENDMENTS AND WAIVERS. Subject to Section 6.7, any term of this
Agreement may be amended and the observance of any term of this Agreement may
be waived only with the written consent of RV Centers, the Company and
Stockholders who hold or held at least 51% of the Company Stock. Any amendment
or waiver effected in accordance with this Section 17.14 shall be binding upon
each of the parties hereto, any other person receiving RV Centers Stock in
connection with the purchase and sale of the Company Stock and each future
holder of such RV Centers Stock.
17.15 DISPUTE RESOLUTION. Except with respect to disputes involving
parties other than the parties to this Agreement, no party to this Agreement
shall institute a proceeding in any court or administrative agency to resolve a
dispute arising under this Agreement before that party has sought to resolve
the dispute through direct negotiation with the other party or parties. If the
dispute is not resolved within two weeks after a demand for direct negotiation,
the parties shall attempt to resolve the dispute through mediation. If the
parties do not promptly agree on a mediator, the parties shall request the
Association of Attorney Mediators in Harris County, Texas to appoint a mediator
certified by the Supreme Court of Texas. If the mediator is unable to
facilitate a settlement of the dispute within a reasonable period of time, as
determined by the mediator, the mediator shall issue a written statement to the
parties to that effect and any unresolved dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by
arbitration, conducted before a panel of three arbitrators in Houston, Texas,
in accordance with the rules promulgated by the American Arbitration
Association then in effect. Each party shall choose one arbitrator and those
arbitrators shall agree upon the third arbitrator; if they cannot agree upon a
third arbitrator within 20 days, the American Arbitration Association shall
appoint the third arbitrator. A decision by a majority of the arbitration panel
shall be final and binding. Judgment may be entered on the arbitrators' award
in any court having jurisdiction. The costs and expenses, including reasonable
attorneys' fees, of the prevailing party in any dispute arising under this
Agreement will be promptly paid by the other party or parties.
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17.16 REFERENCES, GENDER, NUMBER. All references in this Agreement to
a "Section," or "subsection" shall be to a Section, or subsection of this
Agreement, unless the context requires otherwise. Unless the context otherwise
requires, the words "this Agreement," "hereof," "hereunder," "herein," or words
of similar import shall refer to this Agreement as a whole and not to a
particular Section, subsection, clause or other subdivision hereof. Whenever
the context requires, the words used herein shall include the masculine,
feminine and neuter gender, and the singular and the plural.
17.17 SOLE STOCKHOLDER. Notwithstanding anything in this Agreement to
the contrary, if there is only a single Stockholder, all references herein to
"Stockholders," "each of the Stockholders," "any Stockholder" and any other
reference to Stockholders in the plural context, as well as any reference to
any potential liability or obligation of the Stockholders being "joint and
several," shall be deemed to mean and include only the sole Stockholder of the
Company.
17.18 SCHEDULES AND ANNEXES. Each schedule and annex attached to this
Agreement is incorporated herein by reference and made a part hereof. The
disclosures made on any schedule or annex hereto with respect to any
representation or warranty shall be deemed to be made with respect to any other
representation or warranty requiring the same or similar disclosure to the
extent that the relevance of such disclosure to other representations and
warranties is evident from the face of such schedule or annex.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
RV CENTERS, INC.
By: /s/ Clayton K. Trier
-------------------------------------
Name: Clayton K. Trier
Title: Chairman of the Board,
Chief Executive Officer and
President
CASEY MOTORS, INC.
By: /s/ Steve Casement
-------------------------------------
Name: Steve Casement
Title: President
-63-
<PAGE> 72
STOCKHOLDERS:
/s/ Steve Casement ###-##-####
- ------------------------------------ -----------------------------
Steve Casement Social Security Number
6665 Young Field Ct.
Arvada, Colorado 80004
-64-
<PAGE> 73
ANNEX I -
CASEY MOTORS, INC., d/b/a
CASEY'S RECREATIONAL SALES
TO THE ACQUISITION AGREEMENT
DATED AS OF JANUARY 12, 1999
BY AND AMONG
RV CENTERS, INC.
CASEY MOTORS, INC., D/B/A CASEY'S RECREATIONAL SALES
AND ITS STOCKHOLDER
CONSIDERATION TO BE PAID TO THE STOCKHOLDER
AGGREGATE CONSIDERATION TO BE PAID TO STOCKHOLDER
Four Million Nine Hundred Fifty-Two Thousand Dollars ($4,952,000) in cash and
the value of outstanding Common Stock of RV Centers, Inc. ("RV Centers")
(assuming a public offering price of $12.50 per share), consisting of: (A) Two
Hundred Ninety-Eight Thousand (298,000) shares of RV Centers Common Stock, and
(B) One Million Two Hundred Twenty-Seven Thousand Dollars ($1,227,000) cash;
provided however, that the aggregate consideration shall not be less than the
minimum value set forth below.
<TABLE>
<CAPTION>
Consideration to be paid to the
STOCKHOLDER:
------------------------------------
Number of
Company Shares of RV Centers
Stockholder Shares Owned Common Stock Cash
- ----------- ------------ -------------------- ------------
<S> <C> <C> <C>
Steve Casement 1,000 298,000 $ 1,227,000
</TABLE>
MINIMUM VALUE: Four Million Two Hundred Fifty-Six Thousand Dollars ($4,256,000)
ASSETS TO BE REMOVED FROM THE COMPANY: RV Centers and the Stockholder agree
that, after the Balance Sheet Date, no assets other than the following assets,
along with any associated debt, may be removed from the Company, such assets to
become the property of the Stockholder and any associated debt to become the
liability of the Stockholder:
1. 1997 Ford Explorer
2. 1997 GMC Pickup
Page 1 of Annex I
<PAGE> 74
ANNEX I -
CASEY MOTORS, INC., d/b/a
CASEY'S RECREATIONAL SALES
3. 1998 Yamaha Snowmobile
4. 1997 Yamaha Snowmobile
ALLOWABLE DIVIDENDS: With the exception of the following, no dividends or
distributions will be paid subsequent to June 30, 1998:
1. An amount equal to the reasonably estimated federal and state
(net of federal benefit) income taxes owed on S-corporation
profits of the Company for the period from July 1, 1998 to
December 31, 1998.
2. An amount equal to the reasonably estimated federal and state
(net of federal benefit) income taxes owed on S-corporation
profits of the Company for the period from January 1, 1999 to
the Consummation Date.
3. If Company is an S Corporation at the date of this Agreement,
at any time and from time to time up until five days prior to
the Consummation Date, Company may distribute to the
Stockholder cash up to the lesser of (A) the amount of such
corporation's "accumulated adjustment account" (as such term
is used in the Internal Revenue Code of 1986, as amended) as
of the Consummation Date, and (B) the total amount of cash to
be paid to the Stockholder as provided above. If any such
distributions are made, Stockholder shall provide written
notice of the amount of such distributions to RV Centers no
later than five days prior to the Consummation Date, and the
total amount of such distributions shall be deducted from the
cash to be paid to the Stockholder pursuant to this Annex I.
4. A total of Two Hundred Thirteen Thousand Three Hundred Fifty
Dollars ($213,350) in distributions between July 1, 1998 and
December 31, 1998, applicable to a personal residence built
by the Stockholder.
5. Up to $159,000 in connection with the purchase and
development of property described in Schedule 6.3; provided
however, all such distributed amounts shall be repaid to the
Company by the Stockholder at the Closing.
ALLOWABLE MONTHLY COMPENSATION: The Company has not since June 30, 1998, and
will not after the date hereof, pay or agree to pay salary, bonus, sales
commissions, fees or any other form of compensation, directly or indirectly, to
the Stockholder or any members of his family in excess of
Page 2 of Annex I
<PAGE> 75
ANNEX I -
CASEY MOTORS, INC., d/b/a
CASEY'S RECREATIONAL SALES
an aggregate of Twelve Thousand Dollars ($12,000) per month (Eight Thousand
Dollars ($8,000) per month for the Stockholder and Four Thousand Dollars
($4,000) per month for the Stockholder's spouse). Notwithstanding the foregoing,
family members, who are not Stockholders and who are currently employed by the
Company and are disclosed on Schedule 4.18, may continue to receive their
current salary.
Page 3 of Annex I
<PAGE> 76
ANNEX III
FORM OF OPINION OF COUNSEL
TO RV CENTERS, INC.
, 1998
- ----------------------------------
- ----------------------------------
- ----------------------------------
Ladies and Gentlemen:
We have acted as counsel to RV Centers, Inc., a Delaware corporation
("RV Centers"), in connection with the transactions contemplated by the
Acquisition Agreement (the "Agreement") dated as of , 1998, among RV Centers,
[Founding Company] and the stockholders named therein (the "Stockholders").
This opinion is being delivered to you pursuant to Section 8.3 of the
Agreement. All capitalized terms used herein, unless expressly defined herein,
shall have the meanings ascribed to such terms in the Agreement.
We have examined originals, or copies certified or otherwise
identified to our satisfaction, of the Agreement and such documents and records
as we deemed to be necessary as a basis for the opinion hereinafter expressed.
With respect to such examination, we have assumed the genuineness of all
signatures appearing on all documents presented to us as originals, and the
conformity to the originals of all documents presented to us as conformed or
reproduced copies. We also have assumed the due execution and delivery of the
Agreement by all parties thereto other than RV Centers. In addition, we have
relied on certificates of officers of RV Centers and certificates of public
officials as to certain matters of fact relating to this opinion and have made
such investigations of law as we have deemed necessary and relevant as the
basis hereof.
Based upon the foregoing and such consideration of matters of law as
we deemed to be relevant, and subject to the limitations, qualifications and
assumptions set forth herein, we are of the following opinion:
1. RV Centers has been duly incorporated and is validly existing and
in good standing under the laws of the State of Delaware.
2. The Agreement has been duly authorized, executed and delivered by
RV Centers and constitutes a legal, valid and binding agreement of RV Centers,
enforceable against it in accordance with its terms. RV Centers has taken all
corporate action necessary to authorize the execution, delivery and performance
of the Agreement.
Page 1 of Annex III
<PAGE> 77
3. The authorized capital stock of RV Centers consists of shares
of Common Stock, par value $.01 per share (the "RV Centers Common Stock");
and shares of Preferred Stock par value $.01 per share (the "Preferred
Stock"). As of , 1998, there were outstanding shares
of RV Centers Common Stock [and no shares of Preferred Stock] which were duly
and validly authorized and issued and, to our knowledge, fully paid and
nonassessable and not issued in violation of the preemptive rights of any
stockholder of RV Centers. Each share of RV Centers Common Stock to be issued to
the Stockholders has been duly and validly authorized and upon issuance on
consummation of the transactions set forth in the Agreement such shares will be
validly issued, fully paid and nonassessable and, to our knowledge, none of such
shares will have been issued in violation of the preemptive rights of any
stockholder of RV Centers.
4. To our knowledge, except as set forth in the Prospectus, (a) RV
Centers is not in violation of any order issued by any court or governmental
agency and (b) there is no action, suit or proceeding pending or threatened
against RV Centers before any court, arbitrator or governmental authority.
5. To our knowledge, RV Centers is not in default, nor has it received
any notice of default, under any contract or agreement to which it is a party,
except where such default would not have a material adverse effect on RV
Centers.
6. No notice to, consent, authorization, approval or order of any
court or governmental agency or body or, to our knowledge, any other person is
required in connection with the execution, delivery or performance by RV
Centers of the Agreement, except for such notices, consents, authorizations,
approvals or orders as have already been made or obtained.
7. The execution of the Agreement and the performance by RV Centers of
its obligations thereunder will not violate any of the terms or provisions of
its Certificate of Incorporation or Bylaws or, to our knowledge, conflict with,
violate or result in any breach of or default under any lease, instrument,
license, permit or any other agreement or instrument to which it is a party or
by which it may be bound or to which any of its properties is subject, except
where such violation, breach or default would not have a material adverse
effect on RV Centers and its subsidiaries, taken as a whole.
The opinions expressed herein are, with your concurrence, predicated
on and qualified in their entirety by the following:
(i) This opinion is limited to the laws of the State of Texas,
the General Corporation Law of the State of Delaware and the
relevant law of the United States of America (other than laws
applicable to patents, copyrights and trademarks).
Page 2 of Annex III
<PAGE> 78
(ii) Our opinion in paragraph 2, above regarding the
enforceability of the Agreement is subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and
to principles of equity. Furthermore, the enforceability of
any indemnity and contribution obligations contained in the
Agreement may be limited under applicable law or public
policy.
(iii) In rendering the opinion herein related to the absence of any
litigation, suits or proceedings, we express no opinion with
respect to the possible effect of administrative and
legislative actions and proceedings as to which RV Centers is
not a named party.
(iv) Whenever our opinion is based on circumstances "to our
knowledge," we have relied exclusively on certificates of
officers (after discussion of the contents thereof with such
officers) of RV Centers or certificates of others as to the
existence or nonexistence of the circumstances upon which
such opinion is predicated. We have no reason to believe,
however, that any such certificate is untrue or inaccurate in
any material respect.
We understand that we have no obligation to update this opinion to
reflect any facts or circumstances occurring after the date hereof, provided
however, that unless we otherwise notify you on or prior to the Consummation
Date that this opinion may no longer be relied upon, you shall be entitled to
rely on this opinion as of the Consummation Date if it were dated on such date.
This opinion is delivered to you solely as a party to the Agreement
and may not be quoted, circulated or published in whole or in part, or
furnished to any other Person without our express consent. The opinions set
forth are limited to matters expressly set forth and no opinion is to be
implied or may be inferred beyond the matters expressly stated.
Very truly yours,
Page 3 of Annex III
<PAGE> 79
ANNEX IV
FORM OF OPINION OF COUNSEL TO COMPANY
AND STOCKHOLDERS
,1998
RV Centers, Inc.
Houston, Texas 77002
[Underwriters]
[International Underwriters, if any]
Ladies and Gentlemen:
We have acted as counsel to ____________________________, a
___________________ corporation (the "Company"), in connection with the
transactions contemplated by the Acquisition Agreement (the "Agreement"), dated
as of , 1998, among RV Centers, Inc., a Delaware corporation, the Company and
the stockholders named therein (the "Stockholders"). This opinion is being
delivered to you pursuant to Section 9.7 of the Agreement. All capitalized
terms used herein, unless expressly defined herein, shall have the meanings
ascribed to such terms in the Agreement.
We have examined originals, or copies certified or otherwise
identified to our satisfaction of the Agreement and such documents and records
as we deemed to be necessary as the basis for the opinion hereinafter
expressed. [Documents and records may be listed.] With respect to such
examination, we have assumed the genuineness of all signatures appearing on all
documents presented to us as originals, and the conformity to the originals of
all documents presented to us as conformed or reproduced copies. We also have
assumed the due execution and delivery of the Agreement by all parties thereto
other than the Company. In addition, we have relied on certificates of officers
of the Company and certificates of public officials as to certain matters of
fact relating to this opinion and have made such investigations of law as we
have deemed necessary and relevant as the basis hereof.
Based upon the foregoing and such consideration of matters of law as
we deemed to be relevant, and subject to the limitations, qualifications and
assumptions set forth herein, we are of the following opinion:
1. The Company [and each subsidiary of the Company] has been duly
incorporated and is validly existing and in good standing under the laws of the
State of __________________ and has
Page 1 of Annex III
<PAGE> 80
all requisite corporate power and authority to own and operate its properties,
to lease the properties it operates under lease and to conduct its business as
currently conducted. [The Company has no subsidiaries.]
2. The Company [and each subsidiary] is duly qualified to transact
business as a foreign corporation in all jurisdictions in which the conduct of
its business requires such qualification, or in which the failure to qualify
would not have a materially adverse effect upon the business of the Company.
3. The authorized capital stock of the Company is as represented in
the Agreement and, based solely on our review of the stock records of the
Company, the outstanding capital stock of the Company is as represented in the
Agreement. Each share of such stock has been duly and validly authorized and
issued and, to our knowledge, is fully paid and nonassessable and was not
issued in violation of the preemptive rights of any stockholder.
All outstanding shares of capital stock of each subsidiary of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable and are owned, directly or indirectly through wholly owned
subsidiaries, by the Company free and clear of any liens, claims or
encumbrances.
4. To our knowledge, there are no outstanding securities of the
Company convertible into or exercisable or exchangeable for or evidencing the
right to purchase or subscribe for any shares of capital stock of the Company
[or any subsidiary] and there are no outstanding or authorized options,
warrants or rights of any character obligating the Company [or any subsidiary]
to issue or sell any shares of its capital stock or any securities convertible
into or exercisable or exchangeable for or evidencing the right to purchase or
subscribe for any shares of such stock.
5. The Agreement has been duly authorized, executed and delivered by
the Company and the Stockholders and constitutes a legal, valid and binding
agreement of the Company and the Stockholders, enforceable against the Company
and such Stockholders in accordance with its terms. The Company and its
Stockholders have taken all corporate and other action necessary to authorize
the execution, delivery and performance of the Agreement and the consummation
of the transactions contemplated thereby. Each Stockholder has the legal
capacity to execute, deliver and perform such Stockholders obligations under
the Agreement [and the Employment Agreement to which such Stockholder is a
party.]
6. To our knowledge, neither the Company nor any subsidiary is in
default, nor have they received any notice of default, in the performance of
any obligation, agreement or condition contained in any bond, debenture, note
or any other evidence of indebtedness or in any other agreement, indenture or
instrument material to the conduct of the business of the Company, to which the
Company [or any subsidiary] is a party or by which the Company [or any
subsidiary] or its property is bound.
Page 2 of Annex IV
<PAGE> 81
7. To our knowledge, except to the extent set forth on Schedules and
to the Agreement, (a) [the Company is not] [Neither the Company nor any
subsidiary is] in violation of any order issued by any court or governmental
agency and [(b) there is no action, suit or proceeding pending or threatened
against the Company [or any subsidiary] before any court, arbitrator or
governmental authority].
8. No notice to, consent, authorization, approval or order of or
filings with any court or governmental agency or body or, to our knowledge, any
other person is required in connection with the execution, delivery or
performance of the Agreement, or the consummation of the transactions therein
contemplated, by the Company or any of the Stockholders, except for such
notices, consents, authorizations, approvals, orders or filings as have already
been made or obtained, as applicable.
9. The execution of the Agreement and the performance by the Company
and the Stockholders of their respective obligations thereunder do not and will
not violate any of the terms or provisions of the Company's [Articles] of
Incorporation or By-laws or, to our knowledge, conflict with, violate or result
in any breach of or default under any lease, instrument, license, permit or any
other agreement or instrument to which the Company [or any subsidiary] is a
party or by which the Company [or any subsidiary] may be bound or to which any
of the properties of the Company [or any subsidiary] is subject.
10. To our knowledge, there is no pending or threatened action, suit
or proceeding that (a) questions the validity of the Agreement [or the
Employment Agreement[s]] or any action taken or to be taken by the Company or
any Stockholder in connection with the Agreement [or the Employment
Agreement[s]], at law or in equity, before or by any governmental authority or
before any court or arbitrator or (b) if adversely determined, would have a
material adverse effect (i) on the condition (financial or other), earnings,
business, operations or prospects of the Company [and its subsidiaries, taken
as a whole], (ii) on the ability of the Company to perform its obligations
under the Agreement or (iii) on the ability of any Stockholder to perform his
[or her] obligations under the Agreement [or the Employment Agreement[s]].
The opinions expressed herein are, with your concurrence, predicated
on and qualified in their entirety by the following:
(i) This opinion is limited to the laws of the State of and the
relevant law of the United States of America (other than laws
applicable to patents, copyrights and trademarks). [As to
matters involving the law of the State of ______________, we
have relied upon and our opinion is subject to the
qualifications, limitations, exceptions and assumptions
contained in, the opinion of _____________________, a copy of
which is annexed hereto.]
(ii) Our opinion in Paragraph 5, above regarding the
enforceability of the Agreement is subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and
to principles of equity. Furthermore, the enforceability of
any indemnity and contribution obligations contained in this
Agreement may be limited under applicable law or public
policy.
Page 3 of Annex IV
<PAGE> 82
(iii) In rendering the opinion herein related to the absence of any
litigation, suits or proceedings, we express no opinion with
respect to the possible effect of administrative and
legislative actions and proceedings as to which neither the
Company nor any subsidiary is not a named party.
(iv) Whenever our opinion is based on circumstances "to our
knowledge," we have relied exclusively on certificates of
officers (after discussion of the contents thereof with such
officers) of the Company or certificates of others as to the
existence or nonexistence of the circumstances upon which
such opinion is predicated. We have no reason to believe,
however, that any such certificate is untrue or inaccurate in
any material respect.
This opinion is delivered to you solely and may not be quoted,
circulated or published in whole or in part or delivered to any other person
without our express written consent. The Underwriters [and International
Underwriters] are entitled to rely upon this opinion.
Very truly yours,
Page 4 of Annex IV
<PAGE> 83
ANNEX V
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between Casey
Motors, Inc., d/b/a Casey's Recreational Sales (the "Company"), a Colorado
corporation and a wholly-owned subsidiary of RV Centers, Inc. ("RV Centers"), a
Delaware corporation, and Steve Casement ("Executive") is hereby entered into
and effective as of the day of , 1999 (the "Effective Date"), the date of
the consummation of the initial public offering of the common stock of RV
Centers (the "IPO"). This Agreement hereby supersedes any other employment
agreements or understandings, written or oral, between and among the Company, RV
Centers and Executive.
RECITALS
RV Centers, the Company and the other current subsidiaries of RV
Centers are engaged primarily in the recreational vehicle dealer business
including, but not limited to, sales, service, parts and rentals. RV Centers,
the Company and the other current and future subsidiaries of RV Centers are
collectively referred to herein as the "RV Centers Companies" and individually,
as an "RV Centers Company."
Executive is employed hereunder by the Company in a confidential
relationship wherein Executive, in the course of his employment with the
Company, has and will continue to become familiar with and aware of information
as to the Company's and RV Centers' customers and specific manner of doing
business, including the processes, techniques and trade secrets utilized by the
Company and RV Centers, and future plans with respect thereto, all of which has
been and will be established and maintained at great expense to the Company and
RV Centers. This information is a trade secret and constitutes valuable
goodwill of the Company and RV Centers.
Therefore, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby
agreed as follows:
AGREEMENTS
1. Employment and Duties.
(a) The Company hereby employs Executive as President of the Company.
As such, Executive shall have responsibilities, duties and authority reasonably
accorded to, expected of and consistent with such office and will report
directly to the Board of Directors of the Company (the "Board") or such person
as the Board may direct. Additional or different duties, titles or positions,
however, may be assigned to Executive or (without limiting Executive's right to
terminate for Good Reason) may be taken from Executive from time to time,
provided that any such changes are consistent and compatible with Executive's
experience, background and managerial skills. Executive hereby accepts this
employment upon the terms and conditions herein contained and, subject to
paragraph 1(c), agrees to devote substantially all of his business time,
attention and efforts to promote and further the business and interests of the
Company and its affiliates.
Page 1 of Annex V
<PAGE> 84
(b) Executive shall faithfully adhere to, execute and fulfill all
lawful policies established, promulgated and communicated by the Company.
(c) Executive shall not, during the term of his employment hereunder,
engage in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Executive's duties and
responsibilities hereunder. If Executive intends to engage in any other
business activity, he shall give written notice of such intent to the Board,
and the Board shall in good faith determine whether such activity will
interfere with Executive's duties and responsibilities hereunder, and Executive
agrees to accept such a determination by the Board. The foregoing limitations
shall not be construed as prohibiting Executive from making personal
investments in such form or manner as will neither require his services in the
operation or affairs of the companies or enterprises in which such investments
are made nor violate the terms of paragraph 3 hereof. Notwithstanding the
foregoing, Executive may continue to engage in those activities described on
Schedule 1(c) to the same extent Executive is engaged in such activities
currently and provided Executive continues to devote at least the same amount
of time to Executive's duties hereunder as Executive has devoted to the Company
prior to the Effective Date.
2. Compensation. For all services rendered by Executive, the Company
shall compensate Executive beginning upon consummation of the IPO as follows:
(a) Base Salary. The base salary payable to Executive shall be
$120,000 per year, payable on a regular basis in accordance with the Company's
standard payroll procedures, but not less than monthly. Such base salary shall
be reviewed by the Board on at least an annual basis and may be adjusted in
light of Executive's position, responsibilities, performance and other relevant
factors; provided, however, as adjusted the base salary may not be less than
the amount in effect on the Effective Date.
(b) Incentive Bonus Plan. For 1999 and subsequent years, it is the
intent of RV Centers and the Company to develop written Management Incentive
Bonus Plans setting forth the criteria under which Executive and other officers
and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Executive
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Admittance for participation and payment of all premiums
for coverage for Executive and Executive's dependent family members
under health, hospitalization, disability, dental, life and other
insurance plans that the Company may have in effect from time to time,
provided benefits provided to Executive under this clause (b)(ii)
shall be at least equal to such benefits provided to other RV Centers'
executives similarly situated.
Page 2 of Annex V
<PAGE> 85
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Executive in the
performance of his services pursuant to this Agreement and in
accordance with Company and RV Centers' policies. All reimbursable
expenses shall be appropriately documented in reasonable detail by
Executive upon submission of any request for reimbursement, and in a
format and manner consistent with the Company's expense reporting
policy.
(iii) Four (4) weeks of paid vacation per year or such
greater amount as may be afforded officers and key employees under the
Company's or RV Centers' policies in effect from time to time.
(iv) The Company shall provide Executive with other executive
perquisites as may be available to or deemed appropriate for Executive
by the Board and participation in all other company-wide employee
benefits as are available from time to time to all RV Centers
Companies.
3. Non-Competition Agreement.
(a) Executive recognizes that the Company's willingness to enter into
this Agreement, including the compensation arrangements set forth in paragraph
2 above, and that certain Acquisition Agreement dated as of January 12, 1999
(the "Acquisition Agreement") among the Company, RV Centers, Executive and
other Company stockholders, if any, is based in material part on Executive's
agreement to the provisions of this paragraph 3 and that Executive's breach of
the provisions of this paragraph 3 could materially damage the Company.
Executive will not, during the period of employment by or with the Company, and
for a period of two (2) years immediately following the termination of his
employment under this Agreement, for any reason whatsoever (other than a
termination by the Company without "Good Cause" or by Executive for "Good
Reason," as each term is defined below, in which case for a period of one (1)
year immediately following the termination), directly or indirectly, for
himself or on behalf of or in conjunction with any other person, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any business in direct
competition with any current or future corporate affiliates of the
Company and the RV Centers Companies, within one hundred (100) miles
of any location where any of the RV Centers Companies conducts
business, including any territory serviced by any RV Centers Company;
(ii) call upon any person who is, at that time, an employee
of any of the RV Centers Companies for the purpose or with the intent
of enticing such employee away from or out of the employ of an RV
Centers Company;
Page 3 of Annex V
<PAGE> 86
(iii) call upon any person or business entity which is, at
that time, or which has been, within two (2) years prior to that time,
a customer of an RV Centers Company, for the purpose of soliciting or
selling products or services in competition with any of the RV Centers
Companies;
(iv) call upon any prospective acquisition candidate, on
Executive's own behalf or on behalf of any competitor, which candidate
was, to Executive's knowledge after due inquiry of the company
approached, either called upon by an RV Centers Company or for which
RV Centers has made an acquisition analysis, for the purpose of
acquiring such entity; or
(v) voluntarily testify as an expert witness in recreational
vehicle matters for an adverse party to any RV Centers Company in
litigation or arbitration.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit: (1) Executive from acquiring as an investment not more than five
percent (5%) of the capital stock of a competing business, whose stock is
traded on a national securities exchange or on an over-the-counter or similar
market; (2) Executive leasing any real property currently owned by him or his
designee to any person or entity, including, without limitation, any person or
entity that will operate an automobile or RV dealership, service center or
other related activity on such real property; (3) management or ownership of or
employment as a salesperson at a dealership selling new or used boats, boating
equipment and other marine equipment and supplies, but not recreational
vehicles, so long as RV Centers or any of its affiliates do not operate a
dealership selling boats or marine equipment within 100 miles of the location
Executive desires to own or work from; or (4) employment as a manufacturer's
representative with any manufacturer of recreational vehicles, provided that
Executive is not involved in any way whatsoever with any dealership operations
that such manufacturer may own.
(b) Because of the difficulty of measuring economic losses to the
Company and RV Centers as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to the
Company and RV Centers for which they would have no other adequate remedy,
Executive agrees that the foregoing covenant may be enforced by RV Centers or
the Company, in the event of breach by Executive, by injunctions, restraining
orders and orders of specific performance issued by a court. Executive further
agrees to waive any requirement for the Company's securing or posting of any
bond in connection with such remedies.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Executive in light of the
activities and business of the RV Centers Companies on the Effective Date and
the current plans of the RV Centers Companies; but it is also the intent of the
Company and Executive that such covenants be construed and enforced in
accordance with the changing activities, business and locations of the RV
Centers Companies, throughout the term of the employment of Executive under
this Agreement. For example, if, during the term of this Agreement, an RV
Centers Company engages in new and different activities, enters a new business
or establishes new locations for its current activities or business in addition
to or other than the activities or
Page 4 of Annex V
<PAGE> 87
business enumerated under the Recitals above or the locations currently
established therefor, then Executive will be precluded from soliciting the
customers or employees of such new activities and business or from directly
competing with such new activities or business within one hundred (100) miles
of its then-established operating locations through the term of this covenant.
It is further agreed by the parties hereto that, if Executive shall
cease to be employed hereunder and shall enter into a business or pursue other
activities not in competition with an RV Centers Company, or shall engage in
similar activities or business in locations the proximity and activities of
which do not violate clause (a) of this paragraph 3 Executive shall not be
chargeable with a violation of this paragraph 3 if an RV Centers Company shall
thereafter enter the same, similar or a competitive (i) business, (ii) course
of activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions
of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth herein are unreasonable, then it is the intention of the parties that
such restrictions be enforced to the fullest extent which the court deems
reasonable, and this Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against an RV Centers
Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by RV Centers or the Company of such
covenants. It is specifically agreed that the period of two (2) years (or one
(1) year in certain circumstances as herein provided) following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants of Executive made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Executive is in violation of any provision of this paragraph 3.
4. Term; Termination; Rights on Termination. The initial term of this
Agreement shall begin on the Effective Date and continue for three (3) years
(the " Initial Term") unless terminated sooner as herein provided. After the
Initial Term, this Agreement shall continue thereafter on a year-to-year basis
(each such year is referred to herein as a "Renewal Term") on the same terms
and conditions contained herein in effect as of the time of renewal unless the
Company gives written notice of non-renewal at least ninety (90) days prior to
the end of the Initial Term or the then current Renewal Term, as the case may
be. If this Agreement is not renewed prior to the end of the Initial Term or
any subsequent Renewal Term, then Executive shall become an employee at-will at
the expiration of the term of the Agreement. If the Agreement is not renewed,
this Agreement, including the restrictions in paragraph 3, shall expire;
provided, however, Executive's obligations under paragraphs 6, 7, 8 and 9 and
all rights and liabilities which have accrued hereunder to either party prior
to such expiration shall survive. Non-renewal of the Agreement shall not be
"Good Reason" for Executive to terminate employment under subparagraph (d)
below nor shall it be considered a termination without "Good Cause" by the
Company.
Page 5 of Annex V
<PAGE> 88
During the Initial Term or subsequent Renewal Terms, this Agreement
and Executive's employment may be terminated in any one of the following ways:
(a) Death. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.
(b) Disability. If, as a result of a long-term incapacity or
disability from which Executive is not reasonably likely to continue to full
employment, as such concept is defined in the insurance programs, from time to
time, maintained by the Company ("Long-Term Disability") due to physical or
mental illness or injury, and Executive shall have been absent from his
full-time duties hereunder for three (3) consecutive months, then, the Company
may terminate Executive's employment hereunder. Company shall give Executive
thirty (30) days advance written notice of such termination. Such notice may be
given before or after the end of such three (3) month period, but which shall
not be effective earlier than the last day of such three (3) month period
provided, however, such termination shall not be effective if Executive is able
to resume his full-time duties at the conclusion of such thirty (30) day notice
period.
If Executive shall have been absent from his full-time duties
hereunder for six (6) consecutive months as a result of a short-term incapacity
or disability from which Executive is reasonably likely to continue to full
employment, as such concept is defined in the insurance programs, from time to
time, maintained by the Company ("Short-Term Disability") due to physical or
mental illness or injury, then the Company may terminate Executive's employment
hereunder. Company shall give Executive thirty (30) days advance written notice
of such termination. Such notice may be given before or after the end of such
six (6) month period, but which shall not be effective earlier than the last
day of such six (6) month period. Provided, however, such termination shall not
be effective if Executive is able to resume his full-time duties at the
conclusion of such thirty (30) day notice period.
For purposes of the foregoing paragraphs, if the Company does not have
an insurance program which includes a definition of long-term disability or
short-term disability, such terms shall have the meanings generally ascribed to
them by the insurance industry.
During such three (3) month or six (6) month period, the Company shall
pay to Executive his base salary amount hereunder net of any disability
insurance payments under policies maintained by the Company or RV Centers which
are received by Executive; provided, however, that such payments shall be
netted only to the extent that the premiums for such insurance are borne by the
Company and are not paid or reimbursed by the Executive.
Also, Executive may terminate his employment hereunder if his health
should become impaired to an extent that makes the continued performance of his
duties hereunder hazardous to his physical or mental health or his life,
provided that Executive shall have furnished the Company with a written
statement from a qualified doctor to such effect and provided, further, that,
at the Company's request made within thirty (30) days of the date of such
written statement, Executive shall submit to an examination by a doctor
selected by the Company who is reasonably acceptable to Executive or
Executive's doctor and such doctor shall have concurred in the conclusion of
Executive's doctor.
Page 6 of Annex V
<PAGE> 89
Notwithstanding the payments made pursuant to the provision of this
subparagraph (b) above, in the event this Agreement is terminated as a result
of Executive's incapacity or disability, Executive shall receive from the
Company, in a lump-sum payment due within ten (10) days of the effective date
of termination, the base salary at the rate then in effect for the greater of
(i) whatever time period is remaining under the Initial Term of this Agreement,
but for not more than two (2) years, or (ii) one (1) year.
(c) Good Cause. The Company may terminate this Agreement ten (10) days
after written notice to Executive for "Good Cause," which shall be limited to:
(i) Executive's breach of any material provision of this Agreement (continuing
for ten (10) days after receipt of written notice of need to cure); (ii)
Executive's gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to cure)
of any of Executive's material duties and responsibilities hereunder which is
harmful or injurious to the Company or RV Centers; (iii) Executive's
dishonesty, fraud or willful misconduct with respect to the business or affairs
of the Company or RV Centers which materially and adversely affects the
operations or reputation of the Company or RV Centers; (iv) Executive's
conviction of a felony crime; or (v) Executive's violation of the Company's
substance abuse policy that would result in discharge under such policy as
applied to the Company's employees generally. In the event of a termination for
Good Cause, as enumerated above, Executive shall have no right to any severance
compensation but shall receive all compensation due and payable through the
effective date of termination. Any termination for Good Cause must be approved
by at least fifty-one percent (51%) of the members of the RV Centers Board in
the form of a resolution duly adopted by the RV Centers Board and delivered to
the Executive, finding in the good faith opinion of the RV Centers Board that
Executive has engaged in the type of conduct set forth above and specifying the
particulars thereof. In the event of a termination for Good Cause, as
enumerated above, Executive shall have no right to any severance compensation,
but shall receive all compensation due and payable through the effective date
of termination.
(d) With or without Good Reason or Without Good Cause. At any time,
either Executive, with or without Good Reason, or the Company, without Good
Cause, may terminate this Agreement and Executive's employment; provided,
however, Executive may only be terminated without Good Cause by the Company
during the Initial Term hereof if such termination is approved by at least
fifty-one percent (51%) of the members of the Board of Directors of RV Centers.
Any such termination by Executive or the Company shall be effective thirty (30)
days after written notice of such termination is provided to the other party.
Should this Agreement be terminated by the Company without
Good Cause or by Executive with Good Reason during the Initial Term, Executive
shall receive from the Company an amount equal to the base salary at the rate
then in effect for the greater of (i) the time period remaining under the
Initial Term of this Agreement or (ii) one (1) year. Should this Agreement be
terminated by the Company without Good Cause or by Executive with Good Reason
during any
Page 7 of Annex V
<PAGE> 90
Renewal Term, Executive shall receive from the Company an amount equal to the
base salary at the rate then in effect for the greater of (i) the time period
remaining under such Renewal Term or (ii) six (6) months. Such amount, in all
cases, shall be paid in equal monthly payments on the last regular payday of
each month for all Company employees. Further, any termination without Good
Cause by the Company or with Good Reason by Executive shall operate to shorten
the period set forth in paragraph 3(a) and during which the terms of paragraph
3 apply to one (1) year from the date of termination of employment. If
Executive resigns or otherwise terminates his employment without Good Reason,
Executive shall receive no severance compensation except as may be provided in
paragraph 11 hereof, but shall be entitled to reimbursement for reasonable
business expenses incurred prior to the date of resignation or termination as
provided in paragraph 2 hereof.
Executive shall be deemed to have "Good Reason" to terminate
this Agreement and employment hereunder upon the occurrence of any of the
following events:
(i) (A) Executive is requested to take on duties materially
inconsistent with Executive's managerial experience and abilities, (B)
there is a material reduction in authority, responsibilities or duties
to a position of clearly less stature or importance within RV Centers,
another RV Centers Company or the Company than the position described
in paragraph 1 hereof, or (C) Executive is requested to move his work
location to an area outside the greater metropolitan area of
Executive's present work location, and any such request by the Company
or any such material reduction, is not withdrawn within five (5)
business days after written notice from Executive that he is unwilling
to accept such proposed changes in duties or responsibilities or to
accept such move; Executive's failure to respond within five (5)
business days after receiving notification of any such proposed change
in Executive's duties, responsibilities, titles, or work location
shall be deemed an acceptance of such change by Executive; or
(ii) There is a "Change in Control" of the Company; for purposes of
this subparagraph (ii), "Change in Control" shall have the same
definition as in paragraph 11(e) except that in such definition the
term "Company" shall be substituted for "RV Centers" throughout the
definition other than in the third line of paragraph 11(e)(i).
Provided, however, if Executive is given at least five (5) business
days advance notice of such Change in Control, Executive's failure to
give notice of termination prior to the consummation of the Change in
Control shall be deemed acceptance of such Change in Control and such
event shall not constitute "Good Reason". If Executive is not given at
least five (5) business days advance notice, Executive's failure to
terminate this Agreement within ten (10) business days after receiving
such notice of a Change in Control shall be deemed an acceptance of
such Change in Control by Executive and such event shall not
constitute "Good Reason".
(iii) the Company breaches any material provision of this Agreement
(continuing for ten (10) business days after receipt of written notice
from Executive of the need to cure).
Executive acknowledges that certain changes in authority, responsibility or
duties will result from the acquisition and subsequent operation by RV Centers
of the Company (e.g., shift of responsibility
Page 8 of Annex V
<PAGE> 91
for human resources, accounting, insurance and other activities to officers of
RV Centers, combining Company operations and locations with other RV Centers
Companies, establishment of regional management and regional lines of
authority) and agrees that such changes shall not be of a nature to constitute
Good Reason provided that Executive is treated consistently, in all material
respects, with executives in similar positions in other operating subsidiaries
of RV Centers.
Upon termination of this Agreement for any reason provided in (a)
through (d) above, Executive shall be entitled to receive all compensation
earned and/or accrued and all benefits and reimbursements due and/or accrued
through the effective date of termination. Additional compensation subsequent
to termination, if any, will be due and payable to Executive only to the extent
and in the manner expressly provided above or in paragraph 11. All other rights
and obligations of the Company and Executive under this Agreement shall cease
as of the effective date of termination, except that Executive's obligations
under paragraphs 3, 5, 6, 7 and 8 herein, the Company's obligations with
respect to severance payments, if any, and indemnification under paragraph 13
below, and RV Centers' obligations under paragraph 21 below shall survive such
termination in accordance with their terms if the Agreement is terminated
pursuant to (a) through (d) above or paragraph 11 below.
If Executive is terminated without cause or terminates his employment
hereunder with Good Reason, the Executive shall be entitled to receive a
prorated portion of any annual bonus, which under the bonus plan is based only
on a formula determination and is not discretionary, to which Executive was
entitled to receive for the year during which termination occurred had the
Executive not been terminated. If the formula for the bonus calls for the use
of full year numbers, the amount of such bonus shall be based on such numbers,
notwithstanding that such numbers include a period after termination.
(e) Change in Control of RV Centers. In the event of a "Change in
Control" of RV Centers (as defined below), refer to paragraph 11 below.
5. Return of Company Property. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Executive by or on behalf of any RV Centers
Company, their representatives, vendors or customers which pertain to the
business of any RV Centers Company shall be and remain the property of the RV
Centers Companies, and be subject at all times to their discretion and control.
Likewise, all correspondence, reports, records, charts, advertising materials
and other similar data pertaining to the business, activities or future plans
of the RV Centers Companies which is collected by Executive shall be delivered
promptly to the Company without request by it upon termination of Executive's
employment.
6. Inventions. Executive shall disclose promptly to the Company any
and all conceptions, designs, inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by
Executive, solely or jointly with another, during the period of employment and
which are directly related to the then current business or activities of the
Company and which Executive conceives as a result of his employment by the
Company. Executive hereby
Page 9 of Annex V
<PAGE> 92
assigns and agrees to assign all his interests therein to the Company or its
nominee. Whenever requested to do so by the Company, Executive shall execute
any and all applications, assignments or other instruments that the Company
shall deem necessary to apply for and obtain Letters Patent of the United
States or any foreign country or to otherwise protect the Company's interest
therein.
7. Trade Secrets. Executive agrees that he will not, during or after
the term of this Agreement with the Company, disclose the specific terms of any
RV Centers Company's relationships or agreements with their significant vendors
or customers or any other significant and material trade secret of an RV
Centers Company, whether in existence or proposed, to any person, firm,
partnership, corporation or business for any reason or purpose whatsoever,
except in pursuit of the Company's business (e.g. interaction with outside
auditors and consultants engaged by the Company) or with lenders or potential
lenders consistent with policies of the Company.
8. Confidentiality.
(a) Executive acknowledges and agrees that all Confidential
Information (as defined below) of the Company is confidential and a valuable,
special and unique asset of the Company that gives the Company an advantage
over its actual and potential, current and future competitors. Executive
further acknowledges and agrees that Executive owes the Company a fiduciary
duty to preserve and protect all Confidential Information from unauthorized
disclosure or unauthorized use, that certain Confidential Information
constitutes "trade secrets" under applicable laws, and that unauthorized
disclosure or unauthorized use of the Company's Confidential Information could
irreparably injure the Company.
(b) Both during the term of Executive's employment and after the
termination of Executive's employment for any reason (including wrongful
termination), Executive shall hold all Confidential Information in strict
confidence, and shall not use any Confidential Information except for the
benefit of the Company, in accordance with the duties assigned to Executive.
Executive shall not, at any time (either during or after the term of
Executive's employment), disclose any Confidential Information to any person or
entity (except other employees of the Company who have a need to know the
information in connection with the performance of their employment duties), or
copy, reproduce, modify, decompile or reverse engineer any Confidential
Information, or remove any Confidential Information from the Company's
premises, without the prior written consent of the Chief Executive Officer of
RV Centers, or permit any other person to do so except for the benefit of the
Company. In the event Executive is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or other process) to disclose any Confidential
Information, Executive will provide the Company with immediate written notice
of any such request or requirement so that the Company may seek an appropriate
protective order or seek with Executive's cooperation to narrow the request or
demand or waive Executive's compliance with the provisions of this Agreement.
If, failing the entry of a protective order or the receipt of a waiver
hereunder, Executive is, in the opinion of his counsel, compelled to disclose
Confidential Information, Executive may disclose only that portion of the
Confidential Information which Executive's counsel advises Executive in writing
that Executive is compelled to disclose and Executive will exercise his or her
best efforts to obtain assurance that confidential treatment will be
Page 10 of Annex V
<PAGE> 93
accorded such Confidential Information. In any event, Executive will not oppose
action by the Company to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the
Confidential Information. Executive shall take reasonable precautions to
protect the physical security of all documents and other material containing
Confidential Information (regardless of the medium on which the Confidential
Information is stored). This applies to all Confidential Information, whether
now known or later to become known to Executive.
(c) Upon the termination of Executive's employment with the Company
for any reason, and upon written request of the Company at any other time,
Executive shall promptly surrender and deliver to the Company all documents and
other written material of any nature containing or pertaining to any
Confidential Information and shall not retain any such document or other
material. Within five days of any such request, Executive shall certify to the
Company in writing that all such materials have been returned.
(d) As used in this Agreement, the term "Confidential Information"
shall mean any information or material known to or used by or for the Company
(whether or not owned or developed by the Company and whether or not developed
by Executive) that is not generally known to the public and has been generally
treated by the Company as confidential information. Confidential Information
includes, but is not limited to, the following: all trade secrets of the
Company; all information that the Company has marked as confidential or has
otherwise described to Executive (either in writing or orally) as confidential;
all nonpublic information concerning the Company's products, services,
prospective products or services, research, product designs, prices, discounts,
costs, marketing plans, marketing techniques, market studies, test data,
customers, customer lists and records, suppliers and contracts; all Company
business records and plans; all Company personnel files; all financial
information of or concerning the Company; all information relating to operating
system software, application software, software and system methodology,
hardware platforms, technical information, inventions, computer programs and
listings, source codes, object codes, copyrights and other intellectual
property; all technical specifications; any proprietary information belonging
to the Company; and all data and all computer system passwords and user codes.
"Confidential Information" shall not include information which (i) is
in the public domain to such an extent as to be readily available to
competitors of the RV Centers Companies, (ii) becomes generally known to the
public other than by disclosure by Executive, or (iii) is received by
Executive, outside his capacity as an employee of the Company, from a third
party which was under no legal obligation of confidentiality with an RV Centers
Company with respect to such information.
9. No Prior Agreements. Executive hereby represents and warrants to
the Company that the execution of this Agreement by Executive and his
employment by the Company and the performance of his duties hereunder will not
violate or be a breach of any agreement with a former employer, client or any
other person or entity. Further, Executive agrees to indemnify the Company for
any loss or damage, including, but not limited to, attorneys' fees and expenses
of investigation, the Company may incur based upon or arising out of any breach
of this paragraph 9.
Page 11 of Annex V
<PAGE> 94
10. Assignment; Binding Effect. Executive understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Executive agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement.
Subject to the preceding two sentences and the express provisions of paragraph
11 below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
11. Change in Control.
(a) Executive understands and acknowledges that RV Centers may be
merged or consolidated with or into another entity or that RV Centers may
undergo a "Change in Control" (as defined below). In the event a Change in
Control is initiated or occurs during the Initial Term, then the provisions of
this paragraph 11 shall be applicable.
(b) In the event of a Change in Control wherein Executive has not
received written notice at least five (5) business days prior to the
anticipated date of the event or transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agrees to perform, or continue to cause the Company to perform, the
Company's obligations under this Agreement in the same manner and to the same
extent that the Company is required to perform prior to such event or
transaction, then Executive may, at Executive's sole discretion, elect to
terminate his employment on the effective date of such Change in Control. In
such case, the applicable provisions of paragraph 4(d) will apply as though the
Company had terminated Executive without Good Cause; however, the amount of the
severance payments due Executive shall be triple the amount calculated under
the terms of paragraph 4(d), but shall in no event in the aggregate exceed six
(6) times Executive's annual base salary.
(c) For purposes of applying paragraph 4 under the circumstances
described in (b) above, in the case where Executive's employment under this
Agreement will terminate, the effective date of termination will be the closing
date of the transaction giving rise to the Change in Control and all
compensation, benefits and reimbursements due Executive under paragraph 2 above
must be paid in full by the Company at or prior to such closing. In the case
where Executive's employment under this Agreement does not terminate with a
Change in Control under (b) above, then for one (1) year following the closing
date of a Change in Control, if the Initial Term is ending during such one (1)
year period, the Company shall automatically renew this Agreement for one (1)
year pursuant to the second sentence of paragraph 4 above.
Page 12 of Annex V
<PAGE> 95
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person, entity or group (as such terms are used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Act"), other than RV Centers or an employee benefit plan
of RV Centers, acquires, directly or indirectly, the beneficial
ownership (as defined in Section 13(d) of the Act)) of any voting
security of RV Centers and immediately after such acquisition such
person is, directly or indirectly, the beneficial owner of voting
securities representing 50% or more of the total voting power of all
of the then outstanding voting securities of RV Centers entitled to
vote generally in the election of directors;
(ii) the stockholders of RV Centers shall approve a merger,
consolidation, recapitalization or reorganization of RV Centers, or a
reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not obtained, other
than any such transaction which would result in at least 75% of the
total voting power represented by the voting securities of the
surviving entity outstanding immediately after such transaction being
beneficially owned by the holders of all of the outstanding voting
securities of RV Centers immediately prior to the transactions with
the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or
(iii) the stockholders of RV Centers shall approve a plan of
complete liquidation or dissolution of RV Centers or an agreement for
the sale or disposition by RV Centers of all or a substantial portion
of RV Centers' assets (i.e., 50% or more of the total consolidated
assets of RV Centers).
(f) If it shall be finally determined that any payment made or benefit
provided to Executive in connection with a Change in Control of RV Centers,
whether or not made or provided pursuant to this Agreement, is subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, or any successor thereto, RV Centers or the Company shall pay
Executive an amount of cash (the "Additional Amount") such that the net amount
received by Executive after paying all applicable taxes on such Additional
Amount shall be equal to the amount that Executive would have received if
Section 4999 were not applicable.
13. Release. Notwithstanding anything in this Agreement to the
contrary, Executive shall not be entitled to receive any severance payments
pursuant to paragraphs 4 or 11 of this Agreement unless Executive has executed
(and not revoked) a general release of all claims Executive may have against
the Company and its affiliates relating to Executive's employment hereunder,
other than claims for unpaid compensation amounts required to be paid by the
Company pursuant to paragraph 2 hereof, in a form of such release acceptable to
the Company.
14. Indemnification. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Executive), by reason of the fact that he is or was performing
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<PAGE> 96
services in good faith under this Agreement or as an executive officer of the
Company prior to the date of this Agreement, then the Company shall indemnify
Executive against all expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement, as actually and reasonably incurred by
Executive in connection therewith. In the event that both Executive and the
Company are made a party to the same third-party action, complaint, suit or
proceeding, the Company agrees to engage competent legal representation, and
Executive agrees to use the same representation, provided that if counsel
selected by the Company shall have a conflict of interest that prevents such
counsel from representing Executive, he may engage separate counsel and the
Company shall pay all reasonable attorneys' fees and reasonable expenses of
such separate counsel. Further, while Executive is expected at all times to use
his best efforts to faithfully discharge his duties under this Agreement,
Executive cannot be held liable to the Company for errors or omissions made in
good faith where Executive has not exhibited gross, willful and wanton
negligence and misconduct nor performed criminal and fraudulent acts which
materially damage the business of the Company.
15. Complete Agreement. Except as expressly set forth herein, this
Agreement is not a promise of future employment. Executive has no oral
representations, understandings or agreements with the Company or any of its
officers, directors or representatives covering the same subject matter as this
Agreement. This written Agreement is the final, complete and exclusive
statement and expression of the agreement between the Company and Executive,
and it cannot be varied, contradicted or supplemented by evidence of any prior
or contemporaneous oral or written agreements. This written Agreement may not
be later modified except by a further writing signed by a duly authorized
officer of the Company, RV Centers and Executive, and no term of this Agreement
may be waived except by a writing signed by the party waiving the benefit of
such term.
16. Notice. Whenever any notice is required hereunder, it shall be
given in writing addressed as follows:
<TABLE>
<CAPTION>
<S> <C>
To the Company: Casey Motors, Inc. d/b/a Casey's Recreational Sales
4120 Youngfield
Wheatridge, Colorado 80033
with a copy to: RV Centers, Inc.
Attention: President
600 Travis, Suite 6500
Houston, Texas 77002
To Executive: Steve Casement
6665 Young Field Ct.
Arvada, Colorado 80004
</TABLE>
Notice shall be deemed given and effective on the earlier of three (3) days
after the deposit in the U.S. mail of a writing addressed as above and sent
first class mail, certified, return receipt requested, or when actually
received. Either party may change the address for notice by notifying the other
party of such change in accordance with this paragraph 16.
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<PAGE> 97
17. Severability; Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
18. Arbitration. Any unresolved dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by
arbitration; provided, however, the Company shall be entitled to bring an
action to enforce its rights under paragraphs 3, 5, 6, 7 and 8. The arbitration
shall be conducted before a panel of three (3) arbitrators in Houston, Texas,
in accordance with the National Rules for the Resolution of Employment Disputes
of the American Arbitration Association ("AAA") then in effect. Unless both
parties agree otherwise, the arbitrators will be those provided by the AAA. The
arbitrators shall not have the authority to add to, detract from or modify any
provision hereof nor to award punitive damages to any injured party. The
arbitrators shall have the authority to order back pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of legal fees and costs, including those incurred to enforce this
Agreement, and interest thereon. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The AAA fees and all direct expenses
(e.g., room rental for a location to conduct the proceedings, reimbursement of
arbitrators' per diems and out-of-pocket expenses) of any arbitration
proceeding shall be borne evenly by the parties pending a final determination
by the arbitrators as to how the costs shall be borne between the parties.
19. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of Texas, without regard to its conflicts of
laws provisions.
20. Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
21. Guarantee of Payments. RV Centers has executed this Agreement for
the limited purposes of paragraph 21. In this connection, RV Centers hereby
unconditionally guarantees the punctual payment when due by the Company of all
obligations payable by the Company to the Executive hereunder.
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<PAGE> 98
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"EXECUTIVE" "COMPANY"
By:
- -------------------------- ------------------------------------------
Steve Casement Name:
----------------------------------------
Title:
---------------------------------------
For Purposes of paragraph 21:
"RV CENTERS"
By:
--------------------------------------
Name: Clayton K. Trier
--------------------------------------
Title: Chairman, Chief Executive Officer
and President
Page 16 of Annex V
<PAGE> 99
ANNEX VI
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "LEASE") is made and entered into as of
____________, 1999 by and between ___________________("LANDLORD"), and
______________________("TENANT").
In consideration of the rentals reserved hereunder and the duties, covenants and
obligations of the other hereunder, Landlord and Tenant hereby covenant and
agree as follows:
I.
1.01 DEMISE OF THE PREMISES. Landlord hereby leases, demises and lets to
Tenant, and Tenant hereby leases and takes from Landlord, that certain tract of
land (the "LAND") located in ______________________, and more particularly
described on Exhibit "A" attached hereto together with all buildings,
improvements and fixtures located thereon (the "IMPROVEMENTS") and the
non-exclusive use of all rights, easements, privileges and appurtenances
thereto (said Land, Improvements and appurtenances being hereinafter referred
to as the "PREMISES").
1.02 TERM. The term of this Lease shall commence on ___________, 1999 (the
"COMMENCEMENT DATE") and, unless sooner terminated or renewed and extended in
accordance with the terms and conditions set forth herein, shall expire on
_____________, 2002 (the "Initial Term"). If Tenant occupies the Premises prior
to the Commencement Date, it shall do so subject to all of the terms and
provisions of this Lease except for the obligation to pay Base Rental (as
hereinafter defined).
1.03 RENEWAL TERM. Landlord hereby grants to Tenant the right, privilege and
option to extend the initial term of this Lease for three (3) periods of three
(3) years each (the "RENEWAL TERMS"), beginning on the day following the
expiration of the Initial Term or the first or second Renewal Term, as
applicable, upon the same terms and conditions as herein contained. Tenant may
exercise each such option by delivering written notice to Landlord of Tenant's
exercise of such option at least three (3) months prior to the expiration of
the initial term or renewal term, as applicable, upon satisfaction of the
following terms and conditions: (i) that, at the time of the exercise of such
option and at the time the applicable Renewal Term begins, Tenant shall not be
in default in the performance of any of the terms, covenants and conditions
contained in this Lease after notice and the expiration of any applicable cure
periods; and (ii) that this Lease shall not have been theretofore terminated
and shall be in full force and effect at the date of the exercise of such
option and at the date the applicable Renewal Term begins. As used herein,
"TERM" shall mean the Initial Term of this Lease as described in Section 1.02
above, as extended and renewed by any Renewal Terms.
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1.04 USE. The Premises are to be used for the operation of a recreational
vehicle dealership and servicing facility and related uses or any lawful
purpose with the prior written consent of Landlord, such consent not to be
unreasonably withheld or delayed.
II.
2.01 BASE RENTAL. Tenant hereby covenants and agrees to pay to Landlord at
Landlord's address set forth in Section 12.01 or such other address as Landlord
may designate from time to time in writing to Tenant, a base annual rental (the
"BASE RENTAL"). Base Rental shall be payable in 12 equal monthly installments
in advance on the first business day of each month during the Initial Term
except that all payments due hereunder for any fractional month of the
commencement or end of this Lease shall be prorated based upon the number of
days in such fractional month during the Term. All Base Rental or any other
sums due hereunder will be paid without notice, demand, abatement, deduction or
setoff except as otherwise set forth herein. Base Rental for the Initial Term
shall equal $182,400.
2.02 BASE RENTAL ADJUSTMENT FOR RENEWAL TERMS. The Base Rental for each Renewal
Term shall be calculated in accordance with the following formula:
Base Rental for the Renewal Term = Base Rental for the Initial Term x
(CPI2/CPI1)
In applying the above formula for rental adjustment, the following
definitions shall prevail:
(a) "CPI" means the monthly indexes of the National Consumer Price
Index for All Urban Consumers (All items: 1982-84 equals 100) issued by the
U.S. Department of Labor, Bureau of Labor Statistics or any successor agency
that shall issue the indexes.
(b) "CPI1" means the CPI as of the commencement date of the Initial
Term.
(c) "CPI2" means the CPI as of the commencement date of the Renewal
Term for which the adjustment of Base Rental is computed.
In the event that (i) the Bureau of Labor Statistics ceases to use the
1982-84 average of 100 as the basis of calculation, or (ii) a substantial
change is made in the number or characters of "market basket" items used in
determining the CPI, or (iii) Landlord and Tenant mutually agree in writing
that the CPI does not accurately reflect the purchasing power of the dollar, or
(iv) the CPI shall be discontinued for any reason, the Bureau shall be
requested to furnish a new index comparable to the CPI together with
information which will make possible the conversion to the new index in
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<PAGE> 101
computing the adjusted rental. If for any reason the Bureau does not furnish
such an index and such information, the parties shall thereafter accept and use
such other index or comparable statistics on the cost of living for the county
in which the Premises is located, as shall be computed and published by an
agency of the United States or by a responsible financial periodical of
recognized authority then to be selected by Landlord (but subject to reasonable
approval by Tenant).
2.03 TENANT'S MAINTENANCE AND REPAIRS. Except as otherwise notified to Tenant
in writing to Landlord prior to the Commencement Date, Landlord hereby
represents and warrants that as of the date hereof, the Improvements and all
structural and non-structural elements thereof (including all electrical,
mechanical, heating, ventilating, air conditioning, plumbing and other systems
serving the Premises) and all entryways, driveways, walkways and parking areas
are free of defects and in good repair and operating condition, normal wear and
tear excepted. From and after the Commencement Date and during the Term, Tenant
shall, at Tenant's sole cost and expense: (i) make non-structural repairs,
replacements and renewals necessary to keep the Premises in good condition,
order and repair as the same are in as of the Commencement Date, reasonable
wear and tear and damage by fire or other casualty or condemnation excepted;
(ii) keep all electrical, mechanical, heating, ventilating and air
conditioning, plumbing and any other systems serving the Premises in good order
and repair; (iii) keep all entryways, driveways, walkways and parking areas on
the Premises in good order and repair, and (iv) with respect only to capital
improvements constructed by Tenant under Section 5.01 below, structural repairs
necessary to keep such capital improvements in good condition, order and
repair, reasonable wear and tear and damage by fire or other casualty or
condemnation excepted. Notwithstanding anything contained herein to the
contrary, replacement of shingles, tar and gravel, membranes or other similar
exterior roofing material, if required, shall be Tenant's responsibility. In
the event that heating, ventilation and air conditioning systems (including
furnaces) must be replaced during the Term and no violation of the
representation in the first sentence of this Section 2.03 has occurred with
respect to such system, then Tenant will be responsible for such replacement
and the associated costs. In the event Tenant shall fail to fulfill its
obligations to repair and maintain the Premises in accordance with this Section
2.03, Landlord, notwithstanding anything herein to the contrary, shall have the
right upon not less than thirty (30) days' prior written notice to Tenant
(except in cases of emergency), to make such repairs and maintain the Premises
at the expense of Tenant, and Tenant shall promptly pay to Landlord the actual
cost thereof.
2.04 LANDLORD'S MAINTENANCE AND REPAIRS. From and after the Commencement Date
and during the Term, Landlord shall, at its own cost and expense, make all
necessary structural repairs, replacements and renewals to the Premises
including, but not limited to, maintaining the foundation, floor slabs,
exterior walls, structural roof members and all other structural supports of
such Improvements in good and sound condition. Landlord shall not, however, be
obligated to make structural repairs to any capital improvements constructed by
Tenant under Section 5.01 which repairs are the responsibility of Tenant under
Section 2.03 above. In the event Landlord shall fail
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to fulfill its obligations to repair and maintain the Premises in accordance
with this Section 2.04, Tenant, notwithstanding anything herein to the
contrary, shall have the right, upon not less than thirty (30) days' prior
written notice to Landlord (except in the case of an emergency), to make such
repair and maintain the Premises at the expense of Landlord, and to deduct the
cost of the same from the Base Rental that shall thereafter become due. In the
event Landlord disputes the amount being offset by Tenant and Landlord prevails
through arbitration pursuant to Section 12.02 hereof, Tenant shall promptly
reimburse Landlord for such amount.
III.
3.01 UTILITIES. Landlord agrees to provide, at its cost, water, electricity and
telephone service connections into the Premises, but Tenant shall pay for all
water, gas, heat, lights, power, telephone, sewer, sprinkler charges and other
utilities and shall furnish all electric light bulbs and tubes. In the event of
a failure by Landlord to provide the service connections specified in this
Section 3.01 which is not caused by a failure of the applicable utility company
to provide actual service or another Force Majeure event as set forth in
Section 12.03(k) ("FAILURE OF SERVICES"), which such Failure of Services is not
cured within five (5) days, Tenant shall have the following rights:
(a) For each day or portion thereof that Failure of Services continues for more
than five (5) days, Tenant will be entitled to an abatement of Base Rental,
beginning with the inception of the sixth (6th) day and terminating on the day
such Failure of Services is completely cured by Landlord having resumed
furnishing the interrupted service.
(b) In the event Failure of Services is not completed cured by Landlord within
thirty (30) days, Tenant will have the option to terminate this Lease and all
of its obligations for the remaining balance of the Term by giving written
notice for such termination to Landlord within five (5) days of the expiration
of such thirty (30) day period.
IV.
4.01 CARE OF THE PREMISES. Tenant shall not commit any waste or damage to any
portion of the Premises, and shall, subject to Sections 2.03 and 2.04, at its
own cost and expense, maintain the Premises in good condition and repair. Upon
termination of this Lease, by lapse of time or otherwise, Tenant shall deliver
up the Premises to Landlord in as good condition as existed on the Commencement
Date, ordinary wear and tear only excepted. Upon such termination of this
Lease, Landlord shall have the right to re-enter and resume possession of the
Premises.
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<PAGE> 103
4.02 LAWS AND REGULATIONS; HAZARDOUS SUBSTANCES.
(a) Tenant shall use its diligent good faith efforts to comply with all laws,
ordinances, orders, rules, regulations and other requirements of governmental
authority pertaining to or governing Tenant's particular use and occupancy of
the Premises, whether now in force or hereafter enacted, and all applicable
federal, state or local laws, regulations, orders, judgments and decrees
regarding health, safety or the environment ("ENVIRONMENTAL LAWS"), including
without limitation the application for and maintenance of all required permits,
the submittal of all notices and reports, proper labeling, training and record
keeping, and timely and appropriate response to any release or other discharge
by Tenant of a substance under Environmental Laws.
(b) Landlord shall use its diligent good faith efforts to comply with all laws,
ordinances, orders, rules, regulations and other requirements of governmental
authority pertaining to or governing Landlord's ownership, maintenance and
repair of the Premises, whether now in force or hereafter enacted, including,
without limitation, the American Disabilities Act and all Environmental Laws,
including without limitation the application for and maintenance of all
required permits, the submittal of all notices and reports, proper labeling,
training and record keeping, and timely and appropriate response to any release
or other discharge by Landlord of a substance under Environmental Laws.
(c) Tenant shall indemnify, protect and hold harmless Landlord and each of its
officers, directors, employees, shareholders and respective subsidiaries from
and against all loss, cost, damage, expense and liability incurred by Landlord
in connection with the presence, emanation, migration, disposal, release or
threatened release of any oil or other petroleum products or hazardous
materials or substances on, within or to or from the Premises as a result of
(i) the operations of Tenant on the Premises after the Commencement Date and
(ii) the activities of third parties affiliated with Tenant or invited on the
Premises by Tenant after the Commencement Date. Landlord represents and
warrants to Tenant that as of the Commencement Date, the Premises do not
contain any oil or other petroleum products or hazardous materials or
substances, the existence of which imposes a requirement under any law or
regulation to remove, remediate, reduce the levels of such substances or
otherwise perform any response, corrective or preventive measure or pay for any
environmental response costs. Landlord shall indemnify, protect and hold
harmless Tenant and each of its officers, directors, employees, shareholders
and respective subsidiaries from and against all loss, cost damage, expense and
liability incurred by Tenant in connection with the presence, emanation,
migration, disposal, release or threatened release of any oil or other
petroleum products or hazardous materials or substances on, within, or to or
from the Premises as a result of (i) any activity or action by any party prior
to the Commencement Date or after the expiration of the Term, except any action
or activity, during the Term, of Tenant, its agents, employees, contractors or
any other party acting by or through or on behalf of Tenant, (ii) the condition
of the Premises prior to the Commencement Date or after the expiration of the
Term, including any future manifestations of such
Page 5 of Annex VI
<PAGE> 104
conditions, except to the extent that any such condition is caused by or
attributable to the activities or the actions of the Tenant, its agents,
employees or contractors or by any other party acting by, through or under
Tenant which are taken during the Term or (iii) the actions or activities of
Landlord. Each party agrees that such party will promptly give written notice
to the other party of any investigation, claim, demand, lawsuit or other action
by any governmental or regulatory agency or private party involving the
Premises and any hazardous substance or environmental law of which such party
has actual notice. Notwithstanding the foregoing, Tenant acknowledges that it
can make no claim against the Landlord for indemnity or for breach of
representation or warranty under this Section 4.02(c) which claim is based upon
actions taken by or activities of the Tenant at the Premises prior to the
Commencement Date unless (i) notice of such claim is given to Landlord in
writing prior to June 30, 2000, or (ii) the Landlord had actual knowledge of
such matter and failed to disclose same, in writing, to Tenant prior to the
Commencement Date.
V.
5.01 ALTERATIONS TO THE PREMISES. Subject to the other provisions of this
Section 5.01, at any time and from time to time during the Term, Tenant may
perform such alteration, renovation, repair, refurbishment, and other work,
including the construction of new improvements (collectively called the
"ALTERATIONS") with regard to any Improvements as Tenant may elect. Any and all
alteration, renovation, repair, refurbishment, construction of new improvements
or other work with regard thereto shall be performed, in accordance with the
following "CONSTRUCTION STANDARDS" herein so referenced:
(i) All such construction or work shall be performed in a good
and workmanlike manner in accordance with good industry practice for
the type of work in question;
(ii) All such construction or work shall be done in compliance
with all applicable building codes, ordinances, and other laws or
regulations having jurisdiction;
(iii) No such construction or work shall be commenced until there
shall have been first obtained all licenses, permits, and
authorizations required by applicable laws;
(iv) Tenant shall have obtained and shall maintain in force and
effect the insurance coverage required in Section 7.01 with respect to
the type of construction or work in question;
(v) After commencement, such construction or work shall be
prosecuted with due diligence to its completion;
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<PAGE> 105
(vi) Tenant shall furnish Landlord with a copy of all plans and
specifications relating to each alteration to the extent that such
plans and specifications have been furnished to Tenant; and
(vii) Any such construction or work which has a cost in excess of
$25,000 shall be subject to the approval of Landlord. Such approval
shall not be unreasonably withheld and if no approval or disapproval
is expressed within 15 days of the receipt of the request and related
plans, the approval of Landlord shall be deemed to have been granted.
5.02 MECHANIC'S LIEN. Tenant shall not permit any mechanic's lien or liens to
be placed upon the Premises during the term hereof caused by or resulting from
any work performed, materials furnished, or obligation incurred by or at the
request of Tenant. If a lien is filed upon the interest of Landlord or Tenant
in the Premises, Tenant shall cause the same to be discharged of record or
bonded within one hundred twenty (120) days after the filing of same. If Tenant
shall fail to discharge such mechanic's lien within such period, then, in
addition to any other right or remedy of Landlord, Landlord may discharge the
same, either by paying the amount claimed to be due, or by procuring the
discharge of such lien by deposit in court or bonding. Any amount paid by
Landlord for any of the aforesaid purposes, or for the satisfaction of any
other lien not caused by Landlord, with interest thereon at the rate
hereinafter provided from the date of payment, shall be paid by Tenant to
Landlord immediately on demand as rent.
5.03 SIGNS. Tenant shall have the right to install signs upon the Premises,
subject to any applicable governmental law, ordinances, restrictive covenants,
regulations and other requirements. Tenant shall remove all such signs by the
termination of this Lease. Such installations and removals shall be made in
such manner as to avoid injury or defacement of the Improvements, and Tenant
shall repair any injury or defacement caused by such installation and/or
removal. Tenant shall not be obligated to remove any signs existing on the
Premises as of the Commencement Date.
VI.
6.01 CONDEMNATION.
(a) If the whole or any substantial part of the Premises should be taken for
any public or quasi-public use under governmental law, ordinance or regulation,
by right of eminent domain or by private purchase in lieu thereof, and the
taking would prevent or materially interfere with the use of the Premises for
the purpose for which they are being used, this Lease shall, at Tenant's
option, terminate and the Base Rental shall be abated during the unexpired
portion of this Lease, effective when the physical taking of said Premises
shall occur.
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<PAGE> 106
(b) If part of the Premises shall be taken for any public or quasi-public use
under any governmental law, ordinance or regulation, by right of eminent domain
or by private purchase in lieu thereof, and this Lease is not terminated as
provided in clause (a) above, this Lease shall not terminate but the Base
Rental payable hereunder during the unexpired portion of this Lease shall be
reduced based on the percentage of the Premises that is not usable.
(c) In the event of any such taking or private purchase in lieu thereof,
Landlord and Tenant shall each be entitled to receive and retain such separate
awards and/or portion of lump sum awards as may be allocated to their
respective interests in any condemnation proceedings.
6.02 CASUALTY.
(a) If the Improvements should be damaged or destroyed by fire, water, tornado,
hurricane, snowstorm or other casualty, Tenant shall give immediate written
notice thereof to Landlord.
(b) If the Improvements should be totally destroyed by fire, water, tornado,
hurricane, snowstorm or other casualty, or if they should be so damaged thereby
that restoration thereof cannot, in Landlord's reasonable judgment, be
completed within one hundred fifty (150) days after the date upon which
Landlord is notified by Tenant of such damage, this Lease shall, at Tenant's
option, terminate and the Base Rental shall be abated during the unexpired
portion of this Lease, effective upon the date of the occurrence of such
damage.
(c) If the Improvements should be damaged by any casualty and this Lease is not
terminated by Tenant pursuant to the foregoing provisions of this Section 6.02,
Landlord shall at its sole cost and expense thereupon proceed with reasonable
diligence to rebuild and repair such Improvements to substantially the
condition in which they existed prior to such damage. Notwithstanding the
previous sentence, Landlord's obligation to restore, rebuild and repair any
casualty during the Term of this Lease shall be limited to the extent of the
insurance proceeds received by Landlord. Landlord shall be entitled to receive
disbursements of insurance proceeds received by Tenant in respect of the
insurance for improvements Tenant is required to maintain hereunder as
restoration progresses for the costs Landlord incurs in connection with such
restoration. If all or a part of the Premises are untenantable, Base Rental
shall be reduced based on the percentage of the Premises that is not usable. In
the event that Landlord should fail to complete such repairs and rebuilding
within one hundred eighty (180) days after the date upon which Landlord is
notified by Tenant of such damage, Tenant may at its option terminate this
Lease by delivering written notice of termination to Landlord as Tenant's
exclusive remedy, whereupon all rights and obligations hereunder shall cease
and terminate.
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<PAGE> 107
VII.
7.01 INSURANCE. Tenant agrees to maintain standard fire and extended coverage
insurance covering the Improvements in an amount not less than 100% of the
replacement costs thereof, insuring against the perils of fire, lightening and
other perils as now or hereafter may be included in "All Risk" insurance
coverage, such coverage and endorsements to be as defined, provided and limited
in the standard bureau forms prescribed by the insurance regulatory authority
for the state in which the Premises are situated for use by insurance companies
admitted in such state for the writing of such insurance on risks located
within such state.
Tenant shall obtain and keep in full force (i) a policy of commercial general
liability and property damage insurance (including, but not limited to,
automobile, personal injury, broad form contractual liability and broad form
property damage), with combined single limits of liability (on an occurrence
basis) of not less than $1,000,000, and (ii) an "all risk" property policy
covering all of Tenant's personal property in, on or about the Premises,
containing an agreed amount endorsement in an amount not less than 100% of the
full replacement cost valuation, with proceeds of such policy to be used by
Tenant for the replacement of such personal property. Tenant shall be named as
the insured under the foregoing policies and Landlord and any mortgagees (whose
names shall have been furnished to Tenant) shall be named as additional
insureds.
All the insurance required to be maintained by Tenant under this Lease shall
(i) be issued by insurance companies authorized to do business in the state in
which the Premises are located, with a financial rating of at least A:XII for
any property insurance and A+ for any liability insurance as rated in the most
recent edition of Best's Insurance Reports, (ii) be issued as a primary policy,
and (iii) contain an endorsement requiring thirty (30) days' written notice
from the insurance company to both parties and to Landlord's lender, if any,
before cancellation or any material change in the coverage, scope, or amount of
any policy. A duplicate original policy, or certificate of the policy with the
actual policy attached shall be deposited with the other party on or before the
Commencement Date, and on the renewal of the policy a certificate of insurance
listing the insurance coverages required hereunder and naming Landlord, and any
mortgagee of Landlord (whose names have been furnished to Tenant), as
applicable, as additional insureds shall be deposited with the other party not
less than seven (7) days before expiration of the term of the policy.
7.02 HOLD HARMLESS.
(a) Tenant releases Landlord from all liability for any injury or damage to
person or property occurring in the Premises, and agrees to protect, defend,
indemnify and hold Landlord harmless from and against all liabilities, claims,
suits, actions and costs (including reasonable attorneys' fees and costs of
suit) arising out of or in connection with any such injury or caused by the
negligence or willful misconduct of Tenant, its partners, agents, servants,
employees or contractors.
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<PAGE> 108
(b) Landlord hereby agrees to protect, defend, indemnify and hold Tenant
harmless from and against all liabilities, claims, suits, actions and costs
(including reasonable attorneys' fees and costs of suit) arising out of or in
connection with any injury or damage to person or property occurring in the
Premises, to the extent that such injury or damage is caused by the negligence
or willful misconduct of Landlord, its partners, agents, servants, employees or
contractors.
7.03 WAIVER OF CLAIMS AND RECOVERY RIGHTS. Anything in this Lease to the
contrary notwithstanding, Landlord and Tenant each, on behalf of themselves and
their respective heirs, successors, legal representatives, assigns and
insurers, hereby (a) waives any and all rights of recovery, claims, actions or
causes of action against the other and its respective officers, directors,
partners, shareholders, agents, servants, employees, guests, licensees or
invitees for any loss or damage that may occur to the Premises or any personal
property of such party therein, by reason of fire, the elements, or any other
cause which is required to be insured against under the terms of the insurance
policies referred to in Section 7.01 hereof, regardless of cause or origin,
including negligence of the other party hereto or its respective officers,
directors, partners, shareholders, agents, servants, employees, guests,
licensees or invitees, and (b) covenants that no insurer shall hold any right
of subrogation against such other party; provided, however, the waiver set
forth in this Section 7.03 shall not apply to any deductibles on insurance
policies carried by Landlord or Tenant or to any coinsurance penalty which
Landlord or Tenant might sustain. If the respective insurer of Landlord and
Tenant does not permit such a waiver without an appropriate endorsement to such
party's insurance policy, then Landlord and Tenant each shall notify its
insurer of the waiver set forth herein and to secure from such insurer an
appropriate endorsement to its respective insurance policy with respect to such
waiver.
7.04 TAXES DEFINED.
(a) Tenant shall be responsible for all Taxes during the Term of the Lease.
"Taxes" means all taxes, assessments, use and occupancy taxes and other charges
by any public authority, including penalties levied for failure by Tenant to
pay any of same in a timely manner, which shall or may during the Term be
assessed, levied, charged, confirmed or imposed by any governmental authority
upon the Premises or any part thereof. "Taxes" shall not include any income
tax, capital levy, estate, succession, inheritance or transfer taxes, or
similar tax of Landlord; any franchise tax imposed upon any owner of the fee of
the Premises; or any income, profits, or revenue tax, assessment, or charge
imposed upon the rent or other benefit received by Landlord under this Lease by
any municipality, county, state, the United States of America, or any other
governmental body.
(b) Tenant may, at its expense, contest the validity or amount of Taxes for
which it is responsible, in which event the payment thereof may be deferred, as
permitted by law, during the pendency of such contest, if diligently
prosecuted. Landlord shall cooperate with Tenant in connection with any such
contest but Landlord shall not be required to spend any sums or incur any
liability in cooperating with Tenant.
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<PAGE> 109
VIII.
8.01 DEFAULT BY TENANT. The occurrence of any one or more of the following
events shall constitute an "EVENT OF DEFAULT" under this Lease:
(a) Tenant shall fail to pay any sum of Base Rental when due, and such failure
shall continue for ten (10) days after written notice to Tenant;
(b) Tenant shall fail in the performance of any of the other covenants or
conditions under this Lease, and such failure shall continue for thirty (30)
days after written notice to Tenant or, if such failure cannot reasonably be
cured within said thirty (30) day period despite Tenant's diligent good faith
efforts, the failure of Tenant to promptly commence its diligent good faith
efforts to cure such failure within said thirty (30) day period and to
thereafter diligently pursue such efforts; or
(c) the interest of Tenant under this Lease shall be levied on under execution
or other legal process; any petition shall be filed by or against Tenant to
declare Tenant a bankrupt or to delay, reduce or modify Tenant's debts or
obligations, or to reorganize or modify Tenant's capital structure; Tenant is
declared insolvent according to law; any assignment of Tenant's property shall
be made for the benefit of creditors; or a receiver or trustee is appointed for
Tenant or its property and such levy, execution, legal process, petition,
declaration, assignment or appointment is not removed or vacated within ninety
(90) days from the date of its creation, service or filing.
8.02 REMEDIES. Upon the occurrence of any Event of Default, at Landlord's
option, Landlord may (without further notice or grace) exercise any one or more
of the following remedies, in addition to all other rights and remedies
provided at law or in equity:
(a) Terminate this Lease and immediately repossess the Premises by forcible
entry and detainer suit or otherwise.
(b) Terminate Tenant's right of possession (but not this Lease) and immediately
repossess the Premises by forcible entry and detainer suit or otherwise,
without thereby releasing Tenant from any liability hereunder and without
terminating this Lease. After regaining possession of the Premises under this
Section 8.02(b), Landlord shall use commercially reasonable efforts to relet
the Premises on such terms and conditions as Landlord in its sole, good faith
judgment deems acceptable, and if the Premises are so relet, Tenant shall
receive credit against the sums otherwise payable to Landlord hereunder only
for the amount of the rentals actually received by Landlord under such new
lease.
Page 11 of Annex VI
<PAGE> 110
8.03 NON-WAIVER. Failure of Landlord to declare any default immediately upon
occurrence thereof, or delay in taking any action in connection therewith,
shall not waive such default, but Landlord shall have the right to declare any
such default at any time and take such action as might be lawful or authorized
hereunder, either in law or in equity.
8.04 HOLDING OVER. If Tenant continues in occupancy of the Premises after
expiration or termination of this Lease without the written consent of
Landlord, Tenant shall pay as rent for the holdover period (pro rated on a
daily basis) 125% of the Base Rental payable immediately prior to the
expiration or termination. No holding over by Tenant after the Term of this
Lease without the written consent of Landlord shall be construed to extend the
term hereof. Any holding over with the written consent of Landlord shall
constitute this a month-to-month tenancy, unless specifically stated otherwise
in such consent. The provisions of this paragraph shall survive the expiration
or termination of this Lease.
IX.
9.01 ASSIGNMENT OR SUBLEASE BY TENANT.
(a) Tenant may assign this Lease or sublet the Premises or any part thereof to
an Affiliate of Tenant without the prior consent of Landlord; provided,
however, that Tenant shall promptly notify Landlord of any such assignment or
subletting, and with respect to any assignment of this Lease, shall deliver a
written assumption in favor of Landlord of the duties, obligations and
liabilities of Tenant hereunder by such Affiliate. "Affiliate" shall mean any
corporation, limited liability company, partnership, sole proprietorship or
other entity controlling, controlled by, or under common control with the
Tenant. The term "control" (including the terms "controlling," "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or the policies
of an entity, whether through the ownership of voting securities, by contract
or otherwise.
(b) Except as provided in Section 9.01(a), Tenant shall not assign this Lease
or sublease all or any portion of the Premises without Landlord's prior written
consent in accordance with this Section 9.01(b) which consent shall not be
unreasonably withheld or delayed. Tenant shall give Landlord at least fifteen
(15) days advanced written notice of a proposed assignment or subletting to an
unaffiliated entity. Landlord shall then have a period of ten (10) days
following receipt of such notice within which to notify Tenant in writing
whether Landlord consents to the proposed assignment or subletting. Failure by
Landlord to respond to Tenant within such ten (10) day period shall be deemed
to be Landlord's approval of such assignment.
9.02 ASSIGNMENT BY LANDLORD. Landlord shall have the right to transfer and
assign its rights and obligations hereunder to any person or entity acquiring
ownership of the Premises, and in such event
Page 12 of Annex VI
<PAGE> 111
and upon such transfer no further liability or obligation shall thereafter
accrue against Landlord hereunder, but Landlord will remain liable for any
accrued and unpaid obligations to Tenant that are not expressly assumed in
writing by the successor Landlord.
X.
10.01 PEACEFUL ENJOYMENT. Landlord covenants that Tenant shall and may
peacefully have, hold and enjoy the Premises, subject to the other terms
hereof, provided that Tenant pays the rental and other sums herein recited to
be paid by Tenant and performs all of Tenant's covenants and agreements herein
contained. It is understood and agreed that this covenant shall be binding upon
Landlord only with respect to breaches occurring during its ownership of the
Landlord's interest hereunder.
XI.
11.01 SUBORDINATION. Tenant covenants and agrees with Landlord that this Lease
shall be subject and subordinate in all respects to any mortgage or deed of
trust or any ground lease which now encumbers or may hereafter encumber the
Premises, and to any advances made on the security thereof and to any and all
increases, renewals, modifications, consolidations, replacements and extensions
thereof, provided that Landlord shall use reasonable efforts to cause the owner
of any such mortgage, deed of trust or ground lease to enter into a written
non-disturbance and attornment agreement with Tenant, in form and content
reasonably satisfactory to Tenant, providing that in the event of foreclosure
or other rights asserted under the applicable mortgage, deed of trust or ground
lease by the holder or any assignee thereof (a) this Lease and all of the
rights of Tenant hereunder shall continue in full force and effect and shall
not be terminated or disturbed except in accordance with the provisions of this
Lease; and (b) Tenant will automatically become the tenant of such ground
lessor or successor in interest without any change in the terms or other
provisions of this Lease. Landlord hereby represents and warrants that, except
for the mortgage more fully described on Exhibit B attached hereto and made
apart hereof, it owns the Premises in fee simple and that the Premises is not
presently subject to any mortgage, deed of trust or ground lease.
11.02 ESTOPPEL CERTIFICATE. Tenant agrees, at any time and from time to time,
upon not less than twenty (20) days prior written request by Landlord, to
execute, acknowledge and deliver to Landlord an estoppel certificate certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that it is in full force and effect as modified, and
stating the modifications), that there have been no defaults thereunder by
Landlord or Tenant (or if there have been defaults, setting forth the nature
thereof), the date to which the Rent and other charges have been paid in
advance, if any, and such other matters as are reasonably requested by
Landlord, it being intended that any such statement delivered pursuant to this
section may be relied upon by any prospective purchaser or lender on all or any
portion of the Landlord's interest herein, or a holder of any mortgage or deed
of trust encumbering the Premises. Tenant's failure to deliver such statement
as provided herein shall constitute an event of default (as that term is
defined elsewhere in this Lease).
Page 13 of Annex VI
<PAGE> 112
11.03 DEFAULT BY LANDLORD. If Landlord shall default in the performance of any
of the terms, covenants, conditions, warranties or agreements of this Lease on
Landlord's part to be performed, and such default has a material adverse effect
on Tenant's use and enjoyment of the Premises, and if such default continues
for thirty (30) days after written notice to Landlord, and to any first lien
mortgagee or ground lessor of Landlord of which Tenant has notice (or, if such
failure cannot reasonably be cured within said thirty (30) day period despite
Landlord's or such mortgagee's or ground lessor's diligent good faith efforts,
the failure of Landlord or such mortgagee or ground lessor to promptly commence
its diligent good faith efforts to cure such failure within said thirty (30)
day period and to thereafter diligently pursue such efforts) Tenant may at its
option, in addition to all other remedies available at law or under this Lease:
(a) cure such default and invoice Landlord for the reasonable costs thereof, in
which event Tenant shall have the right to deduct from the rents payable
hereunder the amount of any such invoice not paid by Landlord within ten (10)
days of its receipt thereof; (b) institute legal proceedings against Landlord
to recover the damages incurred by Tenant on account of such default and/or to
enjoin such default; or (c) terminate this Lease.
XII.
12.01 NOTICES.
(a) Any notice or other communications to Landlord or Tenant required or
permitted to be given under this Lease (and copies of the same to be given to
the parties as below described) must be in writing and shall be effectively
given if delivered to the addresses for Landlord and Tenant set forth below, or
if sent by United States mail, certified or registered, return receipt
requested, to said addresses:
The address for notices to Landlord is:
- ------------------------------------------
- ------------------------------------------
- ------------------------------------------
- ------------------------------------------
Facsimile No. ----------------------------
Page 14 of Annex VI
<PAGE> 113
The address for notices to Tenant is:
- ------------------------------------------
- ------------------------------------------
- ------------------------------------------
- ------------------------------------------
Facsimile No. ----------------------------
(b) Any notice mailed shall be deemed to have been given on the second business
day following the date of deposit of such item in a depository of the United
States Postal Service. Notice effected other than by mail shall be deemed to
have been given at the time of actual delivery. Either party shall have the
right to change its address to which notices shall thereafter be sent by giving
the other written notice thereof.
12.02 ARBITRATION.
Except with respect to disputes involving parties other than the parties to
this Lease, no party to this Lease shall institute a proceeding in any court or
administrative agency to resolve a dispute arising under this Lease before that
party has sought to resolve the dispute through direct negotiation with the
other party, provided that nothing herein shall restrict the Landlord from
instituting a proceeding in any court or administrative agency with respect to
a failure by the Tenant to pay monetary amounts where there is no non-monetary
dispute involved. If the dispute is not resolved within two weeks after a
demand for direct negotiation, the parties shall attempt to resolve the dispute
through mediation. If the parties do not promptly agree on a mediator, the
parties shall request the Association of Attorney Mediators (or equivalent
organization) in the county where the Premises is located to appoint a
mediator. If the mediator is unable to facilitate a settlement of the dispute
within a reasonable period of time, as determined by the mediator, the mediator
shall issue a written statement to the parties to that effect and any
unresolved dispute or controversy arising under or in connection with this
Lease shall be settled exclusively by arbitration, conducted before a panel of
three arbitrators in _______________ [insert city in which property is
located], in accordance with the rules promulgated by the American Arbitration
Association then in effect. Each party shall choose one arbitrator and those
arbitrators shall agree upon the third arbitrator; if they cannot agree upon a
third arbitrator within 20 days, the American Arbitration Association shall
appoint the third arbitrator. A decision by a majority of the arbitration panel
shall be final and binding. Judgment may be entered on the arbitrators' award
in any court having jurisdiction. The costs and expenses, including reasonable
attorneys' fees, of the prevailing party in any dispute arising under this
Lease will be promptly paid by the other party or parties.
Page 15 of Annex VI
<PAGE> 114
12.03 MISCELLANEOUS.
(a) This Lease shall be binding upon and inure to the benefit of the successors
and assigns of Landlord, and shall be binding upon and inure to the benefit of
Tenant, its successors, and, to the extent assignment may be approved by
Landlord hereunder, Tenant's assigns. The pronouns of any gender shall include
the other genders, and either the singular or the plural shall include the
other.
(b) All rights and remedies of Landlord under this Lease shall be cumulative
and none shall exclude any other rights or remedies allowed by law.
(c) This Lease may not be altered, changed or amended, except by an instrument
in writing executed by all parties hereto. The terms and provisions of all
Exhibits described herein and attached hereto are hereby made a part hereof for
all purposes. This Lease constitutes the entire agreement of the parties with
respect to the subject matter hereof, and all prior correspondence, memoranda,
agreements or understandings (written or oral) with respect hereto are merged
into and superseded by this Lease.
(d) If either party defaults in the performance of any of the terms, agreements
or conditions contained in this Lease and the other party places the
enforcement of this Lease, or any part thereof, or the collection of any rental
due or to become due hereunder, or recovery of the possession of the Premises,
in the hands of an attorney who files suit upon the same, and should such
non-defaulting party prevail in such suit, the defaulting party agrees to pay
the other party's reasonable legal fees.
(e) If any term or provision of this Lease, or the application thereof to any
person or circumstance, shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby, and each provision of this Lease shall be valid
and shall be enforceable to the extent permitted by law.
(f) Landlord and Tenant hereby represent and warrant each to the other that
they have not employed any agents, brokers or other such parties in connection
with this Lease, and each agrees that they shall hold the other harmless from
and against any and all claims of all other agents, brokers or other such
parties claiming by, through or under the respective indemnifying party.
(g) This Lease may be executed and delivered in any number of counterparts,
each of which so executed and delivered shall be deemed to be an original and
all of which shall constitute one and the same instrument.
(h) This Lease shall be construed and enforced in accordance with the laws of
the state of which the Premises are located.
Page 16 of Annex VI
<PAGE> 115
(i) If litigation is ever instituted by either party hereto to enforce, or to
seek damages for the breach of, any provision hereof, the prevailing party
therein shall be promptly reimbursed by the other party for all attorneys' fees
reasonably incurred by the prevailing party in connection with such litigation.
(j) It is the intention of Landlord and Tenant to hereby create the
relationship of landlord and tenant, and no other relationship whatsoever is
hereby created. Nothing in this Lease shall be construed to make Landlord and
Tenant partners or joint venturers or to render either party hereto liable for
any obligation of the other.
(k) As used herein "Force Majeure" means the occurrence of any event whereby
Landlord or Tenant shall be delayed or prevented from the performance of any
act required hereunder by reason of acts of God, strikes, lockouts, labor
troubles, failure or refusal of governmental authorities or agencies to timely
issue permits or approvals or conduct reviews or inspections, civil disorder,
restrictive governmental laws or regulations or other cause without fault and
beyond the control of the party obligated (financial inability excepted). If
Tenant or Landlord shall be delayed, hindered, or prevented from performance of
any of its obligations by reason of Force Majeure, the time for performance of
such obligation shall be extended for the period of such delay.
(l) Landlord and Tenant have fully negotiated the provisions of this Lease and,
notwithstanding any rule or principle of law to the contrary, no provision of
the Lease shall be construed in favor of or against either party by virtue of
the authorship or purported authorship thereof.
Page 17 of Annex VI
<PAGE> 116
IN TESTIMONY WHEREOF, the parties hereof have executed this Lease as of the
date first above written.
LANDLORD:
-------------------------------------------
-------------------------------------------
TENANT:
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Page 18 of Annex VI
<PAGE> 1
EXHIBIT 2.15
- -------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
dated as of the 12th day of January, 1999
by and between
RV CENTERS, INC.,
YOUNG'S RV CENTER, INC. a wholly-owned subsidiary of RV Centers, Inc.
and
ROY B. PADGETT
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
RECITALS .........................................................................................................1
1. THE SALE.................................................................................................6
1.1 Agreement to Purchase and Sell..................................................................6
1.2 Purchase Price..................................................................................8
1.3 Prorations and Other Payments...................................................................8
1.4 Assumption of Liabilities.......................................................................9
1.5 Value Assigned to the Assets...................................................................10
2. DELIVERY OF CONSIDERATION...............................................................................10
2.1 Seller's Consideration.........................................................................10
2.2 Seller's Deliveries............................................................................10
3. CLOSING.................................................................................................10
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER............................................................11
4.1 Due Organization...............................................................................11
4.2 Authorization..................................................................................11
4.3 Ownership of the Company.......................................................................11
4.4 No Capital Interests...........................................................................11
4.5 Ownership of the Assets........................................................................11
4.6 Ownership in Other Entities....................................................................12
4.7 Predecessor Status; etc........................................................................12
4.8 Spin-offs......................................................................................12
4.9 Financial Statements...........................................................................12
4.10 Liabilities and Obligations....................................................................13
4.11 Accounts and Notes Receivable..................................................................13
4.12 Permits and Intangibles........................................................................14
4.13 Environmental Matters..........................................................................14
4.14 Personal Property..............................................................................16
4.15 Significant Customers and Suppliers; Material Contracts and Commitments........................16
4.16 Real Property..................................................................................17
4.17 Insurance......................................................................................17
4.18 Compensation; Employment Agreements; Labor Matters.............................................18
4.19 Employee Plans.................................................................................18
4.20 Compliance with ERISA..........................................................................19
4.21 Conformity with Law; Litigation................................................................20
</TABLE>
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<TABLE>
<S> <C> <C>
4.22 Taxes..........................................................................................21
4.23 No Violations; No Consent Required, Etc........................................................21
4.24 Government Contracts...........................................................................22
4.25 Absence of Changes.............................................................................23
4.26 Deposit Accounts; Powers of Attorney...........................................................24
4.27 Validity of Obligations........................................................................25
4.28 Relations with Governments.....................................................................25
4.29 Disclosure.....................................................................................25
4.30 Prohibited Activities..........................................................................26
4.31 No Warranties or Insurance.....................................................................26
4.32 Interest in Customers and Suppliers and Related Party Transactions.............................26
4.33 Registration Statement.........................................................................26
4.34 Inventory......................................................................................26
4.35 Year 2000......................................................................................27
5. REPRESENTATIONS OF RV CENTERS...........................................................................27
5.1 Due Organization...............................................................................27
5.2 Authorization..................................................................................27
5.3 Capital Stock of RV Centers....................................................................28
5.4 Transactions in Capital Stock; Organization Accounting.........................................28
5.5 Subsidiaries...................................................................................28
5.6 No Violations..................................................................................28
5.7 Validity of Obligations........................................................................29
5.8 RV Centers Stock...............................................................................29
5.9 Business; Real Property; Material Agreements...................................................30
5.10 [Intentionally Left Blank].....................................................................30
5.11 Other Agreements...............................................................................30
5.12 Financial Statements...........................................................................30
5.13 Liabilities and Obligations....................................................................31
5.14 Conformity with Law; Litigation................................................................31
5.15 No Side Agreements.............................................................................31
5.16 Relations with Governments.....................................................................31
5.17 Other Agreements...............................................................................31
5.18 Registration Statement.........................................................................32
5.19 Disclosure.....................................................................................32
6. COVENANTS PRIOR TO CLOSING..............................................................................32
6.1 Access and Cooperation; Due Diligence..........................................................32
6.2 Conduct of Business Pending Closing............................................................33
6.3 Prohibited Activities..........................................................................34
6.4 No Shop........................................................................................35
6.5 Employment Agreements..........................................................................35
6.6 Notification of Certain Matters................................................................35
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
6.7 Amendment of Schedules.........................................................................36
6.8 Cooperation in Preparation of Registration Statement...........................................37
6.9 Final Financial Statements.....................................................................37
6.10 Further Assurances.............................................................................37
6.11 Compliance with the Hart-Scott Act.............................................................37
6.12 Transfers of Permits and Intangibles...........................................................38
6.13 Dividends......................................................................................38
6.14 Authorized Capital.............................................................................38
6.15 Employee.......................................................................................38
6.16 Year 2000 Compliance Cost Estimates............................................................38
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER...........................................................39
7.1 Representations and Warranties; Performance of Obligations.....................................39
7.2 No Litigation..................................................................................39
7.3 Opinions.......................................................................................39
7.4 Registration Statement; Minimum Value..........................................................39
7.5 Consents and Approvals.........................................................................40
7.6 Good Standing Certificates.....................................................................40
7.7 No Material Adverse Change.....................................................................40
7.8 Closing of IPO.................................................................................40
7.9 Secretary's Certificate........................................................................40
7.10 Advisory Services Agreements...................................................................40
7.11 Other Founding Companies.......................................................................40
7.12 Management Lock-Up Agreements..................................................................41
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RV CENTERS.......................................................41
8.1 Representations and Warranties; Performance of Obligations.....................................41
8.2 No Litigation..................................................................................41
8.3 No Material Adverse Effect.....................................................................41
8.4 Seller's Release...............................................................................42
8.5 Termination of Related Party Agreements........................................................42
8.6 Opinion of Counsel.............................................................................42
8.7 Consents and Approvals.........................................................................42
8.8 Good Standing Certificates.....................................................................42
8.9 Registration Statement.........................................................................42
8.10 Advisory Services Agreements...................................................................43
8.11 Closing of IPO.................................................................................43
8.12 FIRPTA Certificate.............................................................................43
9. COVENANTS OF RV CENTERS AND THE SELLER AFTER CLOSING....................................................43
9.1 Preparation and Filing of Tax Returns..........................................................43
9.2 Directors......................................................................................44
9.3 Release From Guarantees; Repayment of Certain Obligations......................................44
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C>
9.4 Access to Records..............................................................................44
9.5 Use of Name....................................................................................44
10. INDEMNIFICATION.........................................................................................44
10.1 Indemnification by the Seller..................................................................44
10.2 Indemnification by RV Centers..................................................................46
10.3 Third Person Claims............................................................................46
10.4 Exclusive Remedy...............................................................................47
10.5 Limitations on Indemnification.................................................................48
10.6 Tax Indemnification by the Seller..............................................................49
10.7 Bulk Sales Compliance..........................................................................49
11. TERMINATION OF AGREEMENT................................................................................49
11.1 Termination....................................................................................49
11.2 Liabilities in Event of Termination............................................................50
12. NONCOMPETITION..........................................................................................50
12.1 Prohibited Activities..........................................................................50
12.2 Damages........................................................................................51
12.3 Reasonable Restraint...........................................................................51
12.4 Severability; Reformation......................................................................51
12.5 Independent Covenant...........................................................................51
12.6 Materiality....................................................................................51
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................52
13.1 The Seller.....................................................................................52
13.2 RV Centers.....................................................................................52
13.3 Damages........................................................................................53
13.4 Survival.......................................................................................53
14. TRANSFER RESTRICTIONS...................................................................................53
14.1 Transfer Restrictions..........................................................................53
15. FEDERAL SECURITIES ACT REPRESENTATIONS..................................................................54
15.1 Compliance with Law............................................................................54
15.2 Economic Risk; Sophistication..................................................................55
16. REGISTRATION RIGHTS.....................................................................................55
16.1 Piggyback Registration Rights..................................................................55
16.2 Registration Procedures........................................................................56
16.3 Indemnification................................................................................57
16.4 Underwriting Agreement.........................................................................58
16.5 Rule 144 Reporting.............................................................................58
</TABLE>
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<TABLE>
<S> <C> <C>
16.6 Availability of Rule 144.......................................................................58
17. GENERAL.................................................................................................59
17.1 Cooperation....................................................................................59
17.2 Successors and Assigns.........................................................................59
17.3 Entire Agreement...............................................................................59
17.4 Counterparts...................................................................................59
17.5 Brokers and Agents.............................................................................59
17.6 Expenses.......................................................................................60
17.7 Notices........................................................................................60
17.8 Governing Law..................................................................................61
17.9 Exercise of Rights and Remedies................................................................61
17.10 Time...........................................................................................61
17.11 Reformation and Severability...................................................................61
17.12 Remedies Cumulative............................................................................61
17.13 Captions.......................................................................................61
17.14 Amendments and Waivers.........................................................................61
17.15 Dispute Resolution.............................................................................62
17.16 References, Gender, Number.....................................................................62
17.17 Schedules and Annexes..........................................................................62
</TABLE>
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<PAGE> 7
ANNEXES
Annex I - Consideration to Be Paid to the Seller
Annex II - Certificate of Incorporation and By-Laws of
RV Centers
Annex III - Form of Opinion of Counsel to RV Centers
Annex IV - Form of Opinion of Counsel to the Seller
Annex V - Form of Founder Advisory Agreement
SCHEDULES
4.1 Due Organization
4.7 Predecessor Status; etc
4.8 Spin-offs
4.9 Financial Statements
4.10(a) Liabilities and Obligations
4.10(b) Trade Account Payables etc. and Copies of Loan Agreements
4.11 Accounts and Notes Receivable
4.12 Permits and Intangibles
4.13 Environmental Matters
4.14 Personal Property
4.15(a) Significant Customers and Suppliers
4.15(b) Material Contracts and Commitments
4.16 Real Property
4.17 Insurance
4.18 Compensation; Employment Agreements; Labor Matters
4.19 Employee Plans
4.20 Compliance with ERISA
4.21 Conformity with Law; Litigation
4.22 Taxes
4.23(a) Defaults
4.23(b) Violations or Defaults Arising From this Agreement
4.23(c) Notices Required by Material Documents
4.23(e) Restrictions Imposed by Material Documents
4.24 Government Contracts
4.25 Absence of Changes
4.26 Deposit Accounts; Powers of Attorney
4.30 Prohibited Activities
4.31 No Warranties or Insurance
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<PAGE> 8
4.32 Interest in Customers and Suppliers and Related Party Transactions
4.34 Inventory in Interim Financial Statements
4.35 Year 2000
5.2 Authorization
5.3 Authorized Capital Stock of RV Centers
6.2 Conduct of Business Pending Closing
6.3 Prohibited Activities
6.5 Agreements
8.6 Termination of Related Party Agreements
8.10 Employment Agreements
9.3 Release From Guarantees; Repayment of Certain Obligations
15.2 Non-accredited Investors
17.5 Brokers and Agents
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<PAGE> 9
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of the 12th
day of January, 1999, by and between RV Centers, Inc., a Delaware corporation
("RV Centers"), Young's RV Center, Inc., a California corporation and wholly
owned subsidiary of RV Centers (the "Buyer") and Roy B. Padgett (the "Seller").
RECITALS
WHEREAS, RV Centers is engaged in the business of operating
recreational vehicle dealerships;
WHEREAS, the Seller is engaged, through a sole proprietorship d/b/a
Young's RV Center, in the business of operating a recreational vehicle
dealership located in the State of California (the "Business");
WHEREAS, the Seller desires to sell to the Buyer all of the Assets (as
defined below) used by or useful to the Seller in the conduct of the Business,
and the Buyer desires to purchase the Assets, upon the terms and conditions
hereinafter set forth;
WHEREAS, RV Centers is entering into other separate agreements (the
"Other Agreements") with each of the Other Founding Companies (as defined
herein) and their respective stockholders in order to acquire the capital stock
of additional recreational vehicle dealership companies;
WHEREAS, this Agreement and the Other Agreements constitute the "RV
Centers Plan of Organization;"
WHEREAS, the Seller, RV Centers and the stockholders of each of the
Other Founding Companies that are parties to the Other Agreements have approved
and adopted the RV Centers Plan of Organization as an integrated plan pursuant
to which the Seller and the stockholders of each of the Other Founding Companies
will transfer the assets and/or capital stock of each of the Founding Companies
(as the case may be) to RV Centers or its Affiliates and the Seller and the
stockholders of each of the Founding Companies will acquire shares of RV Centers
Stock (as defined herein);
WHEREAS, the Seller has approved this Agreement as part of the RV
Centers Plan of Organization in order to transfer the Assets to the Buyer; and
WHEREAS, unless the context otherwise requires, capitalized terms used
in this Agreement or in any schedule attached hereto and not otherwise defined
shall have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
<PAGE> 10
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the Company and any member of a Relevant Group.
"Affiliate" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"Assets" has the meaning set forth in Section 1.1.
"Balance Sheet Date" means June 30, 1998.
"Business" has the meaning set forth in the recitals of this Agreement
"Buyer" has the meaning set forth in the first paragraph of this
Agreement.
"Charter" means the certificate of incorporation or articles of
incorporation of the subject corporation, as the case may be.
"Charter Documents" has the meaning set forth in Section 4.1.
"Closing" has the meaning set forth in Section 3.
"Closing Date" has the meaning set forth in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the sole proprietorship of the Seller which is doing
business as Young's RV Center and owns and operates the Assets and the Business.
"Consummation Date" has the meaning set forth in Section 3.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Draft Registration Statement" means the draft of the Registration
Statement as included in the Private Placement Memorandum for RV Centers dated
January 5, 1999, and any corrections thereto and supplemental information
delivered by RV Centers to the Seller prior to the time this Agreement is
delivered by the Seller to RV Centers and the Buyer.
"Effective Time" means the effective time of the consummation of the
purchase and sale of the Assets, which shall occur on the Consummation Date.
"Environmental Law" has the meaning set forth in Section 4.13(c).
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" has the meaning set forth in Section l.1(c).
"Expiration Date" has the meaning set forth in Section 4.
"Founding Companies" means: Ace Fogdall, Inc., an Iowa corporation,
American RV Centers, Inc., a Mississippi corporation, American RV Centers, Inc.,
a Tennessee corporation, Casey Motors, Inc., a Colorado corporation, County Line
Select Cars, Inc., a Florida corporation, Dusty's Camper World of Bartow, Inc.,
a Florida corporation, Emerald Coast RV Center, Inc., a Florida corporation,
Growth Ventures, Inc., a Texas corporation, Hall Enterprises, Inc., a Kentucky
corporation, Little Valley Auto & RV Sales, Inc., a West Virginia corporation,
RVs Northwest, Inc., a Washington corporation, Saddleback Recreational Vehicles,
Inc., a California corporation, Scott Motor Coach Sales, Inc., a New Jersey
corporation, Stoltzfus Trailer Sales, Inc., a Pennsylvania corporation, and Roy
B. Padgett d/b/a Young's RV Center, a sole proprietorship operating in
California.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 4.13(d).
"Information Technology" has the meaning set forth in Section 4.35.
"IPO" means the initial public offering of RV Centers Stock pursuant to
the Registration Statement.
"known," "knowledge" or "best knowledge," when used in reference to a
statement regarding the existence or absence of facts in this Agreement, is
intended by the parties to mean that the only information to be attributed to
such person is information actually known to (a) the person in the case of an
individual or (b) in the case of a corporation or other entity, an officer,
director or member. With respect to the "knowledge" of the Seller, such term is
also intended to mean the knowledge of the Seller provided that Seller has made
inquiry of the management, officers, if any, and employees of the Company and
the Business.
"Lien" means any lien, pledge, mortgage, right of first refusal,
conditional sales contract, charge, restriction, security interest, encumbrance,
or other claim.
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"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity (or business and operations with respect to a sole
proprietorship) and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity (or business and operations with respect to a sole
proprietorship) and its Subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 4.23(a).
"Minimum Value" has the meaning set forth in Annex I.
"Other Agreements" has the meaning set forth in the recitals of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Permitted Encumbrances" means (a) Liens for current property Taxes not
yet due and (b) Liens listed or described in the disclosure schedules attached
to the Agreement.
"Person" means an individual, partnership, joint venture, corporation,
limited liability company, sole proprietorship, bank, trust, unincorporated
organization or other entity.
"Plans" has the meaning set forth in Section 4.19.
"Pricing" means the date of determination by RV Centers and the
Underwriters of the public offering price of the shares of RV Centers Stock in
the IPO.
"Qualified Plans" has the meaning set forth in Section 4.20.
"RV Centers" has the meaning set forth in the first paragraph of this
Agreement.
"RV Centers Charter Documents" has the meaning set forth in Section
5.1.
"RV Centers Documents" has the meaning set forth in Section 5.6.
"RV Centers Plan of Organization" has the meaning set forth in the
recitals of this Agreement.
"RV Centers Stock" means the common stock, par value $.01 per share, of
RV Centers.
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"Registration Statement" means that certain registration statement on
Form S-1 to be filed with the SEC covering the shares of RV Centers Stock to be
issued in the IPO, including the prospectus and all amendments and supplements
thereto.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto (as amended or
supplemented pursuant to Section 6.7), which shall reference the relevant
sections of this Agreement, on which parties hereto disclose information as part
of their respective representations, warranties and covenants.
"SEC" means the United States Securities and Exchange Commission.
"Seller" has the meaning set forth in the first paragraph of the
Agreement.
"State of Incorporation" means, as it relates to a referenced
corporation, the state of incorporation for such corporation.
"Subsidiaries" means with respect to a Person, any corporation or other
entity in which such Person owns a 50% or greater ownership interest.
"Tax" or "Taxes" means all Federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, payroll, excise, property, deed, stamp,
alternative or add-on minimum, or other taxes, assessments, duties, fees, levies
or other governmental charges, whether disputed or not, together with any
interest, penalties, additions to tax or additional amounts with respect
thereto.
"Underwriters" means the prospective underwriters identified in the
Registration Statement and any additional or substitute underwriter appointed by
RV Centers as identified in writing to the Seller.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
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1. THE SALE
1.1 AGREEMENT TO PURCHASE AND SELL. (a) Subject to the terms and
conditions of this Agreement, the Company and the Seller agree to sell, convey,
transfer, assign and deliver to the Buyer, and the Buyer agrees to purchase from
the Company and the Seller, all of the Company's and the Seller's right, title
and interest in and to all assets, rights, franchises and properties used or
useful in the operation of the Business or otherwise relating thereto, whether
now or hereafter existing or acquired, on the Closing Date (which assets,
rights, franchises and properties are herein collectively referred to as the
"Assets" and individually referred to as an "Asset"), free and clear of all
Liens other than Permitted Encumbrances. The Assets shall include, without
limitation, the Assets described in Section 1.1(b); provided, however, that the
Assets shall not include any of the Excluded Assets.
(b) The Assets shall include, without limitation, the following:
(i) Leased Property. The leasehold estates on which the
Business or any part thereof is conducted, including the leasehold
estates created and/or otherwise evidenced by, or described in, the
leases described in Schedule 4.16 hereto (the "Leases") and including
all tenements, hereditaments, easements, rights-of-way and rights of
ingress or egress pertaining thereto (collectively, the "Leased
Property").
(ii) Fixtures and Improvements. All estates, rights, titles
and interests in and to all structures, fixtures, construction in
progress, improvements, betterments, installations and additions
constructed, erected or located on or attached or affixed to the Leased
Property (collectively, the "Fixtures and Improvements").
(iii) Equipment. All the furniture, fixtures, equipment,
machinery, apparatus, tools, dies, appliances, vehicles, implements,
spare parts, supplies, inventory, vehicles and all other tangible
personal property of every kind and description located either on the
Leased Property or elsewhere insofar as any of the foregoing relates to
the Business (collectively, the "Equipment"). The Equipment includes,
but is not limited to, all of the items listed in Schedule 4.14 hereto.
(iv) Permits. To the extent assignable, all right, title and
interest of the Company and Seller in, to and under all Licenses
relating to the Business or all or any of the Assets, including those
listed in Schedule 4.12 hereto.
(v) Intellectual Property. All right, title and interest of
the Company and Seller in, to and under all (1) trademarks, technology,
know-how, data, copyrights, trade names, service marks, licenses, trade
secrets, software programs, copyrights, patents, patent applications,
and other intellectual property (collectively, the "Intellectual
Property"), (2) the right to recover for infringement of any
Intellectual Property, and (3) all goodwill associated
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with the Business in connection with which any of the Intellectual
Property is used (collectively, the "Intangible Assets").
(vi) Material Contracts. All rights under operating leases,
orders and contracts for products or services and other contracts and
agreements described in Schedule 4.15(b) hereto (such scheduled leases,
contracts and other agreements, and all rights (including, without
limitation, rights of refund, rebate and offset), privileges, deposits,
claims, causes of action and options relating or pertaining thereto or
any proceeds thereof.
(vii) Cash and Bank Accounts. All depository accounts
described in Schedule 4.26 hereto used in the Business and the cash
therein.
(viii) Books and Records. All books, records, papers and
instruments of whatever nature and wherever located that relate to the
Business or the Assets or which are necessary or appropriate in order
for RV Centers to conduct the Business in the manner in which it is
presently being conducted, including, without limitation (to the extent
the same exist), accounting and financial records, personnel and labor
relations records, sales and property tax records and returns, sales
records, customer lists and other customer data (including credit data)
and the supplier list and other supplier data relating to the purchase
of utilities and other supplies used in connection with the Business.
(ix) Prepaid Expenses and Current Assets. All prepaid rentals,
other prepaid expenses, bonds, deposits and financial assurance
requirements, and other current assets relating to any of the Assets or
the Business.
(x) Insurance Proceeds, Etc. All insurance proceeds and
insurance claims of the Company and Seller relating to all or any part
of the Assets or the Business (including rebates of insurance premiums)
and, to the extent transferable, the benefit of and the right to
enforce the covenants and warranties, if any, that the Company or the
Seller is entitled to enforce with respect to the Assets against the
Company's or the Seller's predecessors in title to the Assets.
(xi) Telephone Numbers; Computer Sites. All telephone numbers,
E-Mail and Web Site addresses that are used in the Business.
(xii) Accounts. All accounts receivable with respect to the
Business and all other rights of the Company to payment for goods sold
or leased or for services rendered, including without limitation those
which are not evidenced by instruments or chattel paper, whether or not
they have been earned by performance or have been written of or
reserved against as a bad debt or doubtful account in any Financial
Statements; together with all instruments and all documents of title
representing any of the foregoing, all rights in any merchandise or
goods which any of the same represent, and all rights, title, security
and guaranties in favor of the Company with respect to any of the
foregoing.
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(xiii) Name. All rights to use the name "Young's RV Center".
(xiv) Goodwill. The goodwill and going concern value of the
Business.
(xv) Other Intangibles. All rights, title and interest of the
Company and the Seller in, to and under all rights, privileges, claims,
causes of action, and options relating or pertaining to the Business or
the above-referenced assets.
(xvi) Other Property. All other or additional privileges,
rights, interests, properties and assets of the Company or Seller of
every kind and description and wherever located that are used or
intended for use in connection with, or that are necessary to the
continued conduct of, the Business as presently being conducted.
(c) "Assets" shall not include any of the assets (the "Excluded
Assets") of the Company.
1.2 PURCHASE PRICE. The purchase price (the "Purchase Price") payable
to the Seller for the Assets shall be the cash amount and shares of RV Centers
stock referenced in Section 2.1 below.
1.3 PRORATIONS AND OTHER PAYMENTS. Operation of the Business until 8:00
a.m. (Pacific time) on the Closing Date shall be for the account of the Seller,
and thereafter for the account of the Buyer. Those items of revenue and expense
of the Business and other items hereinafter described shall be prorated and
adjusted between the Seller and the Buyer as of the Closing Date as follows:
(a) General Adjustment. Real estate taxes, personal property taxes,
lease payments and rents and any other receipts and expenses attributable to any
lease by the Company as lessee of the Leased Property, and other operating
income and expenses relating to the Leased Property, shall be prorated as of the
Closing Date between the Company and the Buyer. All business, license,
occupation, sales, use, withholding or similar taxes, or any other taxes of any
kind (other than real estate and personal property taxes which shall be prorated
as hereinbefore provided) relating to the Business or the Assets and
attributable to the period prior to the Closing Date shall be paid by the
Company, and all such taxes attributable to the period on and after the Closing
Date shall be paid by the Buyer. Payment by the Company of any obligations under
any contracts the benefit of which payment relates in whole or part to the
period on and after the Closing Date shall be adjusted between the Company and
the Buyer such that the Company shall receive credit or be reimbursed by the
Buyer for that portion of any obligation paid by the Company, the benefit of
which relates to the period on and after the Closing Date. Prepayments received
by the Company on any contracts and other deposits which the Company received
prior to the Closing Date for periods on and after the Closing Date shall
(except as otherwise expressly provided in this Agreement) be paid over and
delivered by the Company to the Buyer.
(b) Utilities. The Buyer shall make appropriate arrangements for
transfer of all necessary utility and other services in its own name to be
effective as of the Closing Date. In lieu of prorating power, gas and water
bills, the appropriate utilities will be requested to take meter readings as
close
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to the Closing Date as possible, and to bill the Company for service prior to
such readings and to bill the Buyer for service thereafter. The readings may
occur before or after the Closing Date. With respect to telephone services, upon
receiving a copy of the next billing for telephone service following Closing,
the Company will either pay directly or reimburse the Buyer within five (5) days
after receipt thereof for those charges attributable to calls made before the
Closing Date. General monthly charges reflected by such billing for telephone
service will be prorated on the basis of the number of days the Company owned
the Leased Property during the period covered by the billing.
(c) Implementation of Prorations and Other Payments. Except for those
subsections in this Section 1.2 which provide for direct payment or credit or
earlier settlement and payment between the parties, within five (5) working days
following the Closing Date, the Seller and the Buyer shall undertake in good
faith mutually to agree upon and execute and deliver to each other a closing
statement setting forth the determination of the items to be prorated and
accounted for hereunder, and the net amount due, if any, to either the Seller or
the Buyer, as the case may be, shall be paid within two (2) business days
following the receipt of the final closing statement by certified or bank
cashier's check payable to the order of the party entitled thereto. If the
parties are unable within said five (5) day period to agree upon the appropriate
proration of or payment due for an item of revenue or expense or other item
pursuant to this Section 1.2, then the parties shall employ the Houston, Texas
office of Ernst & Young LLP, or such other nationally recognized accounting firm
as may be selected by the parties, as independent certified public accountants
("Accountant"), to determine the amount of the proration or payment as of the
Closing Date consistent with the provisions of this Agreement. Accountant shall
make such determination as promptly as possible, and in no event later than
forty-five (45) days following such employment. The amount of the proration or
payment as of Closing as determined by Accountant shall be final and binding
upon the parties, each of whom hereby consents to the procedure herein set
forth. The Accountant's fees and expenses shall be evenly divided between the
parties.
1.4 ASSUMPTION OF LIABILITIES. (a) Upon Closing, the Buyer shall assume
the obligations of the Company to perform under the Material Documents and the
Leases to the extent such rights and obligations have not been performed on the
Closing Date and are not then in default and accounts payable and other
obligations with respect to the Business as may be set forth in an Assumption
Agreement to be entered into between Seller and Buyer at Closing.
(b) Except as explicitly provided in Section 1.4(a), the
Buyer does not assume or agree to pay, perform or discharge, and shall not be
responsible for, any other liabilities or obligations of the Company or Seller,
whether, known or unknown, asserted or unasserted, accrued, absolute, contingent
or otherwise, including, without limitation, (i) any pending litigation matters,
including without limitation, those referenced in Schedule 4.21; (ii) any claims
under Environmental Laws; (iii) any obligations or liabilities relating to the
Excluded Assets; and (iv) any Taxes imposed by any governmental authority on the
Company or Seller, with respect to the Business or the Company's operations,
activities or this sale.
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1.5 VALUE ASSIGNED TO THE ASSETS. On or before the Closing Date, the
Buyer and the Seller shall agree on the proportion of the consideration to be
allocated to each of the Assets purchased pursuant to this Agreement as shall
have been proposed by the Buyer and reasonably approved by the Seller, and the
Buyer and the Seller agree that they shall not thereafter take any position or
action inconsistent with such allocation in the filing of any Federal income tax
returns.
2. DELIVERY OF CONSIDERATION
2.1 SELLER'S CONSIDERATION. On the Consummation Date and upon the
delivery of the documents listed in Section 2.2 to the Buyer and RV Centers, the
Seller shall receive from RV Centers the respective number of shares of RV
Centers Stock and the amount of cash described on Annex I hereto, which shall be
payable by certified check or wire transfer.
2.2 SELLER'S DELIVERIES. The Company and Seller shall deliver at the
Closing:
(i) an executed Assignment and Bill of Sale for the Assets in
form satisfactory to RV Centers and the Buyer together with such other
or further documents or instruments of transfer for the Assets as RV
Centers and the Buyer may reasonably request or require in order to
complete the sale, transfer and delivery of the Assets to, and vest
title to the Assets in, the Buyer; and
(ii) other documents and instruments as will be necessary or
reasonably requested by RV Centers or the Buyer to effect the
transactions contemplated by this Agreement.
Simultaneously with such deliveries, Seller will take such
steps as are necessary to put the Buyer in actual possession and control of the
Assets.
3. CLOSING
At or prior to the Pricing and subject to the satisfaction or waiver of
the conditions in Sections 7 and 8, the parties shall take all actions necessary
to effect the delivery referred to in Section 2 hereof; provided, that such
actions shall not include the actual completion of the purchase and sale of the
Assets or the delivery of the RV Centers Stock and cash referred to in Section
2.1 hereof, each of which actions shall only be taken upon the Consummation Date
as herein provided. The delivery of the conveyance documents necessary to effect
the transfer of the Assets, which shall occur at or prior to the Pricing (the
"Closing"), shall take place on the closing date (the "Closing Date") at the
offices of Andrews & Kurth L.L.P., 600 Travis, Suite 4200, Houston, Texas 77002.
All of the documents conveying title to the Assets shall be delivered at the
Closing to Andrews & Kurth L.L.P., to be held in trust until the Consummation
Date, and shall be returned immediately upon any termination of this Agreement
prior to the Consummation Date. Within 20 days after Pricing (x) all
transactions contemplated by this Agreement, including the delivery of shares
and cash which the Seller shall be entitled to receive pursuant to Annex I
hereof, shall be completed, and
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(y) the closing with respect to the IPO shall occur and be completed. The date
on which the actions described in the preceding clauses (x) and (y) occurs shall
be referred to as the "Consummation Date." During the period from the Closing
Date to the Consummation Date, this Agreement may only be terminated by the
Company if the underwriting agreement in respect of the IPO is terminated
pursuant to the terms of such underwriting agreement. This Agreement shall in
any event terminate if the Consummation Date does not occur within 20 days of
the Pricing or the Closing Date, whichever occurs first. Time is of the essence
with respect to the performance hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, the Seller, represents and warrants that
all of the following representations and warranties in this Section 4 are true
at the date of this Agreement, and that such representations and warranties
shall survive the Consummation Date until June 30, 2000 (the "Expiration Date"),
except that the warranties and representations set forth in Sections 4.5 and
4.22 hereof shall survive until such time as the applicable limitations period
has run, which shall be deemed to be the Expiration Date for Sections 4.5 and
4.22.
4.1 DUE ORGANIZATION. The Company is a sole proprietorship under the
laws of the State of California. The Company has the requisite power and
authority to own and operate the Assets and carry on the Business as it is now
being conducted. The Company is duly qualified or authorized to do business and
is in good standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification or
authorization necessary except where the failure to be so qualified or
authorized would not have a Material Adverse Effect on the Assets or the
Business. Schedule 4.1 sets forth a list of all states in which the Company is
authorized or qualified to do business.
4.2 AUTHORIZATION. (i) The Seller has the authority to enter into and
bind himself to the terms of this Agreement and (ii) the Seller has the full
legal right, power and authority to enter into this Agreement and consummate the
transactions contemplated herein.
4.3 OWNERSHIP OF THE COMPANY. Seller owns 100% of the ownership
interests in the Business and in the Company as a sole proprietorship.
4.4 NO CAPITAL INTERESTS. No option, warrant, call, conversion right or
commitment of any kind exists which obligates the Seller to incorporate the
Company or to issue any equity or ownership interests in the Company or the
Business.
4.5 OWNERSHIP OF THE ASSETS. The Company is and at Closing the Company
will be the true and lawful owner of the Assets. No other Person will have on
the Closing Date any direct or indirect interest in any of the Assets. All
tangible property constituting part of the Assets is in good operating condition
and repair, subject to reasonable and ordinary wear and tear, and is fully
usable for its intended purpose. Upon execution and delivery to the Buyer of the
documents referenced in Section 2.2 above, the Buyer will acquire good, complete
and valid ownership of the Assets, free and
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clear of all Liens except for Permitted Encumbrances. The Assets constitute all
of the property and other assets necessary to conduct the Business as it is
presently being conducted by the Company.
4.6 OWNERSHIP IN OTHER ENTITIES. Neither the Company nor Seller
presently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is the Company
or Seller, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity, in each case involving or relating to
the Business.
4.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 4.7 is a listing of
all predecessor companies, if any, of the Company, including the names of any
entities acquired by the Company (by stock purchase, merger or otherwise) or
owned by the Company or from whom the Company previously acquired assets which
are material to the Business.
4.8 SPIN-OFFS. Except as set forth on Schedule 4.8, there has not been
any sale, spin-off or split-up by the Seller of the Company of material assets
involved in or relating to the Business since January 1, 1995.
4.9 FINANCIAL STATEMENTS. Copies of the following financial statements
are attached hereto as Schedule 4.9:
(i) the balance sheets of the Company as of December 31, 1996
and 1997 and the related statements of operations, owner's equity and
cash flows for the two-year period ended December 31, 1997, together
with the related notes and schedules (such balance sheets, the related
statements of operations, owner's equity and cash flows and the related
notes and schedules are referred to herein as the "Year-end Financial
Statements"); and
(ii) the balance sheet of the Company as of the Balance Sheet
Date and the related statements of operations, owner's equity and cash
flows for the six-month period ended June 30, 1998 and on the Balance
Sheet Date, together with the related notes and schedules (such balance
sheets, the related statements of operations, owner's equity and cash
flows and the related notes and schedules are referred to herein as the
"Interim Financial Statements").
(iii) The Year-end Financial Statements and the Interim
Financial Statements are collectively referred to herein as the
"Financial Statements". The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis and fairly present
in all material respects the financial position of the Company as of
the dates thereof and the results of its operations and changes in
financial position for the periods then ended. The Company's books of
account have been kept accurately in all material respects, the
transactions entered therein represent bona fide transactions, and the
revenues, expenses, assets and liabilities of the Company have been
properly recorded in such books in all material respects.
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4.10 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule
4.10(a), as of the Balance Sheet Date, there are no liabilities or obligations
relating to the Assets or the Business of any kind, character or description,
whether accrued, absolute, secured or unsecured, contingent or otherwise, which
are not reflected in the Company Interim Financial Statements at the Balance
Sheet Date. In addition, except as set forth on Schedule 4.10(a), since the
Balance Sheet Date, the Company has not incurred any material liabilities or
obligations relating to or affecting the Assets or Business of any kind,
character or description whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business and consistent with past operating practices. For each contingent
liability or other liability for which the amount is not fixed or is contested,
the Seller has included on Schedule 4.10(a) the following information:
(i) a summary description of the liability together with the
following:
(A) copies of the principal documentation in the
possession of the Seller or the Company or
its officers, management, or key employees
relating thereto;
(B) amounts claimed and any other action or
relief sought; and
(C) name of claimant and all other parties to
the claim, suit or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending; and
(iii) the date such claim, suit or proceeding was instituted.
Schedule 4.10(b) sets forth an accurate list of all trade
accounts payable, accrued liabilities, indebtedness and other liabilities of the
Company as reflected in the Company Interim Financial Statements as of the
Balance Sheet Date. Schedule 4.10(b) also includes copies of all loan
agreements, floor plan financing agreements, warranty, indemnity or guarantee
agreements, bonds, mortgages, pledges or other security agreements relating to
the Business to which the Company is a party or by which its properties may be
bound.
4.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 4.11 sets forth an
accurate list of the accounts and notes receivable of the Company, as of the
Balance Sheet Date, including any such amounts which are not reflected in the
balance sheet as of the Balance Sheet Date, and including all receivables from
and advances to employees, which are identified as such. Schedule 4.11 also sets
forth an accurate aging of all accounts and notes receivable as of the Balance
Sheet Date showing amounts due in 30-day aging categories. Except to the extent
reflected on Schedule 4.11, such accounts, notes and other receivables arose in
connection with bona fide transactions, the reserves reflected in the balance
sheet as of the Balance Sheet Date are adequate and such accounts, notes and
other receivables are, subject to the stated reserves, collectible.
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4.12 PERMITS AND INTANGIBLES. The Company holds all licenses,
franchises, permits and other governmental authorizations ("Licenses") necessary
to conduct the Business, and the Seller has delivered to RV Centers a list that
is accurate and summary description (which is set forth on Schedule 4.12) of all
such Licenses, including any trademarks, trade names, patents, patent
applications and copyrights owned or held by the Company or any of its employees
(including interests in software or other technology systems, programs and
intellectual property) the absence of which would have a Material Adverse Effect
on the Business. Except as set forth on Schedule 4.12, the Licenses and other
rights listed on Schedule 4.12 are valid, held by the Company and the Company
has not received any notice that any Person intends to cancel, terminate or not
renew any such License or other right. Except as set forth on Schedule 4.12, the
Company has conducted and is conducting the Business in compliance with the
requirements, standards, criteria and conditions set forth in the Licenses and
other rights listed on Schedule 4.12 and is not in violation of any of the
foregoing. Except as specifically provided in Schedule 4.12, the consummation by
the Company of the transactions contemplated in this Agreement will not result
in a default under or a breach or violation of, or adversely affect the rights
and benefits afforded by, any such Licenses or other rights.
4.13 ENVIRONMENTAL MATTERS. (a) Except as specifically set forth in
Schedule 4.13 attached hereto, (i) the Company has conducted and is conducting
the Business in compliance with all applicable Environmental Laws, including,
without limitation, having all environmental permits, licenses and other
approvals and authorizations required by Environmental Laws for the operation of
the Business as presently conducted, (ii) none of the properties now or
previously owned or occupied by the Company and used in the Business contain any
Hazardous Substance, the existence of which imposes a requirement under
Environmental Laws to remove, remediate, reduce the levels of Hazardous
Substances to levels below regulatory action levels, or otherwise perform any
response, corrective or preventive measure or pay for any environmental response
costs ("Environmental Response Measures"), (iii) the Company has not received
any written notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that the Company may be in violation of, or liable for any Environmental
Response Measures under, any Environmental Law in connection with the ownership
or operation of the Business, and has no reason to believe that any such written
documentation may be forthcoming, (iv) there have been and are no civil,
criminal or administrative actions, suits, demands, claims, hearings, consent
orders, investigations or proceedings pending or, to the knowledge of the
Company, threatened, against the Company relating to any Environmental Law, (v)
no reports have been filed, or are required to be filed, by the Company
concerning the release of any Hazardous Substance or the threatened or actual
violation of any Environmental Law, (vi) no Hazardous Substance has been
disposed of, released or transported in violation of any applicable
Environmental Law from any properties owned, leased or operated by the Company
as a result of any activity of the Company during the time such properties were
owned, leased or operated by the Company, (vii) there have been and are no
environmental investigations, studies, audits, tests, reviews or other analyses
regarding compliance or non-compliance with any applicable Environmental Law
conducted by or which are in the possession of the Company relating to the
Business, (viii) there are no underground storage tanks on, in or under any
properties owned or
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<PAGE> 23
leased by the Company, there were no underground storage tanks owned or used by
the Company on properties formerly owned, leased or operated by the Company, and
no underground storage tanks have been closed or removed from any of such
properties during the time such properties were owned, leased or operated by the
Company, (ix) there is no asbestos or asbestos-containing material present in
any of the properties owned, leased or operated by the Company that is required
to be removed or otherwise abated under Environmental Laws, and no asbestos was
removed from any properties now or formerly owned, leased or operated during the
time such properties were owned, leased or operated by the Company, except in
compliance with Environmental Laws, (x) neither the Company nor any of its
respective properties are subject to any liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order, administrative order,
regulatory requirement, judgment or claim asserted or arising under any
Environmental Law, (xi) there are no environmental liabilities at sites not
owned, operated or leased by the Company, for which the Company or the Business
could, in whole or in part, be liable, and (xii) the Company has not been a
contractee under any tolling agreement, processing agreement or netback
agreement with a third party.
(b) With respect to any past direct or indirect Subsidiaries or
Affiliates of the Company, the representations contained in Section 4.13(a)
shall apply to the assets of and activities conducted by such entity while
owned, directly or indirectly, by the Company or affiliated therewith to the
extent that a failure of such representations to be true and correct could
subject the Company or the Business to liability.
(c) As used herein, "Environmental Law" means any Federal, state, or
local, statute, ordinance, rule, regulation, code, license, permit,
authorization, order, judgment, decree, injunction, restriction or agreement
with any governmental entity, relating to (x) the protection, preservation or
restoration of the environment or to human health or safety or (y) the exposure
to, or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as in effect on the Closing Date. The
term Environmental Law includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Toxic Substances Control Act,
the Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970, and similar law, regulation or requirement of any
governmental authority or agency having jurisdiction over the Company or its
property or the Business, each as amended and as in effect on the Closing Date,
and (ii) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass and
strict liability) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of, effects of or
exposure to any Hazardous Substance.
(d) As used herein, "Hazardous Substance" means any substance regulated
under any Environmental Law or the exposure to which is regulated by any
Environmental Law, and shall include, without limitation, any industrial
substance, petroleum or any derivative or by-product
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<PAGE> 24
thereof, radon, asbestos or asbestos-containing material, urea formaldehyde foam
insulation, lead, fibers or polychlorinated biphenyls.
4.14 PERSONAL PROPERTY. Schedule 4.14 sets forth an accurate list of
(x) all personal property material to the Business included in "plant, property
and equipment" on the balance sheet of the Company, (y) all other personal
property owned by the Company and used or useful in the Business with an
individual net book value in excess of $5,000 (i) as of the Balance Sheet Date
and (ii) acquired since the Balance Sheet Date and (z) all material leases and
agreements in respect of personal property, including, in the case of each of
(x), (y) and (z), (1) true, complete and correct copies of all such leases and
agreements and (2) an indication as to which assets are currently owned, or were
formerly owned, by the Company, relatives of Seller, or Affiliates of the
Seller. Except as set forth on Schedule 4.14, (i) all personal property material
to, and used by, the Company in the Business is either owned by the Company or
leased by the Company pursuant to a lease included on Schedule 4.14, (ii) all of
the personal property listed on Schedule 4.14 or replacement property thereof is
in working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 4.14 are in full force and effect and
constitute valid and binding agreements of the Company and (to the knowledge of
the Seller) the other parties thereto (or their successors) in accordance with
their respective terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium, liquidation or
other similar laws and equity principles relating to creditors' rights
generally. For the purposes of this Section 4.14, "personal property" shall be
deemed to exclude personal property addressed by Sections 4.11 and 4.12 and
inventory of the Company.
4.15 SIGNIFICANT CUSTOMERS AND SUPPLIERS; MATERIAL CONTRACTS AND
COMMITMENTS.
(a) Schedule 4.15(a) sets forth an accurate list of (i) all customers
(persons or entities) representing 5% or more of the Company's annual revenues
for fiscal year 1997, showing the approximate total sales to each such customer,
and (ii) all suppliers (persons or entities) representing 5% or more of the
Company's annual purchases of supplies for fiscal year 1997, showing the
approximate total purchases of supplies from each such supplier. Except to the
extent set forth on Schedule 4.15(a), none of such customers or suppliers has
canceled or substantially reduced or are currently attempting or threatening to
cancel a contract or substantially reduce utilization of the services provided
by the Company.
(b) The Company has listed on Schedule 4.15(b) all material contracts,
commitments and similar agreements relating to the Business to which the Company
is a party or by which it or any of its properties are bound (including, but not
limited to, contracts with significant customers or suppliers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land), other than agreements listed on
Schedules 4.10(a), 4.10(b), 4.14 or 4.16, (i) in existence as of the Balance
Sheet Date and (ii) entered into since the Balance Sheet Date, and in each case
has delivered true, complete and correct copies of such agreements to RV
Centers. Except as set forth on Schedule 4.15(b), the Company has complied with
all commitments and obligations pertaining to it or the Business and is not in
default in any material
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<PAGE> 25
respect under any contracts or agreements listed on Schedules 4.10(a), 4.10(b),
4.14, 4.15(b) or 4.16 and has not received notice of a default under any such
contract or agreement. Where required prior to the execution of this Agreement
under such contracts or agreements, the Company has furnished notice of the
Agreement to third parties and has, where required prior to the execution of
this Agreement, obtained consent from third parties to enter into the
transactions contemplated in this Agreement. The Company has also indicated on
Schedule 4.15(b) a list of all plans or projects involving the opening of new
operations, expansion of existing operations, or the acquisition of any personal
property, business or assets relating to the Business and requiring, in any
event, the payment of more than $25,000 by the Company.
(c) Except as set forth on Schedule 4.15(b), since January 1, 1997, the
Company has not experienced any difficulties in obtaining any inventory items
necessary to the operation of the Business, and, to the knowledge of the
Company, no such shortage of supply of inventory items is threatened or pending.
Except as set forth in Schedule 4.15(b), to the knowledge of the Company, no
customer or supplier of the Company has indicated that it will cease to do
business with, or substantially reduce its purchases from or sales to, the
Company or RV Centers by reason of or after the consummation of the transactions
contemplated hereby.
(d) Except as set forth on Schedule 4.15(b), the Company is not
required to provide any bonding or other financial security arrangements in any
amount in connection with any contract listed on Schedule 4.15(b).
4.16 REAL PROPERTY. The Company does not own any real property.
Schedule 4.16 includes a list of all real property leased by the Company and
used or useful in the Business at the date hereof and all other real property,
if any, used by the Company in the conduct of the Business.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct, are attached to
Schedule 4.16, and an indication as to which such properties, if any, are
currently owned, or were formerly owned, by the Company or Affiliates of the
Company is included in Schedule 4.16. Copies of all title reports and title
insurance policies with respect to such real property leased by the Company and
used or useful in the Business and in its possession or reasonably accessible to
it are attached to Schedule 4.16. Except as set forth on Schedule 4.16, all of
such leases included on Schedule 4.16 are in full force and effect and
constitute valid and binding agreements of the Company and to the knowledge of
the Company the other parties thereto in accordance with their respective terms,
subject to the effect of applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium, liquidation or other similar laws and equity
principles relating to creditors' rights generally.
4.17 INSURANCE. The Seller has delivered to RV Centers (i) an accurate
list as of the Balance Sheet Date of all insurance policies relating to the
Business or the Assets, (ii) an accurate list of all insurance loss runs or
workers compensation claims received by the Company or the Seller for the past
three policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance the Company or the Seller
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<PAGE> 26
is required to carry pursuant to all of its contracts and other agreements and
pursuant to all applicable laws relating to the Business and Assets. Except as
set forth on Schedule 4.17, all of such insurance policies are currently in full
force and effect and shall remain in full force and effect through the
Consummation Date. Since January 1, 1996, no insurance relating to the Business
or Assets has been canceled by the insurer and neither the Company nor the
Seller has been denied coverage.
4.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS. (a) The Seller
has delivered to RV Centers an accurate list (which is set forth on Schedule
4.18) showing all officers, and key employees of the Company or Business,
listing all employment, compensation, change in control and severance agreements
with such officers and key employees (the "Employment Agreements") and the rate
of compensation, and sales commissions, (and the portions thereof attributable
to salary, bonus and other compensation, respectively) of each of such persons
as of (i) the Balance Sheet Date and (ii) the date hereof. The Seller has
provided to RV Centers true, complete and correct copies of all Employment
Agreements. Since the Balance Sheet Date, except as disclosed on Schedule 4.18,
there have been no increases in the compensation payable or any special bonuses
to any officer, key employee or other employee, except ordinary salary increases
implemented on a basis and in amounts consistent with past practices.
(b) Except as set forth on Schedule 4.18, (i) the Company is not bound
by or subject to (and none of the Assets or the Business is bound by or subject
to) any arrangement with any labor union, (ii) no campaign to establish such
arrangement is in progress and (iii) to the knowledge of the Company, there is
no pending or threatened labor dispute involving the Company and any group of
its employees nor has the Company experienced any labor interruptions over the
past three years. Except as set forth on Schedule 4.18, the Company believes its
relationship with its employees to be good.
(c) Except as set forth in Schedule 4.18, (i) there are no significant
controversies pending or, to the knowledge of the Seller, threatened between the
Company and any of its employees, (ii) the Company has complied in all material
respects with all applicable laws relating to the employment of labor,
including, without limitation, any provisions thereof relating to wages, hours,
collective bargaining, and the payment of social security and similar taxes, and
(iii) the Company has not received notice from any person asserting the Company
is liable for any arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing.
4.19 EMPLOYEE PLANS. The Company has delivered to RV Centers an
accurate schedule (Schedule 4.19) listing all employee benefit plans and
compensation plans, programs or arrangements (the "Plans") which relate to the
Business and are maintained by, contributed to or with respect to which there is
or would be any obligation or liability of the Company, including all employment
agreements and other agreements or arrangements containing "golden parachute" or
other similar provisions, incentive compensation agreements, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date and as of the date of
this Agreement. Except for the Plans, if any, described on Schedule 4.19, the
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<PAGE> 27
Company does not sponsor, maintain or contribute to any plan, program, fund or
arrangement which relates to the Business that constitutes an "employee benefit
plan," and the Company does not have any obligation to contribute to or accrue
or pay any benefits under any deferred compensation or retirement arrangement on
behalf of any current or former employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of ERISA). For the purposes
of this Agreement, the term "employee benefit plan" shall have the same meaning
as is given that term in Section 3(3) of ERISA. The Company has not sponsored,
maintained or contributed to any employee benefit plan other than the Plans set
forth on Schedule 4.19, and the Company is not or could not be required to
contribute to any Plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions of employment of any of the
Company's employees.
Except as set forth on Schedule 4.19, the Company is not now, and will
not as a result of its past activities become, liable to the Pension Benefit
Guaranty Corporation (the "PBGC") or to any multiemployer employee pension
benefit plan under the provisions of Title IV of ERISA.
All Plans listed on Schedule 4.19 and the administration thereof are in
compliance in all material respects with their terms and all applicable
provisions of ERISA and the regulations issued thereunder, as well as with all
other applicable Federal, state and local statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any Plan listed on Schedule 4.19 have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company included in the Interim Financial Statements. All accrued contribution
obligations of the Company since the Balance Sheet Date with respect to any Plan
listed on Schedule 4.19 have been fulfilled or will be fully reflected on the
Balance Sheets delivered pursuant to Section 6.9.
4.20 COMPLIANCE WITH ERISA. All such Plans listed on Schedule 4.19 that
are intended to qualify (the "Qualified Plans") under Section 401(a) of the Code
are, and have been from their inception, so qualified and are the subject of a
determination letter or notification letter issued by the Internal Revenue
Service, which letter covers the status of such Qualified Plans the provisions
of the Tax Reform Act of 1986, and copies of such letters are attached to
Schedule 4.19. Except as disclosed on Schedule 4.20, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audits or tax returns) have been timely filed or distributed. Neither
the Company, any such Plan listed in Schedule 4.19, nor, to the knowledge of the
Seller, any other Person has engaged in any transaction with any Plan which is
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA, and to which no exemption under the Code or ERISA applies. No such Plan
listed in Schedule 4.19 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(l) of ERISA, whether or
not waived; and neither the Company nor, to the knowledge of the Seller, any
other Person has incurred any liability for excise tax or penalty due to the
Internal Revenue Service nor any liability to the
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PBGC with respect to any Plan or breached any fiduciary duty with respect to any
Plan. The Seller further represents that except as set forth on Schedule 4.20
hereto:
(i) with respect to any plan year for which the applicable
statutes of limitations has not expired, there have been no
terminations, partial terminations or discontinuations of contributions
to any Qualified Plan intended to qualify under Section 401(a) of the
Code without notice to and approval by the Internal Revenue Service;
(ii) no Plan listed in Schedule 4.19 is subject to the
provisions of Title IV of ERISA;
(iii) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any Plan listed in
Schedule 4.19;
(iv) the Company has not incurred liability under Section 4062
or Section 4069 of ERISA;
(v) no circumstances exist pursuant to which the Company could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise tax
or penalty, or being subject to any statutory lien to secure payment of
any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that
is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company; and
(vi) each Plan may be unilaterally terminated at any time by
the Company without material liability to the Company.
4.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 4.21 or 4.13, the Company is not in violation of any law or regulation
or any order of any court or Federal, state, local or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it involving or relating to the Business or the Assets other
than violations that would not have a Material Adverse Effect on the Business or
the Assets and except to the extent set forth on Schedules 4.10 or 4.13, there
are no claims, actions, suits or proceedings, pending or, to the knowledge of
the Company, threatened against or affecting, the Company, at law or in equity,
or before or by any Federal, state, local or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
any of them and no written notice of any claim, action, suit or proceeding,
whether pending or threatened, has been received by the Company. Except as set
forth in Schedule 4.21, the Company has conducted and is now conducting the
Business in compliance in all material respects with the requirements,
standards, criteria and conditions set forth in applicable Federal, state and
local statutes, ordinances, orders, approvals, variances, rules and regulations.
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4.22 TAXES.
(a) The Seller has timely filed all requisite Federal, state, local and
other income and payroll tax returns or extension requests with respect to the
Company or the Business for all fiscal periods ended on or before the Balance
Sheet Date; and except as set forth on Schedule 4.22, there are no examinations
in progress or claims pending against the Seller for Federal, state, local and
other Taxes (including penalties and interest) for any period or periods prior
to and including the Balance Sheet Date and no notice of any claim for Taxes,
whether pending or threatened, has been received. All Taxes, including interest
and penalties (whether or not shown on any tax return), owed by the Seller with
respect to the Company or the Business has been paid or reflected as accrued as
of the Balance Sheet Date. The amounts shown as accruals for Taxes on the
Company Financial Statements are sufficient for the payment of all Taxes with
respect to the Company or the Business of the kinds indicated (including
penalties and interest) for all fiscal periods ended on or before that date.
Copies of (i) any tax examinations, (ii) extensions of statutory limitations and
(iii) the Federal and local income tax returns and franchise tax returns of the
Company for their last three (3) fiscal years, or such shorter period of time as
any of them shall have existed, are attached hereto as Schedule 4.22 or have
otherwise been delivered to RV Centers. Except as set forth on Schedule 4.22,
the Company uses the accrual method of accounting for income tax purposes, and
the Company's methods of accounting have not changed in the past five years. The
Company is not an Investment Company as defined in Section 351(e)(1) of the
Code. Except as set forth on Schedule 4.22, the Company is not and has not been
a party to any tax sharing agreement or agreement of similar effect involving or
relating to the Business. Except as set forth on Schedule 4.22, the Company is
not and has not been a member of any consolidated group. The Company has not
received, been denied, or applied for any private letter ruling during the last
ten years.
(b) The Seller has timely filed all requisite Federal, state, local and
other income and payroll tax returns or extension requests with respect to the
Company or the Business for all fiscal periods ended on or prior to the date
hereof; and there are no examinations in progress or claims pending against the
Seller for Federal, state, local and other Taxes (including penalties and
interest) for any period or periods ended on or prior to the date hereof and no
notice of any claim for Taxes, whether pending or threatened, has been received.
All Taxes, including interest and penalties (whether or not shown on any tax
return), owed by the Seller with respect to the Business have been paid or
reflected as accrued. The amounts shown as accruals for Taxes on the Company's
Financial Statements are sufficient for the payment of all Taxes with respect to
the Company or the Business of the kinds indicated (including penalties and
interest) for all fiscal periods ended on or before that date.
4.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) Except as set forth on Schedule 4.23(a), to the knowledge of the
Seller, neither the Company nor any other party thereto, is in default under any
lease, instrument, agreement, license, or permit set forth on Schedule 4.10(b),
4.12, 4.14, 4.15(b) or 4.16 (the "Material Documents").
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<PAGE> 30
(b) Except as set forth on Schedule 4.23(b), the execution and delivery
of this Agreement by the Seller does not violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
Lien, upon any of the Assets under any of the terms, conditions or provisions of
(i) any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company, the Business or the Assets, or (ii) any Material
Document to which the Company or Seller is now a party or by which the Company,
Seller or any of the Assets may be bound or affected. The consummation by the
Seller and the Company of the transactions contemplated herein will not result
in any material violation, conflict, breach, right of termination or
acceleration or creation of liens under any of the terms, conditions or
provisions of the items described in clauses (i) or (ii) of the preceding
sentence, subject, in the case of the terms, conditions or provisions of the
items described in clause (ii) above, to obtaining (prior to the Effective Time)
such consents as may be required from commercial lenders, lessors or other third
parties.
(c) Except as set forth on Schedule 4.23(c) and except for requirements
under the Hart- Scott Act, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to the transfer of the Assets or the consummation by the Seller of any
of the transactions contemplated herein in order to remain in full force and
effect, and consummation by the Company or Seller of the transactions
contemplated herein will not give rise to any right to termination, cancellation
or acceleration or loss of any right or benefit.
(d) Except for (i) the filing of the Registration Statement, (ii) the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities and (iii) any filing required under the Hart-Scott
Act in connection with the purchase and sale of the Assets, no declaration,
filing or registration with, or notice to, or authorization, consent or approval
of, any governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated herein.
(e) Except as set forth on Schedule 4.23(e), none of the Material
Documents prohibits the use or publication by the Company or RV Centers of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from providing services or selling
products to any other customer or potential customer of the Seller, RV Centers
or any Other Founding Company.
4.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 4.24, the
Company is not a party to any governmental contract subject to price
redetermination or renegotiation.
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4.25 ABSENCE OF CHANGES. Since June 30, 1998, except as set forth on
Schedule 4.25 or as otherwise contemplated herein, there has not been:
(i) any Material Adverse Change in the Business;
(ii) any material damage, destruction or loss to any property
or asset of the Company (whether or not covered by insurance) which has
caused a Material Adverse Effect on the Business;
(iii) any change in the ownership of the Company or any grant
of any options, warrants, calls, conversion rights or commitments
respecting the Company or the Business;
(iv) any distribution in respect of the ownership interests in
the Company or the Business or any direct or indirect redemption,
purchase or other acquisition of any of the ownership interests in the
Company except for distributions that would be permitted under Section
6.3(iii);
(v) any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by the Company to any
of its officers, employees, consultants or agents, except for ordinary
and customary bonuses and salary increases for employees in accordance
with past practice or any payment of salary, bonus, sales commissions,
fees or any other form of compensation, directly or indirectly, to the
Seller or any members of his family in excess of the aggregate monetary
compensation provided for in Annex I hereto;
(vi) any work interruptions, labor grievances or claims filed,
or any similar event or condition of any character which has caused a
Material Adverse Effect on the Business or Assets;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company or the
Business to any person, including, without limitation, Affiliates of
the Company, except inventory sold or transferred in the ordinary
course of business;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company and involving or
relating to the Business, including without limitation any indebtedness
or obligation of the Company or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
material assets, property or rights of the Company or the Business or
requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
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<PAGE> 32
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of the Business;
(xi) any waiver of any material rights or claims relating to
the Business or Assets;
(xii) any amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a
party relating to the Business or Assets;
(xiii) any transaction by the Seller outside the ordinary
course of business;
(xiv) any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date other
than in the ordinary course of business and of which prior notice has
been given to RV Centers;
(xv) any other distribution of property or assets by the
Company other than in the ordinary course of business and other than
distributions of real estate and other assets as permitted by this
Agreement (including the Schedules hereto); or
(xvi) any occurrence that is reasonably likely to give rise to
a contingent liability which would have a Material Adverse Effect on
the Business or Assets excluding occurrences due to general economic
conditions, legislative or regulatory developments or occurrences
affecting the recreational vehicle industry generally.
4.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered to
RV Centers an accurate schedule (which is set forth on Schedule 4.26) as of the
date of this Agreement of:
(i) the name of each financial institution in which the
Company has accounts or safe deposit boxes relating to the Business;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
All of the cash indicated on the Company's balance sheet as of June 30,
1998, is held in the accounts listed on Schedule 4.26 and as of the Consummation
Date, the Company will have no other accounts. Schedule 4.26 also sets forth the
name of each person, corporation, firm or other entity holding a general or
special power of attorney from the Company and a description of the terms of
such power.
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4.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Seller and the performance by the Seller of the transactions
contemplated herein have been duly and validly authorized by the Seller and this
Agreement is a valid and binding obligation of the Seller, subject to the effect
of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium, liquidation or other similar laws and equity principles relating to
creditors' rights generally.
4.28 RELATIONS WITH GOVERNMENTS. None of the Company, the Seller nor
any Affiliate of the Company or Seller has given or offered anything of value to
any governmental official, political party or candidate for government office
nor has it or any of them otherwise taken any action which would in any case
cause the Company or Seller to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any law of similar effect.
4.29 DISCLOSURE. (a) The representations and warranties of the Seller
as set forth in this Agreement, including the Annexes and Schedules hereto, the
completed Director and Officer Questionnaires of the Company to the extent such
Questionnaires have been completed, and the written information provided by the
Seller to RV Centers's environmental consultants do not contain an untrue
statement of a material fact concerning the Company or the Business or omit to
state a material fact concerning the Company or the Business necessary to make
the statements herein and therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the foregoing does not
apply to statements contained in or omitted from any of such documents made or
omitted in reliance upon information furnished in writing by the Other Founding
Companies, RV Centers and its Affiliates or any representatives or agents of RV
Centers and its Affiliates.
(b) The Seller acknowledges and agrees that (i) there exists no firm
commitment, binding agreement, or promise or other assurance of any kind,
whether express or implied, oral or written, that a Registration Statement will
become effective or that the IPO pursuant thereto will occur; (ii) none of RV
Centers, the Buyer or Baker Kreft Funding I, L.L.C. or any of their officers,
directors, Affiliates, agents or representatives nor any Underwriter shall have
any liability to the Company or the Seller or any other person affiliated or
associated with the Company or the Seller for any failure of the Registration
Statement to become effective, the IPO to occur at a particular price or within
a particular range of prices or to occur at all, the transactions contemplated
by this Agreement to be successful or the prospects for RV Centers described in
the Registration Statement to be realized; and (iii) that the decision of the
Company to enter into this Agreement, or to vote in favor of or consent to the
proposed purchase of RV Centers Stock and sale of the Assets, has been or will
be made independent of, and without reliance upon, any statements, opinions or
other communications, or due diligence investigations which have been or will be
made or performed by any prospective Underwriter, relative to RV Centers or the
prospective IPO.
(c) The Seller has no present plan, intention, commitment or binding
agreement or arrangement to dispose of any shares of RV Centers Stock to be
received by the Seller as a result of
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the transactions contemplated in this Agreement, except for transfers permitted
pursuant to Sections 14 and 15 hereof.
4.30 PROHIBITED ACTIVITIES. Except as set forth on Schedule 4.30, the
Company has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 6.3.
4.31 NO WARRANTIES OR INSURANCE. Except as set forth on Schedule 4.31,
the Company has no liability to any person under any warranty relating to goods
sold or services provided by the Company and the Company does not offer or sell
insurance or consumer protection plans or other arrangements that could result
in the Company being required to make any payment to or perform any service for
any person.
4.32 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 4.32, neither the Company nor any
officer, employee or Affiliate of the Company (i) possesses, directly or
indirectly, any financial interest in, or is a director, officer, employee or
affiliate of, any corporation, firm, association, business organization or
Person that is a client, supplier, customer, lessor, lessee or competitor of the
Company, or (ii) is a party to an agreement or relationship, that involves the
receipt by such person of compensation or property from the Company other than
through a customary employment relationship.
4.33 REGISTRATION STATEMENT. None of the information supplied by the
Seller in writing for inclusion in the Registration Statement contains any
untrue statement of a material fact concerning the Company or the Business or
has omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein concerning the Company or the
Business, in light of the circumstances under which they are made, not
misleading. The Seller will have the right to review and approve in advance any
statements made about the Company or the Business in the Registration Statement.
4.34 INVENTORY. Except as provided in Schedule 4.34, all of the
inventories of the Company at June 30, 1998 are reflected on the Interim
Financial Statements. The values at which inventories are carried on the Interim
Financial Statements reflect the normal inventory valuation policies of the
Company in conformity with GAAP consistently applied. The inventories reflected
on the Interim Financial Statements or arising since the date thereof are
currently marketable and substantially all of such inventories can reasonably be
anticipated to be sold at normal mark-ups within 180 days after the date hereof
in the ordinary course of business (subject to any reserve for obsolete,
off-grade or slow-moving items that is reflected in the Interim Financial
Statements) except for spare parts inventory which inventory is good and usable.
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4.35 YEAR 2000. Except and to the extent described in Schedule 4.35,
the "Information Technology" (as defined below in this Section 4.35) of the
Company which is included in the Assets is Year 2000 compliant. "Year 2000
compliant" means that the Information Technology is designed to be used prior
to, during and after the calendar Year 2000 A.D. and the Information Technology
used during each such time period will accurately receive, provide and process
date/time data (including, but not limited to, calculating, comparing and
sequencing) from, into and between the 20th and 21st centuries, including the
years 1999 and 2000, and leap-year calculations and will not malfunction, cease
to function, or provide invalid or incorrect results as a result of date/time
data.
For purposes hereof, "Information Technology," means all computer
operated or micro processor controlled equipment, including, but not limited to
computer software, computer hardware and related software, all central
processing units, terminals, disk drives, tape drives, electronic memory units,
printers, keyboards, screens, peripherals (and other input/output devices),
modems and other communication controllers, and any and all parts and
appurtenances thereto, together with all intellectual property used in the
operation of such computer equipment and hardware, and other similar or related
items of automated, computerized, or software system(s) that are used or relied
on by the Company in the conduct of the Business.
5. REPRESENTATIONS OF RV CENTERS
Except as set forth in the disclosure schedules attached hereto and
except otherwise qualified below, RV Centers represents and warrants that all of
the following representations and warranties in this Section 5 are true at the
date of this Agreement, and that such representations and warranties shall
survive the Consummation Date until the Expiration Date except that the
representations and warranties set forth in Section 5.3 shall survive until the
date on which the applicable statute of limitations expires, which shall be the
"Expiration Date" for purposes of Section 5.3.
5.1 DUE ORGANIZATION. Each of RV Centers and the Buyer is a corporation
duly incorporated and organized, validly existing and in good standing under the
laws of its State of Incorporation, and it has the requisite power and authority
to carry on its business as it is now being conducted and as contemplated in the
RV Centers Plan of Organization. Each of RV Centers and the Buyer is duly
qualified or authorized to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or authorization necessary, except where
the failure to be so qualified or authorized to do business would not have a
Material Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and By-laws, as proposed to be amended, of RV Centers (the "RV
Centers Charter Documents") are attached hereto as Annex II.
5.2 AUTHORIZATION. (i) The officers of RV Centers and the Buyer
executing this Agreement have the authority to enter into and bind RV Centers
and the Buyer to the terms of this Agreement and (ii) each of RV Centers and the
Buyer has the full legal right, power and authority to enter into and perform
this Agreement and consummate the transactions contemplated herein. All
corporate acts and other proceedings required to have been taken by RV Centers
or the Buyer to
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authorize the execution and delivery and performance of this Agreement and all
of the transactions contemplated hereby have been duly and properly authorized.
Copies of the most recent resolutions adopted by the Board of Directors of RV
Centers and the Buyer, which approve this Agreement and the transactions
contemplated herein in all respects, certified by the Secretary or an Assistant
Secretary of RV Centers and the Buyer, as the case may be, as being in full
force and effect on the date hereof, are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF RV CENTERS. As of the date of this Agreement, the
authorized capital stock of RV Centers is as set forth on Schedule 5.3.
Immediately prior to the Closing Date and the Consummation Date, all of the
issued and outstanding shares of the capital stock of RV Centers will be as set
forth in the Registration Statement, free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind other than any restrictions described in the Registration
Statement. All of the issued and outstanding shares of the capital stock of RV
Centers has been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by RV
Centers in compliance with all applicable state and Federal laws concerning the
issuance of securities. Further, none of such shares were issued in violation of
the preemptive rights of any past or present Stockholder of RV Centers.
5.4 TRANSACTIONS IN CAPITAL STOCK; ORGANIZATION ACCOUNTING. Except for
the Other Agreements and except as set forth in the Registration Statement, (i)
no option, warrant, call, conversion right or commitment of any kind exists
which obligates RV Centers to issue any of its authorized but unissued capital
stock; and (ii) RV Centers has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. The outstanding options, warrants or other rights to acquire shares of
the stock of RV Centers will be as described in the Registration Statement.
5.5 SUBSIDIARIES. RV Centers has no Subsidiaries except for the Buyer.
RV Centers does not presently own, of record or beneficially, or control,
directly or indirectly, any capital stock, securities convertible into capital
stock or any other equity interest in any corporation, association or business
entity, and RV Centers, directly or indirectly, is not a participant in any
joint venture, partnership or other non-corporate entity except for the Buyer.
5.6 NO VIOLATIONS. (a) RV Centers is not in violation of any RV Centers
Charter Document. Neither RV Centers nor, to the best knowledge of RV Centers,
any other party thereto, is in default under any lease, instrument, agreement,
license, or permit to which RV Centers is a party, or by which RV Centers, or
any of its properties, is bound (collectively, the "RV Centers Documents").
(b) The execution and delivery of this Agreement by RV Centers and the
Buyer does not violate, conflict with or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the
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termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
RV Centers under any of the terms, conditions or provisions of (i) the RV
Centers Charter Documents, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to RV Centers or any of its properties or
assets, or (iii) any RV Centers Document. The consummation by RV Centers of the
transactions contemplated herein will not result in any material violation,
conflict, breach, right of termination or acceleration or creation of liens
under any of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the preceding sentence, subject, in the case of the
terms, conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Effective Time) such consents as may be required from
commercial lenders, lessors or other third parties.
(c) Except for (i) the filings with the SEC pursuant to the 1933 Act in
connection with the IPO and the purchase and sale of the Assets, (ii) the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities, and (iii) any filings required under the Hart-Scott
Act in connection with the transactions contemplated by the RV Centers Plan of
Organization, none of the RV Centers Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by RV Centers of any of the transactions
contemplated herein, and consummation by RV Centers of the transactions
contemplated herein will not give rise to any right to termination, cancellation
or acceleration or loss of any material right or benefit under any of the RV
Centers Documents.
(d) Except for (i) the filings with the SEC pursuant to the 1933 Act in
connection with the IPO and the purchase and sale of the Assets, (ii) the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities, and (iii) any filings required under the Hart-Scott
Act in connection with the transactions contemplated in the RV Centers Plan of
Organization, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by RV
Centers or the Buyer or the consummation by RV Centers or the Buyer of the
transactions contemplated herein.
5.7 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by RV Centers and the Buyer and the performance of the transactions
contemplated herein have been duly and validly authorized by the Boards of
Directors of RV Centers and the Buyer and this Agreement has been duly and
validly authorized by all necessary corporate action and is a legal, valid and
binding obligation of RV Centers and the Buyer.
5.8 RV CENTERS STOCK. At the time of issuance thereof and delivery to
the Seller, the RV Centers Stock to be delivered to the Seller pursuant to this
Agreement will constitute valid, duly authorized and legally issued shares of RV
Centers, fully paid and nonassessable, and with the exception of restrictions
upon resale set forth in Sections 14 and 15 hereof, will be identical in all
substantive respects (which do not include the form of certificate upon which it
is printed or the
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presence or absence of a CUSIP number on any such certificate) to the RV Centers
Stock issued and outstanding as of the date hereof by reason of the provisions
of the Delaware GCL. The RV Centers Stock issued and delivered to the Seller
shall at the time of such issuance and delivery be free and clear of any liens,
claims or encumbrances of any kind or character. The shares of RV Centers Stock
to be issued to the Seller pursuant to this Agreement will not be registered
under the 1933 Act, except as provided in Section 16 hereof.
5.9 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. RV Centers was formed
in May 1998 and has conducted only limited operations since that time. RV
Centers has not conducted any material business since the date of its inception,
except in connection with this Agreement, the Other Agreements and the IPO.
Except as described in the Draft Registration Statement, RV Centers does not own
and has not at any time owned any real property or any material personal
property and is not a party to any other material agreement other than the Other
Agreements, the agreements contemplated hereby and such agreements as will be
filed as Exhibits to the Registration Statement. Except as set forth in the
Registration Statement, RV Centers has not entered into any material agreement
with any of the Founding Companies or the Seller of the Founding Companies other
than the Other Agreements and the agreements contemplated in each of the Other
Agreements and the Registration Statement, including the employment agreements
and leases referred to herein or entered into in connection with the
transactions contemplated herein and therein.
5.10 [INTENTIONALLY LEFT BLANK].
5.11 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by RV Centers and constitute the legal, valid and binding
obligation of RV Centers enforceable against RV Centers in accordance with their
respective terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium, liquidation or other similar
laws and equity principles relating to creditors' rights generally.
5.12 FINANCIAL STATEMENTS. The unaudited pro forma financial statements
of RV Centers included in the Draft Registration Statement comply as to form in
all material respects to the applicable accounting requirements of the 1933 Act
and the regulations promulgated under the 1933 Act. Management of RV Centers
believes that the assumptions underlying the pro forma adjustments utilized in
the preparation of such pro forma financial statements are reasonable, and such
pro forma adjustments have been properly applied to the historical financial
amounts in the compilation of the pro forma financial statements. Based on the
representations in Section 4.9 of this Agreement and in Section 4.9 of each of
the Other Agreements, to the knowledge of RV Centers, the pro forma financial
information of RV Centers fairly presents the pro forma financial position,
results of operations and other information purported to be shown therein at the
respective dates and for the respective periods specified.
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5.13 LIABILITIES AND OBLIGATIONS. Except as set forth in the Draft
Registration Statement, as of the date of this Agreement, RV Centers has no
material liabilities or obligations of any kind, character or description,
whether accrued, absolute, secured or unsecured, contingent or otherwise, other
than liabilities incurred in the ordinary course of business and consistent with
past practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
5.14 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in
the Draft Registration Statement, RV Centers is not in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of RV Centers,
threatened against or affecting, RV Centers, at law or in equity, or before or
by any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. RV Centers has conducted and is conducting its businesses in
compliance in all material respects with the requirements, standards, criteria
and conditions set forth in applicable Federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation, in any material respect, of any of the
foregoing.
5.15 NO SIDE AGREEMENTS. RV Centers has not entered into any agreement
with any of the Founding Companies or the Stockholders of the Founding Companies
other than the Other Agreements and the agreements referred to in the Other
Agreements or the Draft Registration Statement, including the employment
agreements and/or advisory agreements and leases referred to herein or entered
into in connection with the transactions contemplated hereby and thereby. RV
Centers has not entered into any agreements providing for rights to register
shares of RV Centers Stock under the 1933 Act except as provided in Section 16
of this Agreement, in Section 16 of the Other Agreements and the Exhibits to the
Draft Registration Statement.
5.16 RELATIONS WITH GOVERNMENTS. Neither RV Centers nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor has
RV Centers, any of its directors, officers or Affiliates of any of them
otherwise taken any action, which would cause RV Centers to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.17 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by RV Centers and constitute the legal, valid and binding
obligation of RV Centers enforceable against RV Centers in accordance with their
respective terms. Except as disclosed on Schedule 5.17 or the Draft Registration
Statement and except for changes resulting from a stock purchase rather than an
asset purchase structure, the terms and conditions of the Other Agreements
(excluding the terms relating to the consideration payable by RV Centers
thereunder) are identical in all material respects to the terms and conditions
in this Agreement.
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5.18 REGISTRATION STATEMENT. On the date of each filing of the
Registration Statement with the SEC the Registration Statement will comply, as
to form in all material respects with the requirements of the Form S-1
Registration Statement and applicable requirements under Federal laws and
regulations (except for the inclusion of all exhibits required to be filed
therewith with respect to the Registration Statement prior to its effective
date), provided that the foregoing does not apply to any information that the
Company has furnished to RV Centers in writing specifically for inclusion in the
Registration Statement.
5.19 DISCLOSURE. The Draft Registration Statement delivered to the
Seller does not as of the date hereof contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that the foregoing does not apply to statements contained in
or omitted from any of such documents made or omitted in reliance upon, and in
conformity with, information furnished to RV Centers by the Seller in writing
specifically for inclusion in the Registration Statement. The Registration
Statement, when it becomes effective, will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and each prospectus
included therein, on the date of filing thereof with the SEC and at the Closing
Date and the Consummation Date, will not include an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; except that the foregoing shall not apply to statements in or
omissions from any such document in reliance upon, and in conformity with,
information furnished to RV Centers by the Seller in writing specifically for
inclusion therein.
6. COVENANTS PRIOR TO CLOSING
6.1 ACCESS AND COOPERATION; DUE DILIGENCE.
(a) Between the date of this Agreement and the Consummation Date, the
Seller will afford to the officers and authorized representatives of RV Centers
reasonable access during normal business hours to all of the Company's sites,
properties, books and records relating to the Business and will furnish RV
Centers with such additional financial and operating data and other information
as to the Business and properties of the Company as RV Centers may from time to
time reasonably request. The Seller will cooperate with RV Centers, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. RV Centers will treat all information
obtained in connection with the negotiation and performance of this Agreement or
the due diligence investigations conducted with respect to the Company and the
Business as confidential in accordance with the provisions of Section 13 hereof.
(b) Between the date of this Agreement and the Consummation Date, RV
Centers will afford to the Seller access to all of RV Centers's sites,
properties, books and records and will furnish the Seller with such additional
financial and operating data and other information as to the business
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and properties of RV Centers as the Seller may from time to time reasonably
request. RV Centers will cooperate with the Seller, its representatives,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by this
Agreement. The Seller will cause all information obtained in connection with the
negotiation and performance of this Agreement (including information regarding
each of the Other Founding Companies) to be treated as confidential in
accordance with the provisions of Section 13 hereof.
6.2 CONDUCT OF BUSINESS PENDING CLOSING. Except as set forth on
Schedule 6.2, between the date of this Agreement and the Consummation Date, the
Seller will cause the Company to:
(i) carry on the Business in the ordinary course, consistent
with past practice, and not introduce any material new method or
changes in operation or accounting;
(ii) use all commercially reasonable efforts to maintain the
Assets, in as good working order and condition as at present, ordinary
wear and tear excepted;
(iii) perform all of its obligations under agreements relating
to or affecting the Assets or Business, the nonperformance of which
could have a Material Adverse Effect on the Assets or Business;
(iv) use all reasonable efforts to keep in full force and
effect present insurance policies or other comparable insurance
coverage relating to the Assets or Business;
(v) use reasonable efforts to maintain and preserve its
business organization intact, retain its respective key employees and
maintain its respective material relationships with suppliers,
customers and others having business relations with the Company;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, the
noncompliance with which could have a Material Adverse Effect on the
Assets or Business;
(vii) maintain present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or
lease instruments involving or affecting the Business without the
knowledge and written consent of RV Centers (which consent shall not be
unreasonably withheld) provided that debt or lease instruments may be
replaced without the consent of RV Centers if the replacement
instruments are on terms at least as favorable to the Company as the
instruments being replaced;
(viii) maintain or reduce present salaries and commission
levels for all officers, employees and agents involved in the Business
except for ordinary and customary bonus and
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salary increases for employees in accordance with past practices;
notwithstanding the foregoing, the Company will not pay or agree to pay
salary, bonus, sales commissions, fees or any other form of
compensation, directly or indirectly, to the Seller or any member of
his family in excess of the aggregate monthly compensation provided for
in Annex I hereto; and
(ix) pay all of its obligations, including, but not limited
to, Taxes, loans and manufacturers' invoices, as they become due and
payable and not prepay any of its obligations.
6.3 PROHIBITED ACTIVITIES. Except as set forth on Schedule 6.3 or on
Annex I to this Agreement, between the date hereof and the Consummation Date,
the Company will not, without prior written consent of RV Centers:
(i) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures respecting the
Business, except if it is in the normal course of business (consistent
with past practice) or involves an amount, in the aggregate, not in
excess of $100,000 except for purchases and sales of recreational
vehicles inventory in the ordinary course of business;
(ii) create or assume any mortgage, pledge or other lien or
encumbrance upon any of the Assets, except (1) with respect to purchase
money liens incurred in connection with the acquisition of equipment,
(excluding rolling stock inventory) with an aggregate cost per item not
in excess of $25,000 necessary or desirable for the conduct of the
Business, (2) (A) liens for taxes either not yet due or being contested
in good faith and by appropriate proceedings (and for which contested
taxes adequate reserves have been established and are being maintained)
or (B) materialmen's, mechanics', workers', repairmen's, employees' or
other like liens arising in the ordinary course of business (the liens
set forth in clause (2) being referred to herein as "Statutory Liens"),
or (3) liens set forth on Schedule 4.10, 4.15(b) and/or 4.16 hereto;
(iii) except as set forth in Schedule 6.3, sell, assign, lease
or otherwise transfer or dispose of any property or equipment relating
to the Business with a net book value in excess of $25,000 except in
the normal course of business;
(iv) consummate or enter into any commitment for the
acquisition of any business or the start-up of any new business
relating to the Business;
(v) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(vi) waive any material rights or claims of the Company
relating to the Business or Assets, provided that the Seller may
negotiate and adjust bills and accounts in the course of good faith
disputes with customers in a manner consistent with past practice,
provided,
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further, that such adjustments shall not be deemed to be included in
Schedule 4.11 unless specifically listed thereon;
(vii) commit a material breach of or amend or terminate any
material agreement, permit, license or other right of the Company
relating to or involving the Business;
(viii) enter into any other transaction relating to or
involving the Business outside the ordinary course of its business or
prohibited hereunder; or
(ix) pay or agree to pay salary, bonus, sales commissions,
fees or any other form of compensation, directly or indirectly, to the
Seller or any member of his family in excess of the aggregate monthly
compensation provided for in Annex I hereto.
6.4 NO SHOP. Neither the Company, the Seller, nor any agent, officer,
trustee or any representative of any of the foregoing will, during the period
commencing on the date of this Agreement and ending with the earlier to occur of
the Consummation Date or the termination of this Agreement in accordance with
its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than RV
Centers or its authorized agents relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation, share exchange or
business combination of the Company or Business.
6.5 EMPLOYMENT AGREEMENTS. Except as disclosed on Schedule 6.5, the
Seller and the Company shall terminate employment agreements between the Company
and any employee listed on Schedule 8.10 hereto on or prior to the Consummation
Date. Such termination agreements are listed on Schedule 6.5 and copies thereof
are attached thereto.
6.6 NOTIFICATION OF CERTAIN MATTERS. The Seller shall give prompt
notice to RV Centers of the Seller's knowledge of (i) the occurrence or
non-occurrence of any event the occurrence or non occurrence of which would be
likely to cause any representation or warranty of the Seller contained herein to
be untrue or inaccurate in any material respect at or prior to the Closing and
(ii) any material failure of the Seller or the Company to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by the
Seller or the Company hereunder. RV Centers shall give prompt notice to the
Seller of RV Centers's knowledge of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of RV Centers contained herein to be untrue or
inaccurate in any material
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respect at or prior to the Closing and (ii) any material failure of RV Centers
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder. The delivery of any notice pursuant to this
Section 6.6 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 6.7, (ii) modify the conditions set forth in Sections 7
and 8, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
6.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
anticipated effectiveness of the Registration Statement to supplement or amend
promptly the Schedules hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules or which may have
been omitted from the schedules previously provided by the Seller; provided
however, that supplements and amendments to Schedules 4.10, 4.11, 4.14, 4.15(a),
and 4.15(b) shall only have to be delivered at the Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the Seller that constitutes or
reflects an event or occurrence that would have a Material Adverse Effect on the
Company, the Assets or the Business may be made unless RV Centers consents to
such amendment or supplement; and provided further, that no amendment or
supplement to a Schedule prepared by RV Centers that constitutes or reflects an
event or occurrence that would have a Material Adverse Effect on RV Centers may
be made unless a majority of the Founding Companies consent to such amendment or
supplement. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Sections 7.1 and 8.1
have been fulfilled, the Schedules hereto shall be deemed to be the Schedules as
amended or supplemented pursuant to this Section 6.7. In the event that the
Seller seeks to amend or supplement a Schedule pursuant to this Section 6.7 to
reflect an item not known to RV Centers or the Seller, as applicable, at the
time of entering into this Agreement or an event occurring after the date of
this Agreement, and RV Centers does not consent, in its reasonable discretion,
to such amendment or supplement, this Agreement shall be deemed terminated by
mutual consent as set forth in Section 11.1(i) hereof. In the event that RV
Centers seeks to amend or supplement a Schedule pursuant to this Section 6.7 and
a majority of the Founding Companies do not consent to such amendment or
supplement, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 11.1(i) hereof. No party to this Agreement shall be liable to
any other party if this Agreement shall be terminated pursuant to the provisions
of this Section 6.7 with respect to an attempt to supplement or amend a Schedule
to reflect an item not known to the Seller or RV Centers (as applicable) at the
time of execution or occurring after the date of execution of this Agreement. No
amendment of or supplement to a Schedule shall be made later than 24 hours prior
to the anticipated effectiveness of the Registration Statement, subject to the
proviso in the first sentence.
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6.8 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The Seller
shall furnish or use reasonable efforts to cause to be furnished to RV Centers
and the Underwriters all of the information concerning the Seller and its
Affiliates, the Business and the Assets as RV Centers may reasonably request
required for inclusion in, and will cooperate with RV Centers and the
Underwriters in the preparation of, the Registration Statement and the
prospectus included therein (including audited and unaudited financial
statements, prepared in accordance with GAAP, in form suitable for inclusion in
the Registration Statement). The parties hereto agree that the disclosure of
information with respect to the Seller and its Affiliates, the Business and the
Assets in the Registration Statement and while marketing the securities of RV
Centers in the IPO shall not be a violation of any confidentiality agreement,
including Article 13 of this Agreement, among the parties hereto or their
officers or stockholders. The Seller agrees promptly to advise RV Centers if at
any time during the period in which a prospectus relating to the offering is
required to be delivered under the 1933 Act, any information contained in the
prospectus concerning the Seller or its Affiliates, the Business and the Assets
becomes incorrect or incomplete in any material respect and to provide the
information needed to correct such inaccuracy. Subject to the Seller's right to
review and approve such information in the Registration Statement set forth in
Section 4.33 above, only insofar as the information relates solely to the Seller
or its Affiliates, the Business and the Assets, the Seller represents and
warrants as to such information, that the Registration Statement will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
6.9 FINAL FINANCIAL STATEMENTS. The Seller shall provide at least five
(5) business days prior to the Consummation Date the consolidated balance sheets
of the Company, audited as of December 31, 1998, and unaudited as of the end of
all fiscal months following December 31, 1998, and ending at least 25 days prior
to the Consummation Date, and the consolidated statement of income, cash flows
and retained earnings of the Company audited for the quarter ending December 31,
1998 and unaudited for the same months as the balance sheets. Such financial
statements shall have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated (except as noted therein), and
will present fairly the financial position and results of operations of the
Company for the periods indicated therein.
6.10 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated herein.
6.11 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act, (ii) such compliance by
the Seller shall be deemed a condition precedent in addition to the conditions
precedent set forth in Section 8 of this Agreement, and such compliance by RV
Centers shall be deemed a condition precedent in addition to the
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conditions precedent set forth in Section 7 of this Agreement, and (iii) the
parties agree to cooperate and use their best efforts to cause all filings
required under the Hart-Scott Act to be made. If filings under the Hart-Scott
Act are required, the costs and expenses thereof (including filing fees) shall
be borne by RV Centers. The obligation of each party to consummate the
transactions contemplated in this Agreement is subject to the expiration or
termination of the waiting period under the Hart- Scott Act, if applicable.
6.12 TRANSFERS OF PERMITS AND INTANGIBLES. The Seller shall use
commercially reasonable efforts to cause all trademarks, trade names, patents,
patent applications, copyrights and other intellectual property owned or held by
the Company or employees of the Company which are material to the operation of
the Business to be assigned or licensed to RV Centers for no additional
consideration.
6.13 DIVIDENDS. The Company may, after the Balance Sheet Date and
before the Consummation Date, pay to the Seller only the distributions expressly
permitted by Annex I hereto.
6.14 AUTHORIZED CAPITAL. Prior to the Consummation Date, RV Centers
shall maintain its authorized capital stock as set forth in the Registration
Statement filed with the SEC except for stock splits, such changes in authorized
capital stock as are made to respond to comments made by the SEC or requirements
of any exchange or automated trading system for which application is made to
register the RV Centers Stock and any changes necessary or advisable in order to
permit the delivery of the opinion contemplated by Section 7.3 hereof.
6.15 EMPLOYEE. RV Centers will have the right but not the obligation to
offer employment to the employees or the Company. RV Centers will have no
liability for accrued wages (including salaries and commissions), severance pay,
sick leave or other benefits or any Plan of any type or nature on account of the
Company's employment of or termination of such employees. Any and all legal
requirements pertaining to such employment terminations will be borne by and be
the responsible of the Company.
6.16 YEAR 2000 COMPLIANCE COST ESTIMATES. Promptly upon execution
hereof, the Seller will undertake an investigation of all Information Technology
suppliers and vendors to determine whether all Information Technology products
purchased, leased, licensed or used by or in connection with the Company, or its
Information Technology, is Year 2000 compliant and, if not, the steps required
to make it Year 2000 compliant. Within thirty-five (35) days hereof, the Seller
shall provide to RV Centers in writing an estimate of the total cost of, and the
time required, to make all the Company's Information Technology Year 2000
compliant.
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7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of the Seller with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions, except Section 7.8. The
obligations of the Seller with respect to actions to be taken on the
Consummation Date are subject to the satisfaction or waiver on or prior to the
Consummation Date of the conditions set forth in Sections 7.1, 7.2, 7.3, 7.5,
7.6, 7.7 and 7.8. As of the Closing Date or, with respect to the conditions set
forth in Sections 7.1, 7.2, 7.3, 7.5, 7.6, 7.7 and 7.8, as of the Consummation
Date, if any such conditions have not been satisfied, the Seller shall have the
right to terminate this Agreement, or in the alternative, waive any condition
not so satisfied. Any act or action of the Seller in consummating the Closing as
of the Consummation Date shall constitute a waiver of any conditions not so
satisfied. However, no such waiver shall be deemed to affect the survival of the
representations and warranties of RV Centers contained in Section 5 hereof.
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of RV Centers contained in this Agreement shall
be true and correct in all material respects as of the Closing Date and the
Consummation Date as though such representations and warranties had been made as
of that time; all of the terms, covenants and conditions of this Agreement to be
complied with and performed by RV Centers and the Buyer on or before the Closing
Date and the Consummation Date shall have been duly complied with and performed
in all material respects; and certificates to the foregoing effect dated the
Closing Date and the Consummation Date, respectively, and signed by the
President or any Vice President of RV Centers shall have been delivered to the
Seller.
7.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Assets or the IPO or the consummation
of the Other Agreements in a manner that would have a Material Adverse Effect
upon RV Centers or any of its stockholders or Subsidiaries.
7.3 OPINIONS. The Seller shall have received an opinion from counsel
for RV Centers and the Buyer, dated the Closing Date, in the form annexed hereto
as Annex III.
7.4 REGISTRATION STATEMENT; MINIMUM VALUE. The Registration Statement
shall have been declared effective by the SEC and not subject to any stop order
proceedings and the underwriters named therein shall have agreed to acquire on a
firm commitment basis, subject to the conditions set forth in the underwriting
agreement, on terms such that the aggregate value of the cash and the number of
shares of RV Centers Stock to be received by the Seller is not less than the
Minimum Value set forth on Annex I.
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7.5 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the transactions contemplated herein and no governmental agency or body shall
have taken any other action or made any request of Seller as a result of which
Seller deems it inadvisable to proceed with the transactions hereunder. All
consents and approvals of third parties listed on Schedule 4.23(c) shall have
been obtained.
7.6 GOOD STANDING CERTIFICATES. RV Centers shall have delivered to the
Seller a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which RV Centers is authorized to do business, showing that RV Centers is in
good standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for RV Centers for all periods prior to the Closing
have been filed and paid and RV Centers shall be in good standing in such states
on the Closing Date and the Consummation Date.
7.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance or series of
events shall have occurred with respect to RV Centers which would constitute a
Material Adverse Effect and no change in the disclosures in the Draft
Registration Statement shall have been made which reflects a Material Adverse
Effect on RV Centers.
7.8 CLOSING OF IPO. The closing of the sale of the RV Centers Stock to
the Underwriters in the IPO shall have occurred on the Consummation Date.
7.9 SECRETARY'S CERTIFICATE. The Seller shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of RV Centers, certifying the truth and correctness of attached copies of RV
Centers's Certificate of Incorporation (including amendments thereto), By-Laws
(including amendments thereto), and resolutions of the boards of directors and,
if required, the stockholders of RV Centers and the Buyer approving RV Centers
and the Buyer entering into this Agreement and the consummation of the
transactions contemplated herein.
7.10 ADVISORY SERVICES AGREEMENTS. The Buyer shall have offered to
enter into an advisory services agreement, substantially in the form of Annex V,
with each of the persons listed in Schedule 8.10.
7.11 OTHER FOUNDING COMPANIES. If a sufficient number of the
transactions contemplated by the Other Agreements with the Other Founding
Companies are not consummated for any reason and as a result (i) RV Centers is
unable to list the RV Centers Stock on the New York Stock Exchange, the American
Exchange or The Nasdaq National Stock Market, subject to official notice of
issuance, on or prior to the Closing Date or (ii) the combined revenue of the
Founding Companies for which the transactions contemplated by this Agreement and
the Other Agreements are consummated is less than $175 million based on the
12-month period ended December 31, 1998.
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7.12 MANAGEMENT LOCK-UP AGREEMENTS. The Chairman, Vice Chairman, other
senior management of RV Centers, J. Christian Baker, III and A. John Kreft shall
have entered into agreements with RV Centers imposing substantially the same
transfer restrictions as provided in Section 14.1 hereof, on seventy-five
percent (75%) of the shares of RV Centers Stock held by such individuals, their
spouses and children and trusts for the benefit of such individuals.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RV CENTERS
The obligations of RV Centers and the Buyer with respect to actions to
be taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions, except Section
8.11. The obligations of RV Centers and the Buyer with respect to actions to be
taken on the Consummation Date are subject to the satisfaction or waiver on or
prior to the Consummation Date of the conditions set forth in Sections 8.1, 8.2,
8.3, 8.4, 8.5, and 8.11. As of the Closing Date or, with respect to the
conditions set forth in Sections 8.1, 8.2, 8.3, 8.5 and 8.11, as of the
Consummation Date, if any such conditions have not been satisfied, RV Centers
and the Buyer shall have the right to terminate this Agreement, or waive any
such condition. Any act or action of RV Centers and the Buyer in consummating
the Closing or delivering the certificates representing RV Centers Stock as of
the Consummation Date shall constitute a waiver of any conditions not so
satisfied. However, no such waiver shall be deemed to affect the survival of the
representations and warranties contained in Section 4 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the Seller contained in this Agreement shall
be true and correct in all material respects as of the Closing Date and the
Consummation Date with the same effect as though such representations and
warranties had been made on and as of such date; all of the terms, covenants and
conditions of this Agreement to be complied with or performed by the Seller on
or before the Closing Date or the Consummation Date, as the case may be, shall
have been duly performed or complied with in all material respects; and the
Seller shall have delivered to RV Centers and the Buyer a certificate dated the
Closing Date and the Consummation Date, respectively, and signed by the Seller
to such effect.
8.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Assets or the IPO.
8.3 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company or Business which would constitute a
Material Adverse Effect, and the Company or Business shall not have suffered any
material loss or damages to any of its properties or assets, whether or not
covered by insurance, which change, loss or damage materially affects or impairs
the ability of the Company to conduct the Business.
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8.4 SELLER'S RELEASE. Seller shall have delivered to RV Centers and the
Buyer an instrument dated the Closing Date, which shall be effective only upon
the occurrence of the Consummation Date, releasing the Assets, the Business and
RV Centers and the Buyer from (i) any and all claims of the Seller against the
Assets, the Business and RV Centers and the Buyer and (ii) obligations of the
Company, RV Centers and the Buyer to the Seller, except for (A) continuing
obligations to Seller relating to his employment pursuant to employment
agreements entered into as specified in Section 8.10 hereof, (B) obligations
arising under this Agreement or the transactions contemplated hereby. In the
event that the Consummation Date does not occur, then the release instrument
referenced herein shall be void and of no further force or effect.
8.5 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 8.5, all existing agreements between the Company and Affiliates of the
Seller (and between the Company and entities controlled by the Seller) shall
have been canceled effective prior to or as of the Consummation Date.
8.6 OPINION OF COUNSEL. RV Centers and the Underwriters shall have
received an opinion from Counsel to the Seller, dated the Closing Date,
substantially in the form annexed hereto as Annex IV.
8.7 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 4.23(c) other than
manufacturers of recreational vehicles, shall have been obtained; provided,
however, the Seller shall have used its best efforts, in cooperation with RV
Centers, to obtain the consent of the recreational vehicle manufacturers listed
in Schedule 4.23(c), and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the purchase and sale of the Assets and no
governmental agency or body shall have taken any other action or made any
request of RV Centers or the Buyer as a result of which RV Centers or the Buyer
deems it inadvisable to proceed with the transactions hereunder.
8.8 GOOD STANDING CERTIFICATES. The Seller shall have delivered to RV
Centers and the Buyer a certificate, dated as of a date no earlier than ten days
prior to the Closing Date, duly issued by the appropriate governmental
authority, in each state in which the Company is authorized to do business,
showing the Company is in good standing and authorized to do business and that
all state franchise and/or income tax returns and taxes for the Company for all
periods prior to the Closing have been filed and paid.
8.9 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
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8.10 ADVISORY SERVICES AGREEMENTS. Each of the persons listed on
Schedule 8.10 shall have entered into an advisory services agreement
substantially in the form of Annex V hereto.
8.11 CLOSING OF IPO. The closing of the sale of the RV Centers Stock to
the Underwriters in the IPO shall have occurred simultaneously with the
Consummation Date hereunder and the Seller shall have delivered to the
Underwriters such customary closing documents as they may reasonably request.
8.12 FIRPTA CERTIFICATE. The Seller shall have delivered to RV Centers
and the Buyer a certificate to the effect that he is not a foreign person
pursuant to Section 1.1445-2(b) of the Treasury regulations.
9. COVENANTS OF RV CENTERS AND THE SELLER AFTER CLOSING
9.1 PREPARATION AND FILING OF TAX RETURNS.
(i) The Seller shall file or cause to be filed all income tax
returns (Federal, state, local or otherwise) of any Acquired Party for
all taxable periods that end on or before the Consummation Date, and
shall permit RV Centers to review all such tax returns prior to such
filings except with respect to information pertaining to members of a
consolidated group other than the Company. The Seller shall pay or
cause to be paid all Tax liabilities (in excess of all amounts already
paid with respect thereto or properly accrued or reserved with respect
thereto on the Company Financial Statements) shown by such tax returns
to be due or otherwise attributable to such tax returns.
(ii) RV Centers shall file or cause to be filed all separate
Returns of, or that include, any Acquired Party for all taxable periods
ending after the Consummation Date.
(iii) Each party hereto shall, and shall cause its
Subsidiaries and Affiliates to, provide to each of the other parties
hereto such cooperation and information as any of them reasonably may
request in filing any Return, amended Return or claim for refund,
determining a liability for Taxes or a right to refund of Taxes or in
conducting any audit or other proceeding in respect of Taxes. Such
cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by Taxing Authorities and
relevant records concerning the ownership and Tax basis of property,
which such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to
provide explanation of any documents or information so provided.
Subject to the preceding sentence, each party required to file Returns
pursuant to this Agreement shall bear all costs of filing such Returns.
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9.2 DIRECTORS. Upon execution of this Agreement by the Seller and
execution of similar agreements by the Other Founding Companies and their
stockholders, each Founding Company shall vote for five representatives to
become Directors of RV Centers. No cumulative voting is permitted. RV Centers
shall appoint those five persons receiving the most votes as directors promptly
following the Consummation Date. The other six persons identified in the
Registration Statement shall also be appointed Directors at the same time, if
not presently on the RV Centers Board of Directors.
9.3 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. RV
Centers shall use reasonable efforts to have the Seller released from any and
all guarantees of the Company's indebtedness, including bond obligations,
identified on Schedule 9.3. Prior to obtaining the release of such guarantees,
RV Centers shall, if requested, provide its guarantee of such indebtedness to
the lenders thereof. In the event that RV Centers cannot obtain such releases
from the lenders of any such guaranteed indebtedness identified on Schedule 9.3
on or prior to 180 days subsequent to the Consummation Date, RV Centers shall
promptly pay off or otherwise refinance or retire such indebtedness such that
the Seller's personal liability shall be released. RV Centers will indemnify the
Seller against any loss or damage suffered as a result of the personal
guarantees.
9.4 ACCESS TO RECORDS. RV Centers agrees (i) to hold all of the books
and records of the Company existing on the Consummation Date and not to destroy
or dispose of any such books and records for a period of 5 years from the
Consummation Date or such longer time as may be required by law, and (ii)
following the Consummation Date to afford the Seller, his accountants and
counsel, during normal business hours, upon reasonable request, access to such
books, records and other data of the Company to the extent that such access may
be requested for a legitimate purpose at no cost to Seller (other than for
reasonable out-of-pocket expenses).
9.5 USE OF NAME. From and after the Closing, the Company and Seller
shall cease using the name "Young's RV Center" or any similar name.
10. INDEMNIFICATION
The Seller and RV Centers each make the following covenants that are
applicable to them, respectively:
10.1 INDEMNIFICATION BY THE SELLER. The Seller covenants and agrees
that he will indemnify, defend, protect and hold harmless RV Centers, the Buyer
and their respective Affiliates at all times, from and after the date of this
Agreement until the Expiration Date (provided that for purposes of Section
10.1(iii) below, the Expiration Date shall be the date on which the applicable
statute of limitations expires), from and against all claims, damages (including
consequential, punitive or exemplary), actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees, consulting fees and expenses of
investigation and environmental response) incurred by RV Centers and the Buyer
as a result of or arising from (i) any breach of the representations and
warranties of the Seller set forth herein or on the schedules or certificates
delivered in connection herewith, (ii) any breach of
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any agreement on the part of the Seller under this Agreement, or (iii) any
liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to the
Company, the Assets or the Business which was based upon and in conformity with
information provided in writing to RV Centers or its counsel by the Seller
expressly for use in the Registration Statement or any prospectus forming a part
thereof and is contained in the Registration Statement or any prospectus forming
a part thereof, or any amendment thereof or supplement thereto, or arising out
of or based upon any omission or alleged omission to state therein a material
fact relating to the Seller required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading to the extent such omission or alleged omission is based upon the
failure of the Seller to provide to RV Centers the information containing that
fact in any Schedule hereto or otherwise to provide the information to RV
Centers in writing, but such indemnity shall not apply to the extent that such
untrue statement (or alleged untrue statement) was made in, or omission (or
alleged omission) occurred in, any preliminary prospectus and the Seller
provided, in writing, corrected information to RV Centers counsel and to RV
Centers for inclusion in the final prospectus, and such information was not so
included or properly delivered, and provided further, that the Seller shall not
be liable for any indemnification obligation pursuant to this Section 10.1 to
the extent solely attributable to a breach of any representation, warranty or
agreement made herein individually by the Seller.
The Seller covenants and agrees that he will indemnify, defend, protect
and hold harmless RV Centers, the Buyer and their respective Affiliates at all
times, from and after the date of this Agreement from and against all claims,
damages (including consequential, punitive or exemplary), actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees, consulting
fees and expenses of investigation and environmental response) incurred by RV
Centers and the Buyer as a result of or arising from (i) any debt, liability or
other obligation of the Company or relating to the Business which was incurred
prior to the Closing Date and is not expressly assumed by the Buyer, and (ii)
ownership or use of the Assets by the Company or the Seller or services provided
or business transacted by the Company prior to the Closing Date and which is not
expressly assumed by the Buyer
Each of RV Centers and the Buyer acknowledges and agrees that other
than the representations and warranties of the Seller specifically contained in
this Agreement, there are no representations or warranties of the Seller, either
express or implied, with respect to the transactions contemplated by this
Agreement, the Seller or his assets, liabilities and the Business.
RV Centers and the Seller further acknowledge and agree that their sole
and exclusive remedy with respect to any and all claims for breach of this
Agreement and the transactions contemplated in this Agreement, shall be pursuant
to the indemnification provisions set forth in this Section 10. RV Centers and
the Seller hereby waive to the fullest extent permitted under applicable law,
any and all other rights, claims and causes of action they or any indemnified
person may have
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against the Seller relating to this Agreement or the transactions arising under
or based upon any Federal, state, local or foreign statute, law, rule,
regulation or otherwise.
10.2 INDEMNIFICATION BY RV CENTERS. RV Centers covenants and agrees
that it will indemnify, defend, protect and hold harmless the Seller at all
times from and after the date of this Agreement until the Expiration Date
(provided that for purposes of Section 10.2(iii) below, the Expiration Date
shall be the date on which the applicable statute of limitations expires), from
and against all claims, damages (including consequential, punitive or
exemplary), actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees, consulting fees and expenses of investigation and environmental
response) incurred by the Seller as a result of or arising from (i) any breach
by RV Centers of its representations and warranties set forth herein or on the
schedules or certificates delivered in connection herewith, (ii) any breach of
any agreement on the part of RV Centers under this Agreement; (iii) all Assumed
Liabilities or (iv) any liability under the 1933 Act, the 1934 Act or other
Federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact relating to RV Centers or any of the Founding Companies contained in any
preliminary prospectus, the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material fact
relating to RV Centers or any of the Founding Companies required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, except to the extent
such statement or omission is based upon an untrue statement or alleged untrue
statement, or omission or alleged omission, made therein in reliance upon, and
in conformity with, the representations and warranties of the Seller
specifically contained in this Agreement or other information furnished to RV
Centers by the Seller in writing specifically for inclusion therein.
10.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 10.1, 10.2, or 10.6
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any such proceeding
without the written consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by
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Indemnifying Party, provided that if counsel to the Indemnifying Party shall
have a conflict of interest that prevents counsel for the Indemnifying Party
from representing Indemnified Party, Indemnified Party shall have the right to
participate in such matter through counsel of its own choosing and Indemnifying
Party will reimburse the Indemnified Party for the reasonable expenses of its
counsel.
After the Indemnifying Party has notified the Indemnified
Party of its intention to undertake to defend or settle any such asserted
liability, and for so long as the Indemnifying Party diligently pursues such
defense, the Indemnifying Party shall not be liable for any additional legal
expenses incurred by the Indemnified Party in connection with any defense or
settlement of such asserted liability, except (i) as set forth in the preceding
sentence and (ii) to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses.
If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim involving only the payment of
money and the Indemnified Party refuses to consent to such settlement, then the
Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person. Upon agreement as to such settlement between said Third Person and
the Indemnifying Party, the Indemnifying Party shall, in exchange for a complete
release from the Indemnified Party, promptly pay to the Indemnified Party the
amount agreed to in such settlement and the Indemnified Party shall, from that
moment on, bear full responsibility for any additional costs of defense which it
subsequently incurs with respect to such claim and all additional costs of
settlement or judgment. If the Indemnifying Party does not undertake to defend
such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnified Party may settle such matter, and
the Indemnifying Party shall reimburse the Indemnified Party for the settlement
and any other liabilities or expenses incurred by the Indemnified Party in
connection therewith, provided, however, that under no circumstances shall the
Indemnified Party settle any Third Person claim without the written consent of
the Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. All settlements hereunder shall effect a complete release of the
Indemnified Party, unless the Indemnified Party otherwise agrees in writing.
10.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
10 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
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10.5 LIMITATIONS ON INDEMNIFICATION. (a) RV Centers and the other
persons or entities indemnified pursuant to Section 10.1 or any other indemnity
hereunder, shall not assert any claim for indemnification pursuant to Section
10.1 against the Seller until such time as the aggregate of all claims which
such persons may have against such Seller shall exceed an amount (the "Threshold
Amount") equal to one percent of the sum of (x) the cash paid to the Seller
pursuant to Section 2.1 and (y) the value of the RV Centers Stock delivered to
the Seller pursuant to Section 2.1 valued at the initial public offering price
as set forth in the Registration Statement, and then only to the extent of
claims in excess of such sum. Seller shall not assert any claim for
indemnification hereunder against RV Centers until such time as the aggregate of
all claims which Seller may have against RV Centers shall exceed the Threshold
Amount.
(b) No person shall be entitled to indemnification under this Section
10 if and to the extent that such Person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement.
(c) Notwithstanding any other term of this Agreement, the Seller shall
not be liable under this Section 10 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds (including cash and RV Centers Stock)
received by the Seller (valued as of the Consummation Date) in connection with
the purchase and sale of the Assets. For purposes of this paragraph, the RV
Centers Stock shall be valued at the initial public offering price to the public
as set forth in the final prospectus deemed by Rule 430A of the 1933 Act
Regulations to constitute a part of the Registration Statement.
(d) The Seller may pay any indemnification obligation under Section 10
by means of the payment of cash or a combination of the payment of cash and the
delivery to RV Centers of shares of RV Centers Stock; provided that the
percentage of the indemnification obligation satisfied by means of the delivery
of shares of RV Centers Stock does not exceed the percentage of RV Centers Stock
comprising the total consideration paid to the Seller by RV Centers pursuant to
Annex I. For the purpose of crediting the Seller for payments made to RV Centers
by means of delivery of shares of RV Centers Stock, the RV Centers Stock shall
be valued at the average closing price as reported on the New York Stock
Exchange (or other national exchange or quotation system) on the five trading
days immediately preceding delivery of the shares pursuant to this section.
(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds actually realized by such party
(or, in the case of RV Centers, by RV Centers, the Buyer or any subsidiary of RV
Centers) and such correlative insurance proceeds or other third party indemnity
or reimbursement proceeds shall be net of any insurance premium or other
incremental cost or expense owed or payable to any third party which becomes due
as a result of such claim. RV Centers shall use commercially reasonable efforts
to pursue any available insurance coverage or other rights of indemnity or
reimbursement from third parties with respect to any such loss, liability or
expense.
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(f) The limitations on liability set forth in this Section 10.5 shall
not apply to breaches of representations, warranties or covenants set forth in
Sections 4.5, 4.22 and 4.29(c).
10.6 TAX INDEMNIFICATION BY THE SELLER. The Seller covenants and agrees
that he will indemnify, defend, protect and hold harmless RV Centers and the
Buyer from and against the entirety of any adverse consequences the Buyer or RV
Centers may suffer resulting from, arising out of, relating to, in the nature
of, or caused by any liability of the Company or Seller for the unpaid Taxes of
any past, current or future member of the consolidated tax group of which the
Company is or was a member on or prior to the Consummation Date pursuant to Reg.
ss.1.1502-6 (or any similar provision of state, local or foreign law), for any
periods prior to the Closing Date, as a transferee or successor, by contract, or
otherwise.
10.7 BULK SALES COMPLIANCE. Seller agrees to and does hereby indemnify
and hold the Buyer and RV Centers harmless from and against all claims, losses,
demands, damages, liabilities, costs and expenses resulting from or relating to
non-compliance by Seller or the Company with any applicable bulk transfer laws
in connection with the sale of Assets.
11. TERMINATION OF AGREEMENT
11.1 TERMINATION. This Agreement may be terminated at any time prior to
the Consummation Date solely:
(i) by mutual consent of the board of directors of RV Centers
and the Seller;
(ii) by the Seller, on the one hand, or by RV Centers (acting
through its board of directors), on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall not
have been consummated by July 31, 1999 unless the failure of such
transactions to be consummated is due to the willful failure of the
party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed
by it prior to or on the Consummation Date;
(iii) by the Seller, on the one hand, or by RV Centers, on the
other hand, if a material breach or default shall be made by the other
party in the observance or in the due and timely performance of any of
the covenants or agreements contained herein, and the curing of such
default shall not have been made on or before the Consummation Date or
by the Seller, if the conditions set forth in Section 7 hereof have not
been satisfied or waived as of the Closing Date or the Consummation
Date, as applicable, or by RV Centers, if the conditions set forth in
Section 8 hereof have not been satisfied or waived as of the Closing
Date or the Consummation Date, as applicable; or
(iv) pursuant to Section 3 hereof.
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11.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section
6.7, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses.
12. NONCOMPETITION
12.1 PROHIBITED ACTIVITIES. The Seller will not, without the prior
written consent of RV Centers, for a period of five (5) years following the
Consummation Date, for any reason whatsoever, directly or indirectly, for
himself or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business or operation selling any products or
services in direct competition with any products or services sold by RV
Centers or any Subsidiary thereof, within one hundred (100) miles of
where RV Centers or any Other Founding Company conducted business prior
to the Effective Time (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of RV Centers or any Subsidiary thereof in a
sales or service representative or managerial capacity for the purpose
or with the intent of enticing such employee away from or out of the
employ of RV Centers or any Subsidiary thereof;
(iii) call upon any Person or entity which is, at that time,
or which has been, within one (1) year prior to the Consummation Date,
a customer of RV Centers or any Subsidiary thereof, of the Company or
of any of the Other Founding Companies within the Territory for the
purpose of soliciting or selling products or services in direct
competition with any products or services sold by RV Centers or any
Subsidiary thereof within the Territory;
(iv) call upon any prospective acquisition candidate, on the
Seller's own behalf or on behalf of any competitor which candidate was,
to the actual knowledge of the Seller after reasonable inquiry, either
called upon by RV Centers or any Subsidiary thereof or for which RV
Centers or any Subsidiary thereof made an acquisition analysis, for the
purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of
the Company to any person, firm, partnership, corporation or business
for any reason or purpose whatsoever except to the extent that the
Company has in the past disclosed such information to the public for
valid business reasons.
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Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit the Seller from acquiring as a passive investment (i) not more than
three percent (3%) of the capital stock of a competing business whose stock is
traded on a national securities exchange, the NASDAQ Stock Market or on an
over-the-counter or similar market, or (ii) not more than five percent (5%) of
the capital stock of a competing business whose stock is not publicly traded.
12.2 DAMAGES. Because of the difficulty of measuring economic losses to
RV Centers as a result of a breach of the covenant set forth in Section 12.1,
and because of the immediate and irreparable damage that could be caused to RV
Centers for which it would have no other adequate remedy, the Seller agrees that
the covenant set forth in Section 12.1 may be enforced by RV Centers, in the
event of breach by the Seller, by injunctions and restraining orders.
12.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 12 impose a reasonable restraint on the
Seller in light of the activities and business of RV Centers and the
Subsidiaries thereof on the date of the execution of this Agreement and the
current plans of RV Centers; but it is also the intent of RV Centers and the
Seller that such covenants be construed and enforced in accordance with the
changing activities, business and locations of RV Centers and its subsidiaries
throughout the term of this covenant including, with respect to subparagraph
12.1(i), any new locations in which RV Centers or any of its Subsidiaries
conducts business during the term of this covenant.
12.4 SEVERABILITY; REFORMATION. The covenants in this Section 12 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
12.5 INDEPENDENT COVENANT. All of the covenants in this Section 12
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of the Seller
against RV Centers or any subsidiary thereof, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by RV
Centers of such covenants. It is specifically agreed that the period of five (5)
years stated at the beginning of this Section 12, during which the agreements
and covenants of the Seller made in this Section 12 shall be effective, shall be
computed by excluding from such computation any time during which the Seller is
in violation of any provision of this Section 12. The covenants contained in
Section 12 shall not be affected by any breach of any other provision hereof by
any party hereto and shall have no effect if the transactions contemplated in
this Agreement are not consummated.
12.6 MATERIALITY. The Seller hereby agrees that this covenant is a
material and substantial part of this transaction.
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13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
13.1 THE SELLER. The Seller recognizes and acknowledges that he had in
the past, currently has, and in the future may possibly have, access to certain
confidential information of the Company or the Business, the Other Founding
Companies, and/or RV Centers, such as operational policies, customer lists, and
pricing and cost policies that are valuable, special and unique assets of the
Company's, the Other Founding Companies' and/or RV Centers's respective
businesses. The Seller agrees that he will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of RV
Centers, provided that such representatives agree to the confidentiality
provisions of this Section 13.1, (b) following the Closing, such information may
be disclosed by the Seller as is required in the course of performing his duties
for RV Centers or its Affiliates and (c) to counsel and other advisers, provided
that such advisers (other than counsel) agree to the confidentiality provisions
of this Section 13.1, unless (i) such information becomes known to the public
generally through no fault of the Seller, (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, that prior
to disclosing any information pursuant to this clause (ii), the Seller shall, if
possible, give prior written notice thereof to RV Centers and provide RV Centers
with the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by the Seller of the provisions of this Section, RV Centers
shall be entitled to an injunction restraining the Seller from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting RV Centers from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages. In the
event the transactions contemplated in this Agreement are not consummated,
Seller shall have none of the above-mentioned restrictions on their ability to
disseminate confidential information with respect to the Company or the
Business.
13.2 RV CENTERS. RV Centers recognizes and acknowledges that it had in
the past and currently has access to certain confidential information of the
Company, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Company. RV Centers agrees that,
prior to the Closing, or if the transactions contemplated in this Agreement are
not consummated, it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the Seller, provided
that such representatives agree to the confidentiality provisions of this
Section 13.2, (b) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
13.2, (c) to the Other Founding Companies and their representatives pursuant to
Section 6.1(a), unless (i) such information becomes known to the public
generally through no fault of RV Centers, (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, that prior
to disclosing any information pursuant to this clause (ii), RV Centers shall, if
possible, give prior written notice thereof to the Seller and provide the Seller
with the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, and (d) to the public to the
extent necessary or
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advisable in connection with the filing of the Registration Statement and the
IPO and the securities laws applicable thereto. In the event of a breach or
threatened breach by RV Centers of the provisions of this Section, the Seller
shall be entitled to an injunction restraining RV Centers from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting the Seller from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages.
13.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Sections 13.1 and 13.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
13.4 SURVIVAL. The obligations of the parties under this Article 13
shall survive the termination of this Agreement.
14. TRANSFER RESTRICTIONS
14.1 TRANSFER RESTRICTIONS. For a period of two years from the Closing
Date, with respect to 80% of the shares of RV Centers Stock received by such
Stockholder pursuant to this Agreement, and for a period of one year from the
Closing Date, with respect to the remaining 20% of such shares, the Seller shall
not (i) sell, assign, exchange, transfer, pledge, or otherwise dispose of any
such shares of RV Centers Stock or any securities convertible into, exchangeable
or exercisable for any such shares of RV Centers Stock, (ii) grant any option to
purchase, or otherwise enter into any contract or arrangement to sell, assign,
transfer, pledge or otherwise dispose of, any such shares of RV Centers Stock,
or (iii) enter into any swap, collar, short sale or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequences of ownership of the RV Centers Stock, whether any such
swap, collar, short sale agreement or transaction is to be settled by delivery
of shares of RV Centers Stock or other securities, by the delivery or payment of
cash or otherwise. The foregoing restrictions shall not apply, however, to (a)
the sale of shares of RV Centers Stock, and entering into agreements relating to
the sale of shares of RV Centers Stock, pursuant to Section 16 hereof, or (b)
transfers to (I) immediate family members of the Seller who agree to be bound by
the restrictions set forth in this Section 14.1, (II) trusts, limited
partnerships or other estate planning entities for the benefit of the Seller or
family members of the Seller which have agreed, through action taken by the
trustees, partners or other persons having authority to bind the trust, limited
partnership or other estate planning entity, to be bound by such restrictions
and to be liable for transferring Seller's indemnification obligations
hereunder, (III) any charitable organization that qualifies for receipt of
charitable contributions under Section 170(c) of the Code which agrees to be
bound by such restrictions and to be liable for transferring Seller's
indemnification obligations hereunder, or (c) for transfers of RV Centers Stock
to RV Centers pursuant to Section 10.5(d).
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The certificates evidencing the RV Centers Stock delivered to the
Seller pursuant to Section 3 of this Agreement will bear a legend substantially
in the form set forth below and containing such other information as RV Centers
may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF WITHOUT THE WRITTEN
CONSENT OF THE ISSUER OR PURSUANT TO CERTAIN LIMITED EXCEPTIONS CONTAINED IN
SECTION 14.1 TO THAT CERTAIN ASSET PURCHASE AGREEMENT BETWEEN RV CENTERS, INC.,
YOUNG'S RV CENTERS, INC. AND ROY B. PADGETT DATED JANUARY 12, 1999, AND THE
ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
_______ [INSERT THE ACTUAL SECOND ANNIVERSARY OF CLOSING DATE] EXCEPT FOR THE
ABOVE-REFERENCED LIMITED EXCEPTIONS. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15. FEDERAL SECURITIES ACT REPRESENTATIONS
15.1 COMPLIANCE WITH LAW. The Seller acknowledges that the shares of RV
Centers Stock to be delivered to the Seller pursuant to this Agreement have not
been and will not be registered under the 1933 Act (except as provided in
Section 16 hereof) and therefore may not be resold without compliance with the
1933 Act. The RV Centers Stock to be acquired by the Seller pursuant to this
Agreement is being acquired solely for his own account, for investment purposes
only, and with no present intention of distributing, selling or otherwise
disposing of it in connection with a distribution. The Seller covenants,
warrants and represents that none of the shares of RV Centers Stock issued to
the Seller will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all of the applicable
provisions of the 1933 Act and the rules and regulations of the SEC or pursuant
to exceptions therefrom. All the RV Centers Stock shall bear the following
legend in addition to the legend required under Section 14 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE SECURITIES LAW OR SUCH SHARES ARE
SOLD OR TRANSFERRED PURSUANT TO AN EXEMPTION THEREFROM.
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15.2 ECONOMIC RISK; SOPHISTICATION. The Seller represents and warrants
that he is able to bear the economic risk of an investment in the RV Centers
Stock to be acquired pursuant to this Agreement and can afford to sustain a
total loss of such investment. The Seller has substantial knowledge and
experience in making investment decisions of this type (or is relying on
qualified purchaser representatives with such knowledge and experience in making
this decision), and is capable, either individually or with such purchaser
representatives, of evaluating the merits and risks of this investment. The
Seller has had an adequate opportunity to ask questions and receive answers from
the officers of RV Centers concerning any and all matters relating to the
transactions described herein including, without limitation, the background and
experience of the current and proposed officers and directors of RV Centers, the
plans for the operations of the business of RV Centers, the business, operations
and financial condition of the Founding Companies other than the Seller, and any
plans for additional acquisitions and the like. The Seller has asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to his satisfaction. Except as set forth on Schedule 15.2,
the Seller is an "accredited investor" as defined in Rule 501 of the 1933 Act.
16. REGISTRATION RIGHTS
16.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the
Consummation Date, whenever RV Centers proposes to register any RV Centers Stock
for its own or others' accounts under the 1933 Act for a public offering, other
than (i) any shelf or other registration of shares to be used as consideration
for acquisitions of additional businesses by RV Centers and (ii) registrations
relating to employee benefit plans, RV Centers shall promptly give the Seller
written notice of its intent to do so. Upon the written request of the Seller
given within 10 days after receipt of such notice, RV Centers shall cause to be
included in such registration all of the RV Centers Stock issued to the Seller
pursuant to this Agreement (including any stock issued as or issuable upon the
conversion or exchange of any convertible security, warrant, right or other
security which is issued by RV Centers as a stock split, dividend or other
distribution with respect to, or in exchange for, or in replacement of such RV
Centers Stock) which the Seller requests, other than shares of RV Centers Stock
which may be sold under Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act, and other than shares of RV Centers Stock that
have been theretofore sold by the Seller in accordance with the 1933 Act,
provided that RV Centers shall have the right to reduce pro rata the number of
shares of each seller included in such registration to the extent that inclusion
of such shares could, in the written opinion of tax counsel to RV Centers or its
independent auditors, jeopardize the status of the transactions contemplated
hereby and by the Registration Statement as a tax-free organization under
Section 351 of the Code. In addition, if RV Centers is advised in writing in
good faith by any managing underwriter of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 16.1 that the number of shares to be sold by persons other than RV
Centers is greater than the number of such shares which can be offered without
adversely affecting the success of the offering, RV Centers may reduce pro rata
(among the Seller and all other selling security holders in the offering) the
number of shares offered for the accounts of such persons (based upon the number
of shares held by such person) to a number deemed satisfactory by such managing
underwriter.
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The right to cause RV Centers to register shares of RV Centers Stock
under this Agreement may be assigned to any transferee or assignee of Seller
permitted under Section 14.1.
16.2 REGISTRATION PROCEDURES. Whenever RV Centers is required to
register shares of RV Centers Stock pursuant to Section 16.1, RV Centers will,
as expeditiously as possible:
(i) Prepare and file with the SEC a registration statement
with respect to such shares and use commercially reasonable efforts to
cause such registration statement to become effective (provided that
before filing a registration statement or prospectus or any amendments
or supplements or term sheets thereto, RV Centers will furnish a
representative of the Seller with copies of all such documents proposed
to be filed and provide the Seller an opportunity to comment on the
information therein relating to the Seller) as promptly as practical;
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days;
(iii) Furnish to the Seller upon his request such number of
copies of such registration statement, each amendment and supplement
thereto and the prospectus included in such registration statement
(including each preliminary prospectus and any term sheet associated
therewith), and such other documents as the Seller may reasonably
request in order to facilitate the disposition of the relevant shares;
(iv) Use commercially reasonable efforts to register or
qualify the securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as shall
be reasonably requested by the Seller, and to keep such registration or
qualification effective during the period such registration statement
is required to be kept effective, provided that RV Centers shall not be
required to become subject to taxation, to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions;
(v) Cause all such shares of RV Centers Stock to be listed or
included on any securities exchanges or trading systems on which
similar securities issued by RV Centers are then listed or included;
and
(vi) Notify the Seller at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act within the
period that RV Centers is required to keep the registration statement
effective of the happening of any event as a result of which the
prospectus included in such registration statement (as then in effect),
together with any associated term sheet, contains an untrue statement
of a material fact or omits any fact not misleading, and, at the
request of the Seller, RV Centers will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of the
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<PAGE> 65
covered shares, such prospectus will not contain an untrue statement of
material fact or omit to state any fact not misleading.
All expenses incurred in connection with the registration under this
Article 16 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall be
borne by RV Centers.
16.3 INDEMNIFICATION.
(a) In connection with any registration under Section 16.1, RV
Centers shall indemnify, to the extent permitted by law, the Seller against all
losses, claims, damages, liabilities and expenses arising out of or resulting
from any untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or associated term
sheet or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading except insofar as the same are caused by or contained in or omitted
from any information furnished in writing to RV Centers by the Seller expressly
for use therein or by the Seller's failure to deliver a copy of the registration
statement or prospectus or any amendment or supplements thereto after RV Centers
has furnished the Seller with a sufficient number of copies of the same.
(b) In connection with any registration under Section 16.1,
the Seller shall furnish to RV Centers in writing such information as is
reasonably requested by RV Centers for use in any such registration statement or
prospectus and will indemnify, to the extent permitted by law, RV Centers, its
directors and officers and each person who controls RV Centers (within the
meaning of the 1933 Act) against any losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement or material fact
or any omission or alleged omission of a material fact required to be stated in
the registration statement or prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein not misleading, but only to
the extent that such untrue or alleged untrue statement or omission or alleged
omission is contained in or omitted from information so furnished in writing by
the Seller specifically for use in preparing the registration statement.
Notwithstanding the foregoing, the liability of the Seller under this Section
16.3 shall be limited to an amount equal to the net proceeds actually received
by the Seller from the sale of the relevant shares covered by the registration
statement.
(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties' reasonable
judgment, a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Any failure to give prompt notice shall deprive a party of
its right to indemnification hereunder only to the extent that such failure
shall have adversely affected the indemnifying party. If the defense of any
claim is assumed, the indemnifying party will not be subject to any liability
for any settlement
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<PAGE> 66
made without its consent (but such consent shall not be unreasonably withheld).
An indemnifying party that is not entitled or elects not, to assume the defense
of a claim, will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party, a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
16.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 16.1 covering an underwritten registered offering, RV
Centers and the Seller agree to enter into a written agreement with the managing
underwriters in such form and containing such provisions as are customary in the
securities business for such an arrangement between such managing underwriters
and companies of RV Centers's size and investment stature, including a customary
indemnification agreement; provided, however, that the Seller shall be excluded
from any indemnification of the underwriters other than with respect to
information provided by the Seller to RV Centers or the managing underwriters
specifically for use in the registration statement.
16.5 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of RV
Centers stock to the public without registration, RV Centers agrees to use
commercially reasonable efforts to:
(i) make and keep public information regarding RV Centers
available as those terms are understood and defined in Rule 144 under
the 1933 Act for a period of four years beginning 90 days following the
effective date of the Registration Statement;
(ii) file with the SEC in a timely manner all reports and
other documents required of RV Centers under the 1933 Act and the 1934
Act at any time after it has become subject to such reporting
requirements; and
(iii) so long as the Seller owns any restricted RV Centers
Common Stock, furnish to the Seller forthwith upon written request a
written statement by RV Centers as to its compliance with the current
public information requirements of Rule 144 (at any time from and after
90 days following the effective date of the Registration Statement, and
of the 1933 Act and the 1934 Act (any time after it has become subject
to such reporting requirements), a copy of the most recent annual or
quarterly report of RV Centers, and such other reports and documents so
filed as the Seller may reasonably request in availing itself of any
rule or regulation of the SEC allowing the Seller to sell any such
shares without registration.
16.6 AVAILABILITY OF RULE 144. RV Centers shall not be obligated to
register shares of RV Centers Stock held by the Seller at any time when the
resale provisions of Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act are available to Seller.
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<PAGE> 67
17. GENERAL
17.1 COOPERATION. The Seller and RV Centers shall each deliver or cause
to be delivered to the other on the Consummation Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Seller will cooperate and use its reasonable efforts to have his and the
Company's present officers, authorized representatives and employees cooperate
with RV Centers on and after the Consummation Date in furnishing information,
evidence, testimony and other assistance in connection with any tax return
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Consummation
Date.
17.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of RV Centers, and the heirs and legal representatives of the Seller.
17.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Seller and RV
Centers and supersede any prior agreement and understanding relating to the
subject matter of this Agreement. This Agreement, upon execution, constitutes a
valid and binding agreement of the parties hereto enforceable in accordance with
its terms and subject to Section 6.7 may be modified or amended only by a
written instrument executed by the Seller and RV Centers. Any disclosure made on
any Schedule delivered pursuant hereto shall be deemed to have been disclosed
for purposes of any other Schedule required hereby, provided that the Seller
shall make a good faith effort to cross reference disclosure, as necessary or
advisable, between related Schedules.
17.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument. A telecopied
facsimile of an executed counterpart of this Agreement shall be sufficient to
evidence the binding agreement of each party to the terms hereof. However, each
party agrees to return to the other parties an original, duly executed
counterpart of this Agreement promptly after delivery of a telecopied facsimile
thereof.
17.5 BROKERS AND AGENTS. Except as disclosed on Schedule 17.5, each
party represents and warrants that it employed no broker or agent in connection
with this transaction and agrees to indemnify the other parties hereto against
all loss, cost, damages or expense arising out of claims for fees or commission
of brokers employed or alleged to have been employed by such indemnifying party.
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<PAGE> 68
17.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, RV Centers will pay or reimburse Baker Kreft Funding I,
L.L.C. and its Affiliates for the fees, expenses and disbursements of RV Centers
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto and the
IPO, including all costs and expenses incurred in the performance and compliance
with all conditions to be performed by RV Centers under this Agreement, the fees
and expenses of Andrews & Kurth L.L.P., and any other person or entity retained
by RV Centers or Baker Kreft Funding I, L.L.C. ("BKF") and the costs of
preparing the Registration Statement. All expenses, including, but not limited
to, all professional fees of accountants, lawyers, tax consultants and others,
incurred by the Company or Seller in connection with this Agreement shall be
paid by the Seller; provided, however, that any such amount paid by the Seller
shall be disclosed to RV Centers in writing prior to Closing and deducted from
the cash payable to the Seller pursuant to Annex I. Upon consummation of the
transactions contemplated herein, BKF will pay up to $150,000 of the fees
charged by Bracewell & Patterson L.L.P., counsel to Company and the Other
Founding Companies; Seller and the stockholders of the Other Founding Companies
shall pay all amounts in excess of $150,000 to be shared pro rata based upon the
relative values of the Founding Companies. The Seller shall pay all sales, use,
transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the
purchase and sale of the Assets. The Seller shall file all necessary
documentation and Returns with respect to such Transfer Taxes. In addition, the
Seller acknowledges that he, and not RV Centers, will pay all taxes due by him
upon receipt of the consideration payable pursuant to Section 3 hereof.
17.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party.
(a) If to RV Centers, addressed to:
RV Centers, Inc.
2100 Chase Tower, 600 Travis
Houston, Texas 77002
Attention: Chief Executive Officer
with copies to:
Christopher S. Collins
Andrew & Kurth L.L.P.
600 Travis, Suite 4200
Houston, Texas 77002
(b) If to the Seller, addressed to him at his address set forth on the
signature pages hereto, with copies to:
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<PAGE> 69
Lynne Bolduc
Horwitz & Beam
2 Venture Plaza, Suite 615
Irvine, California 92618
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 17.7 from time to time.
17.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Delaware, excluding any conflicts of law, rule or
principle that might refer same to the laws of another jurisdiction.
17.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
17.10 TIME. Time is of the essence with respect to this Agreement.
17.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
17.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
17.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
17.14 AMENDMENTS AND WAIVERS. Subject to Section 6.7, any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived only with the written consent of RV Centers and the Seller. Any amendment
or waiver effected in accordance with this Section 17.14 shall be binding upon
each of the parties hereto, any other person receiving RV Centers Stock in
connection with the purchase and sale of the Assets and each future holder of
such RV Centers Stock.
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<PAGE> 70
17.15 DISPUTE RESOLUTION. Except with respect to disputes involving
parties other than the parties to this Agreement, no party to this Agreement
shall institute a proceeding in any court or administrative agency to resolve a
dispute arising under this Agreement before that party has sought to resolve the
dispute through direct negotiation with the other party or parties. If the
dispute is not resolved within two weeks after a demand for direct negotiation,
the parties shall attempt to resolve the dispute through mediation. If the
parties do not promptly agree on a mediator, the parties shall request the
Association of Attorney Mediators in Harris County, Texas to appoint a mediator
certified by the Supreme Court of Texas. If the mediator is unable to facilitate
a settlement of the dispute within a reasonable period of time, as determined by
the mediator, the mediator shall issue a written statement to the parties to
that effect and any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in Houston, Texas, in accordance
with the rules promulgated by the American Arbitration Association then in
effect. Each party shall choose one arbitrator and those arbitrators shall agree
upon the third arbitrator; if they cannot agree upon a third arbitrator within
20 days, the American Arbitration Association shall appoint the third
arbitrator. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The costs and expenses, including reasonable attorneys' fees, of
the prevailing party in any dispute arising under this Agreement will be
promptly paid by the other party or parties.
17.16 REFERENCES, GENDER, NUMBER. All references in this Agreement to a
"Section," or "subsection" shall be to a Section, or subsection of this
Agreement, unless the context requires otherwise. Unless the context otherwise
requires, the words "this Agreement," "hereof," "hereunder," "herein," or words
of similar import shall refer to this Agreement as a whole and not to a
particular Section, subsection, clause or other subdivision hereof. Whenever the
context requires, the words used herein shall include the masculine, feminine
and neuter gender, and the singular and the plural.
17.17 SCHEDULES AND ANNEXES. Each schedule and annex attached to this
Agreement is incorporated herein by reference and made a part hereof. The
disclosures made on any schedule or annex hereto with respect to any
representation or warranty shall be deemed to be made with respect to any other
representation or warranty requiring the same or similar disclosure to the
extent that the relevance of such disclosure to other representations and
warranties is evident from the face of such schedule or annex.
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<PAGE> 71
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
RV CENTERS, INC.
By: /s/ Clayton K. Trier
----------------------------------------
Name: Clayton K. Trier
Title: Chairman of the Board,
Chief Executive Officer and
President
YOUNG'S RV CENTER, INC.
By: /s/ Clayton K. Trier
----------------------------------------
Name: Clayton K. Trier
Title: Chairman of the Board
/s/ Roy B. Padgett
----------------------------------------
Roy B. Padgett
Address: 4753 West Avenue M-10
Quartz Hill, California 93536
Social Security Number: ###-##-####
--------------------
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<PAGE> 72
SPOUSAL JOINDER
The undersigned spouse of Roy B. Padgett executes this Spousal
Joinder to acknowledge (i) such spouse's acceptance of the terms of the
Agreement and to bind such spouse's community property interest, if any, in the
Assets or Business and (ii) that the decisions by Roy B. Padgett in the
Agreement shall be effectively binding upon spouse's community property
interest, if any.
/s/ Charlene Padgett
----------------------------------------
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<PAGE> 73
ANNEX I -
YOUNG'S RV CENTER, INC.
TO THE ASSET PURCHASE AGREEMENT
DATED AS OF JANUARY 12, 1999
BY AND AMONG
RV CENTERS, INC.
YOUNG'S RV CENTER, INC.
AND
ROY B. PADGETT
CONSIDERATION TO BE PAID TO THE SELLER
AGGREGATE CONSIDERATION TO BE PAID TO SELLER
Three Million Two Hundred Seventy-Three Thousand Seven Hundred Fifty Dollars
($3,273,750) in cash and the value of outstanding Common Stock of RV Centers,
Inc. ("RV Centers") (assuming a public offering price of $12.50 per share),
consisting of: (A) One Hundred Twenty- Nine Thousand One Hundred (129,100)
shares of RV Centers Common Stock, and (B) One Million Six Hundred Sixty
Thousand Dollars ($1,660,000) cash; provided however, that the aggregate
consideration shall not be less than the minimum value set forth below.
<TABLE>
<CAPTION>
Consideration to be paid:
------------------------------------
Percentage
Ownership of Shares of RV Centers
the Assets Common Stock Cash
------------ -------------------- ------------
<S> <C> <C> <C>
Roy Padgett 100% 129,100 $ 1,660,000
</TABLE>
MINIMUM VALUE: Two Million Nine Hundred Fifty-One Thousand Dollars ($2,951,000)
EXCLUDED ASSETS:
1. Roy B. Padgett Life Insurance Policy from Prudential
Life Insurance Company in the amount of $1,000,000.
The policy expires in February 1999, annual premiums
are equal to $4,200 and there are no outstanding
policy loans.
2. 1995 Chevrolet Suburban. #1GNEC16K25J352335. (60,000
miles).
Page 1 of Annex I
<PAGE> 74
ANNEX I -
YOUNG'S RV CENTER, INC.
3. 1990 Toyota Tercel. #JT2EL36M1L0554931. (80,000
miles).
4. 1977 Ford van. #N62EVY88594. (140,000 miles).
ALLOWABLE DISTRIBUTIONS: With the exception of the following, no amounts will be
paid to Seller out of Company accounts subsequent to June 30, 1998:
1. An amount equal to the reasonably estimated federal
and state (net of federal benefit) income taxes owed
on sole proprietor profits of the Company for the
period from July 1, 1998 to December 31, 1998.
2. An amount equal to the reasonably estimated federal
and state (net of federal benefit) income taxes owed
on sole proprietor profits of the Company for the
period from January 1, 1999 to the Consummation Date.
ALLOWABLE MONTHLY COMPENSATION: The Company has not since June 30, 1998, and
will not after the date hereof, pay or agree to pay salary, bonus, sales
commissions, fees or any other form of compensation, directly or indirectly, to
the Seller or any members of his family in excess of an aggregate of Nine
Thousand Dollars ($9,000) per month, such amounts to be taken by Seller as
distributions of owner's equity (not payroll compensation) as has been Seller's
past practice.
Page 2 of Annex I
<PAGE> 75
ANNEX III
FORM OF OPINION OF COUNSEL
TO RV CENTERS, INC.
, 1999
- ---------------------------
- ---------------------------
- ---------------------------
Ladies and Gentlemen:
We have acted as counsel to RV Centers, Inc., a Delaware corporation
("RV Centers") and Young's RV Center, Inc., a California corporation (the
"Buyer"), in connection with the transactions contemplated by the Asset Purchase
Agreement (the "Agreement") dated as of January , 1999, among RV Centers, the
Buyer and Roy D. Padgett ("Seller"). This opinion is being delivered to you
pursuant to Section 7.3 of the Agreement. All capitalized terms used herein,
unless expressly defined herein, shall have the meanings ascribed to such terms
in the Agreement.
We have examined originals, or copies certified or otherwise identified
to our satisfaction, of the Agreement and such documents and records as we
deemed to be necessary as a basis for the opinion hereinafter expressed. With
respect to such examination, we have assumed the genuineness of all signatures
appearing on all documents presented to us as originals, and the conformity to
the originals of all documents presented to us as conformed or reproduced
copies. We also have assumed the due execution and delivery of the Agreement by
all parties thereto other than RV Centers. In addition, we have relied on
certificates of officers of RV Centers and certificates of public officials as
to certain matters of fact relating to this opinion and have made such
investigations of law as we have deemed necessary and relevant as the basis
hereof.
Based upon the foregoing and such consideration of matters of law as we
deemed to be relevant, and subject to the limitations, qualifications and
assumptions set forth herein, we are of the following opinion:
1. RV Centers has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware. The Buyer has been duly
incorporated and is validly existing and in good standing under the laws of the
State of California.
Page 1 of Annex III
<PAGE> 76
2. The Agreement has been duly authorized, executed and delivered by RV
Centers and the Buyer and constitutes a legal, valid and binding agreement of RV
Centers and the Buyer, enforceable against it in accordance with its terms. Each
of RV Centers and the Buyer has taken all corporate action necessary to
authorize the execution, delivery and performance of the Agreement.
3. The authorized capital stock of RV Centers consists of shares
of Common Stock, par value $.01 per share (the "RV Centers Common Stock"); and
shares of Preferred Stock par value $.01 per share (the "Preferred Stock"). As
of , 1998, there were outstanding shares of RV Centers Common Stock [and
no shares of Preferred Stock] which were duly and validly authorized and issued
and, to our knowledge, fully paid and nonassessable and not issued in violation
of the preemptive rights of any stockholder of RV Centers. Each share of RV
Centers Common Stock to be issued to the Seller has been duly and validly
authorized and upon issuance on consummation of the transactions set forth in
the Agreement such shares will be validly issued, fully paid and nonassessable
and, to our knowledge, none of such shares will have been issued in violation of
the preemptive rights of any stockholder of RV Centers.
4. To our knowledge, except as set forth in the Prospectus, (a) RV
Centers is not in violation of any order issued by any court or governmental
agency and (b) there is no action, suit or proceeding pending or threatened
against RV Centers before any court, arbitrator or governmental authority.
5. To our knowledge, RV Centers is not in default, nor has it received
any notice of default, under any contract or agreement to which it is a party,
except where such default would not have a material adverse effect on RV
Centers.
6. No notice to, consent, authorization, approval or order of any court
or governmental agency or body or, to our knowledge, any other person is
required in connection with the execution, delivery or performance by RV Centers
of the Agreement, except for such notices, consents, authorizations, approvals
or orders as have already been made or obtained.
7. The execution of the Agreement and the performance by RV Centers of
its obligations thereunder will not violate any of the terms or provisions of
its Certificate of Incorporation or By-laws or, to our knowledge, conflict with,
violate or result in any breach of or default under any lease, instrument,
license, permit or any other agreement or instrument to which it is a party or
by which it may be bound or to which any of its properties is subject, except
where such violation, breach or default would not have a material adverse effect
on RV Centers and its subsidiaries, taken as a whole.
The opinions expressed herein are, with your concurrence, predicated on
and qualified in their entirety by the following:
Page 2 of Annex III
<PAGE> 77
(i) This opinion is limited to the laws of the State of Texas, the
General Corporation Law of the State of Delaware and the
relevant law of the United States of America (other than laws
applicable to patents, copyrights and trademarks).
(ii) Our opinion in paragraph 2, above regarding the enforceability
of the Agreement is subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights generally and to principles
of equity. Furthermore, the enforceability of any indemnity
and contribution obligations contained in the Agreement may be
limited under applicable law or public policy.
(iii) In rendering the opinion herein related to the absence of any
litigation, suits or proceedings, we express no opinion with
respect to the possible effect of administrative and
legislative actions and proceedings as to which RV Centers is
not a named party.
(iv) Whenever our opinion is based on circumstances "to our
knowledge," we have relied exclusively on certificates of
officers (after discussion of the contents thereof with such
officers) of RV Centers or certificates of others as to the
existence or nonexistence of the circumstances upon which such
opinion is predicated. We have no reason to believe, however,
that any such certificate is untrue or inaccurate in any
material respect.
We understand that we have no obligation to update this opinion to
reflect any facts or circumstances occurring after the date hereof, provided
however, that unless we otherwise notify you on or prior to the Consummation
Date that this opinion may no longer be relied upon, you shall be entitled to
rely on this opinion as of the Consummation Date if it were dated on such date.
This opinion is delivered to you solely as a party to the Agreement and
may not be quoted, circulated or published in whole or in part, or furnished to
any other Person without our express consent. The opinions set forth are limited
to matters expressly set forth and no opinion is to be implied or may be
inferred beyond the matters expressly stated.
Very truly yours,
Page 3 of Annex III
<PAGE> 78
ANNEX IV
FORM OF OPINION OF COUNSEL TO SELLER
,1999
RV Centers, Inc.
- ---------------------------
Houston, Texas 77002
[Underwriters]
[International Underwriters, if any]
Ladies and Gentlemen:
We have acted as counsel to Roy D. Padgett (the "Seller"), in
connection with the transactions contemplated by the Asset Purchase Agreement
(the "Agreement"), dated as of January , 1999, among RV Centers, Inc., a
Delaware corporation, Young's RV Center, Inc., a California corporation, and the
Seller. This opinion is being delivered to you pursuant to Section 8.6 of the
Agreement. All capitalized terms used herein, unless expressly defined herein,
shall have the meanings ascribed to such terms in the Agreement.
We have examined originals, or copies certified or otherwise identified
to our satisfaction of the Agreement and such documents and records as we deemed
to be necessary as the basis for the opinion hereinafter expressed. [Documents
and records may be listed.] With respect to such examination, we have assumed
the genuineness of all signatures appearing on all documents presented to us as
originals, and the conformity to the originals of all documents presented to us
as conformed or reproduced copies. We also have assumed the due execution and
delivery of the Agreement by all parties thereto other than the Seller. In
addition, we have relied on certificates of the Seller and certificates of
public officials as to certain matters of fact relating to this opinion and have
made such investigations of law as we have deemed necessary and relevant as the
basis hereof.
Based upon the foregoing and such consideration of matters of law as we
deemed to be relevant, and subject to the limitations, qualifications and
assumptions set forth herein, we are of the following opinion:
1. The Seller and the Company have all requisite power and authority to
own and operate the Assets and to conduct the Business as currently conducted.
Page 1 of Annex IV
<PAGE> 79
2. The Company is duly qualified to transact business in all
jurisdictions in which the conduct of its business requires such qualification,
or in which the failure to qualify would not have a materially adverse effect
upon the Assets or the Business.
3. To our knowledge, there are no outstanding securities of the Company
convertible into or exercisable or exchangeable for or evidencing the right to
purchase or subscribe for any equity of the Company and there are no outstanding
or authorized options, warrants or rights of any character obligating the Seller
or the Company to issue or sell any equity or any securities convertible into or
exercisable or exchangeable for or evidencing the right to purchase or subscribe
for any equity.
4. The Agreement [and the Conveyance Documents] have been duly
authorized, executed and delivered by the Seller and constitute legal, valid and
binding agreements of the Seller, enforceable against the Seller in accordance
with their terms. Seller has the legal capacity to execute, deliver and perform
his obligations under the Agreement [, the Conveyance Documents] and the
Employment Agreement to which Seller is a party.
5. To our knowledge, the Company is not in default, nor has it received
any notice of default, in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any other agreement, indenture or instrument material to the
conduct of the Business, to which the Company is a party or by which the
Company, the Assets or the Business is bound.
6. To our knowledge, except to the extent set forth on Schedules and to
the Agreement, (a) the Seller and the Company are not in violation of any order
issued by any court or governmental agency involving or affecting the Assets or
the Business and [(b) there is no action, suit or proceeding pending or
threatened against the Seller or the Company before any court, arbitrator or
governmental authority involving or affecting the Assets or the Business.
7. No notice to, consent, authorization, approval or order of or
filings with any court or governmental agency or body or, to our knowledge, any
other person is required in connection with the execution, delivery or
performance of the Agreement, or the consummation of the transactions therein
contemplated, by the Seller or the Company, except for such notices, consents,
authorizations, approvals, orders or filings as have already been made or
obtained, as applicable.
8. To our knowledge, the execution of the Agreement and the performance
by the Seller and the Company of their obligations thereunder do not and will
not conflict with, violate or result in any breach of or default under any
lease, instrument, license, permit or any other agreement or instrument to which
the Seller or the Company is a party or by which the Seller or the Company may
be bound or to which any of the Assets or the Business is subject.
9. To our knowledge, there is no pending or threatened action, suit or
proceeding that (a) questions the validity of the Agreement or the Employment
Agreement or any action
Page 2 of Annex IV
<PAGE> 80
taken or to be taken by the Seller or the Company in connection with the
Agreement or the Employment Agreement, at law or in equity, before or by any
governmental authority or before any court or arbitrator or (b) if adversely
determined, would have a material adverse effect (i) on the condition (financial
or other), earnings, business, operations or prospects of the Company or the
Business, (ii) on the ability of the Seller or the Company to perform his
obligations under the Agreement or (iii) on the ability of the Seller to perform
his obligations under the Employment Agreement.
The opinions expressed herein are, with your concurrence, predicated on
and qualified in their entirety by the following:
(i) This opinion is limited to the laws of the State of and the
relevant law of the United States of America (other than laws
applicable to patents, copyrights and trademarks). [As to
matters involving the law of the State of ______________, we
have relied upon and our opinion is subject to the
qualifications, limitations, exceptions and assumptions
contained in, the opinion of _____________________, a copy of
which is annexed hereto.]
(ii) Our opinion in Paragraph 4, above regarding the enforceability
of the Agreement is subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights generally and to principles
of equity. Furthermore, the enforceability of any indemnity
and contribution obligations contained in this Agreement may
be limited under applicable law or public policy.
(iii) In rendering the opinion herein related to the absence of any
litigation, suits or proceedings, we express no opinion with
respect to the possible effect of administrative and
legislative actions and proceedings as to which the Company is
not a named party.
(iv) Whenever our opinion is based on circumstances "to our
knowledge," we have relied exclusively on certificates of the
Seller or certificates of others as to the existence or
nonexistence of the circumstances upon which such opinion is
predicated. We have no reason to believe, however, that any
such certificate is untrue or inaccurate in any material
respect.
This opinion is delivered to you solely and may not be quoted,
circulated or published in whole or in part or delivered to any other person
without our express written consent. The Underwriters [and International
Underwriters] are entitled to rely upon this opinion.
Very truly yours,
Page 3 of Annex IV
<PAGE> 81
ANNEX V
ADVISORY AGREEMENT
This Advisory Agreement (this "Agreement") dated as of the ___
day of ___________, 1999 is entered into by and between Young's RV Center, a
California sole proprietorship (the "Company"), and Roy Padgett (the "Advisor")
as follows:
WHEREAS, the Company and its parent, RV Centers, Inc. and RV
Centers' other current and future subsidiaries are collectively referred to
herein as the "RV Centers Companies" and individually, as an "RV Centers
Company;"
WHEREAS, the RV Centers Companies are engaged in the sale and
servicing of recreational vehicles (the "Business"); and
WHEREAS, Advisor has valuable experience with and
understanding of the Company's business strategy and operations, and the Company
desires to engage Advisor to provide, and Advisor desires to provide, certain
consulting services to the Company on the terms and conditions provided herein;
NOW, THEREFORE, for and in consideration of the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Appointment of the Advisor. The Company hereby
engages the Advisor as an advisor, and the Advisor hereby agrees to provide,
consulting services and business advice to the Company in the operation of the
Business. The Advisor shall from time to time, as reasonably requested by the
Company, consult with and provide business advice to representatives of the
Company and RV Centers, Inc. concerning matters relating to the operation of the
Business.
Such services shall include, but not be limited to, consulting
with the Company and with RV Centers, Inc. as to the overall operations of the
Company, effectiveness of its management and development and implementation of
strategies to profitably grow and expand the Company's business. It is
understood and acknowledged by Advisor that, over the term of this Agreement,
the Company intends to utilize his services for a substantial portion of his
business-related time and advisor agrees to devote such time to the Company,
with the understanding that such time commitment will decrease during the term
of the Agreement. Advisor understands that the Company may require one hundred
percent of Advisor's business-related time during the first two to four months,
gradually decreasing to where, at the final month of the Agreement, Advisor
might be providing less than one-half of his time to the Company.
Page 1 of Annex V
<PAGE> 82
Section 2. Consulting Fees.
(a) In consideration of the Advisor entering into this
Agreement and providing services as herein provided, the Company agrees to pay
to the Advisor a monthly fee in an amount equal to nine thousand dollars
($9,000.00). Such monthly fee shall be paid on the last regularly scheduled
payday of each month for Company's employees; the monthly fee shall be prorated,
based on a thirty day month, for the first and last months of this Agreement if
the Agreement does not commence or terminate as of the first or last day of a
month.
As an independent contractor, Advisor shall be responsible for the
payment of all income and any other taxes assessed upon all payments received by
the Advisor under this Agreement. Advisor hereby agrees to indemnify and hold
the RV Centers Companies harmless from and against any tax, withholding,
unemployment insurance and other employment-related obligations of Advisor.
Section 3. Reimbursement of Expenses. The Company shall
promptly pay or reimburse the Advisor for, or cause to be paid or reimbursed,
all business travel and other out-of-pocket expenses reasonably incurred by
Advisor in the performance of his services pursuant to this Agreement and in
accordance with Company and RV Centers' policies. All reimbursable expenses
shall be appropriately documented in reasonable detail by Advisor upon
submission of any request for reimbursement, and in a format and manner
consistent with the Company's expense reporting policy.
Section 4. Term and Termination. This Agreement shall be for a
term ("Term") commencing on the date hereof and continuing through [1 YEAR FROM
DATE HEREOF], [WITH A ONE YEAR RENEWAL OPTION]; provided that Advisor or the
Company can terminate this Agreement immediately upon 30 days notice for breach
by the other party if such breach is not cured within such 30 days.
Section 5. Non-Competition Agreement.
(a) Advisor recognizes that the Company's willingness to enter
into this Agreement, including the compensation arrangements set forth in
Section 2 above, and that certain Acquisition Agreement dated as of January 12,
1999 (the "Acquisition Agreement") by and among RV Centers, the Company,
Advisor, and the other stockholders set forth therein, if any, is based in
material part on Advisor's agreement to the provisions of this Section 5 and
that Advisor's breach of any of the provisions of this Section 5 could
materially damage the RV Centers Companies. Advisor will not, during the Term of
this Agreement, and for a period of one (1) year immediately following such
Term, directly or indirectly, for himself or on behalf of or in conjunction with
any other person, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any business in direct
Page 2 of Annex V
<PAGE> 83
competition with any RV Centers Company, within one hundred (100) miles
of any location where any of the RV Centers Companies conducts its
Business, including any territory serviced by any RV Centers Company;
(ii) call upon any person who is, at that time, an employee of
any of the RV Centers Companies for the purpose or with the intent of
enticing such employee away from or out of the employ of an RV Centers
Company;
(iii) call upon any person or business entity which is, at
that time, or which has been, within two (2) years prior to that time,
a customer of any RV Centers Company, for the purpose of soliciting or
selling products or services in competition with any of the RV Centers
Companies;
(iv) call upon any prospective acquisition candidate, on
Advisor's own behalf or on behalf of any competitor, which candidate
was, to Advisor's knowledge after due inquiry, either called upon by an
RV Centers Company or for which the Company has made an acquisition
analysis, for the purpose of acquiring such entity; or
(v) voluntarily testify as an expert witness in recreational
vehicle matters for an adverse party to any RV Centers Company in
litigation or arbitration.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Advisor from acquiring as an investment not more than five percent
(5%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or on an over-the-counter or similar market.
(b) Because of the difficulty of measuring economic losses to
the Company as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the RV Centers
Companies for which they would have no other adequate remedy, Advisor agrees
that the foregoing covenant may be enforced by the Company, in the event of
breach by Advisor, by injunctions, restraining orders and orders of specific
performance issued by a court. Advisor further agrees to waive any requirement
for the Company's securing or posting of any bond in connection with such
remedies.
(c) It is agreed by the parties that the foregoing covenants
in this Section 5 impose a reasonable restraint on Advisor in light of the
activities and Business of the RV Centers Companies on the date hereof and the
current plans of the RV Centers Companies; but it is also the intent of the
Company and Advisor that such covenants be construed and enforced in accordance
with the changing activities, Business and locations of the RV Centers
Companies, throughout the Term of this Agreement. For example, if, during the
Term of this Agreement, an RV Centers Company engages in new and different
activities, enters a new business or establishes new locations for its current
activities or business in addition to or other than the activities or the
Business enumerated under the Recitals above or the locations currently
established therefor, then Advisor
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<PAGE> 84
will be precluded from soliciting the customers or employees of such new
activities and business or from directly competing with such new activities or
business within one hundred (100) miles of its then-established operating
locations through the Term of this covenant. It is further agreed by the parties
hereto that, if Advisor shall cease to consult on behalf of the Company and
shall enter into a business or pursue other activities not in competition with
an RV Centers Company, or shall engage in similar activities or business in
locations the proximity and activities of which do not violate clause (a) of
this Section 5, Advisor shall not be chargeable with a violation of this Section
5 if an RV Centers Company shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this Section 5 are severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth herein are unreasonable, then it is the intention of the parties that
such restrictions be enforced to the fullest extent which the court deems
reasonable, and this Agreement shall thereby be reformed.
(e) All of the covenants in this Section 5 shall be construed
as an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Advisor against an RV Centers
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of such covenants. It is
specifically agreed that the period of one [(1) year] during which the
agreements and covenants of Advisor made in this Section 5 shall be effective,
shall be computed by excluding from such computation any time during which
Advisor is in violation of any provision of this Section 5.
Section 6. Return of Company Property. All records, designs,
patents, business plans, financial statements, manuals, memoranda, lists and
other property delivered to or compiled by Advisor by or on behalf of any RV
Centers Company, their representatives, vendors or customers which pertain to
the Business of any RV Centers Company shall be and remain the property of the
RV Centers Companies, and be subject at all times to their discretion and
control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the RV Centers Companies which is collected by Advisor shall be
delivered promptly to the Company without request by it upon termination of this
Agreement.
Section 7. Inventions. Advisor shall disclose promptly to the
Company any and all conceptions, designs, inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Advisor,
solely or jointly with another, during the Term of this Agreement and which are
directly related to the then current Business or activities of the Company and
which Advisor conceives as a result of consultation on behalf of the Company.
Advisor hereby assigns and agrees to assign all his interests therein to the
Company or its nominee. Whenever requested to do so by the Company, Advisor
shall execute any and all applications, assignments or
Page 4 of Annex V
<PAGE> 85
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.
Section 8. Trade Secrets. Advisor agrees that he will not,
during or after the term of this Agreement with the Company, disclose the
specific terms of any RV Centers Company's relationships or agreements with
their significant vendors or customers or any other significant and material
trade secret of an RV Centers Company, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever, except in pursuit of the Company's Business (e.g. interaction with
outside auditors and consultants engaged by the Company) or with lenders or
potential lenders consistent with policies of the Company.
Section 9. Confidentiality.
(a) Advisor acknowledges and agrees that all Confidential
Information (as defined below) of the Company is confidential and a valuable,
special and unique asset of the Company that gives the Company an advantage over
its actual and potential, current and future competitors. Advisor further
acknowledges and agrees that Advisor owes the Company a fiduciary duty to
preserve and protect all Confidential Information from unauthorized disclosure
or unauthorized use, that certain Confidential Information constitutes "trade
secrets" under applicable laws, and that unauthorized disclosure or unauthorized
use of the Company's Confidential Information could irreparably injure the
Company.
(b) Both during the Term of this Agreement and thereafter,
Advisor shall hold all Confidential Information in strict confidence, and shall
not use any Confidential Information except for the benefit of the Company, in
accordance with the duties assigned to Advisor. Advisor shall not, at any time
(either during or after the Term of this Agreement), disclose any Confidential
Information to any person or entity (except other employees of the Company who
have a need to know the information in connection with the performance of their
employment duties), or copy, reproduce, modify, decompile or reverse engineer
any Confidential Information, or remove any Confidential Information from the
Company's premises, without the prior written consent of the Chief Executive
Officer of the Company, or permit any other person to do so except for the
benefit of the Company. In the event Advisor is requested or required (by oral
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or other process) to disclose any Confidential
Information, Advisor will provide the Company with immediate written notice of
any such request or requirement so that the Company may seek an appropriate
protective order or seek with Advisor's cooperation to narrow the request or
demand or waive Advisor's compliance with the provisions of this Agreement. If,
failing the entry of a protective order or the receipt of a waiver hereunder,
Advisor is, in the opinion of his counsel, compelled to disclose Confidential
Information, Advisor may disclose only that portion of the Confidential
Information which Advisor's counsel advises Advisor in writing that Advisor is
compelled to disclose and Advisor will exercise his or her best efforts to
obtain assurance that confidential treatment will be accorded such Confidential
Information. In any event, Advisor will not oppose action by the Company to
obtain an appropriate protective order or other reliable assurance that
confidential
Page 5 of Annex V
<PAGE> 86
treatment will be accorded the Confidential Information. Advisor shall take
reasonable precautions to protect the physical security of all documents and
other material containing Confidential Information (regardless of the medium on
which the Confidential Information is stored). This Agreement applies to all
Confidential Information, whether now known or later to become known to Advisor.
(c) Upon the termination of this Agreement, and upon written
request of the Company at any other time, Advisor shall promptly surrender and
deliver to the Company all documents and other written material of any nature
containing or pertaining to any Confidential Information and shall not retain
any such document or other material. Within five (5) days of any such request,
Advisor shall certify to the Company in writing that all such materials have
been returned.
(d) As used in this Agreement, the term "Confidential
Information" shall mean any information or material known to or used by or for
any RV Centers Company (whether or not owned or developed by an RV Centers
Company and whether or not developed by Advisor) that is not generally known to
the public and has been generally treated by an RV Centers Company as
confidential information. Confidential Information includes, but is not limited
to, the following: all trade secrets of the RV Centers Companies; all
information that any RV Centers Company has marked as confidential or has
otherwise described to Advisor (either in writing or orally) as confidential;
all nonpublic information concerning the RV Centers Companies' products,
services, prospective products or services, research, product designs, prices,
discounts, costs, marketing plans, marketing techniques, market studies, test
data, customers, customer lists and records, suppliers and contracts; all
business records and plans; all personnel files; all financial information of or
concerning the RV Centers Companies; all information relating to operating
system software, application software, software and system methodology, hardware
platforms, technical information, inventions, computer programs and listings,
source codes, object codes, copyrights and other intellectual property; all
technical specifications; any proprietary information belonging to the RV
Centers Companies; and all data and all computer system passwords and user
codes.
"Confidential Information" shall not include information which (i) is
in the public domain to such an extent as to be readily available to competitors
of the RV Centers Companies, (ii) becomes generally known to the public other
than by disclosure by Advisor, or (iii) is received by Advisor, outside his
capacity as an advisor of the Company, from a third party which was under no
legal obligation of confidentiality with an RV Centers Company with respect to
such information.
Section 10. Indemnification. In the event Advisor is made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by the Company against Advisor), by reason of the fact that he is or was
performing services in good faith under this Agreement or as an executive
officer of the Company prior to the date of this Agreement, then the Company
shall indemnify Advisor against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, as actually and reasonably
incurred by Advisor in connection therewith. In the event that both Advisor and
the
Page 6 of Annex V
<PAGE> 87
Company are made a party to the same third-party action, complaint, suit or
proceeding, the Company agrees to engage competent legal representation, and
Advisor agrees to use the same representation, provided that if counsel selected
by the Company shall have a conflict of interest that prevents such counsel from
representing Advisor, he may engage separate counsel and the Company shall pay
all reasonable attorneys' fees and reasonable expenses of such separate counsel.
Further, while Advisor is expected at all times to use his best efforts to
faithfully discharge his duties under this Agreement, Advisor cannot be held
liable to the Company for errors or omissions made in good faith where Advisor
has not exhibited gross, willful and wanton negligence and misconduct nor
performed criminal and fraudulent acts which materially damage the business of
the Company.
Section 11. Notices. Any and all notices, requests or other
communications hereunder shall be given in writing and delivered by regular
mail, overnight mail, hand delivery, or by registered or certified mail,
return-receipt requested, with first class postage prepaid, or by facsimile
transmission or overnight courier service to the parties at the following
addresses or facsimile numbers:
(a) if to the Company, to:
Young's RV Center
2337 West Avenue I
Lancaster, California 93536
Attn: President
Facsimile Number: 805-945-7198
with a copy to:
RV Centers, Inc.
6500 Chase Tower, Suite 2100
Houston, Texas 77002
Attn: President
Facsimile Number: 713-238-6781
(b) if to the Advisor, to:
Roy Padgett
4753 West M-10
Quartz Hill, California 93536
or at such other address or number as shall be designated by such party in a
notice to the other party given in accordance with this Section 10. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given: (i) in the case of a notice sent by facsimile, upon
transmission subject to telephone confirmation of receipt; (ii) when personally
Page 7 of Annex V
<PAGE> 88
delivered; (iii) in the case of a notice sent by overnight courier, the next
business day after such notice is delivered to such courier; or (iv) in the case
of a notice sent by regular or certified mail return receipt requested, three
business days after it is duly deposited in the mails, in each case given or
addressed as aforesaid.
Section 12. Benefit and Burden. This Agreement shall inure to
the benefit of, and shall be binding upon, the parties hereto and their
respective successors and permitted assigns.
Section 13. No Third Party Rights. Nothing in this Agreement
shall be deemed to create any right in any creditor or other person or entity
not a party hereto and this Agreement shall not be construed in any respect to
be a contract in whole or in part for the benefit of any third party.
Section 14. Complete Agreement. This Agreement is not a
contract of employment nor is it a promise of future employment. Advisor is a
party to no other agreements, whether written or verbal, with any RV Centers
Company, or any of their respective officers, directors or representatives
covering the subject matter covered by this Agreement except for the Acquisition
Agreement. This Agreement is the final, complete and exclusive statement and
expression of the agreement between the Company and Advisor and of all the terms
of this Agreement, and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous verbal or written agreements.
Section 15. Amendments and Waiver. No amendment, modification,
restatement or supplement of this Agreement shall be valid unless the same is in
writing and signed by the parties hereto. No waiver of any provision of this
Agreement shall be valid unless in writing and signed by the party against whom
that waiver is sought to be enforced. No failure or delay on the part of any
party hereto in exercising any right, power or privilege hereunder and no course
of dealing between the parties hereto shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. No notice to or demand on any party in any
case shall entitle such party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of any party
to any other or further action in any circumstances without notice or demand.
Section 16. Assignments. The Advisor may assign its rights,
interests and obligations under this Agreement to a corporation or other
business entity in which he or his family has a controlling ownership and the
Company may assign its rights, interests and obligations under this Agreement to
a successor of all or substantially all of the business and/or assets of the
Company. Except for the foregoing, neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto and any
attempt to do so shall be null and void; provided, however, that in connection
with any assignment permitted pursuant to this Section 15, the assignee shall
expressly assume all of the obligations of the Advisor or Company hereunder, as
the case may be,
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<PAGE> 89
and the Advisor or Company shall remain fully liable for the performance of all
such obligations in the manner prescribed in this Agreement.
Section 17. Counterparts. This Agreement may be executed in
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed an original and all of which taken
together shall constitute by one and the same agreement.
Section 18. Captions and Headings. The captions and headings
contained in this Agreement are inserted and included solely for convenience and
shall not be considered or given any effect in construing the provisions hereof
if any question of intent should arise.
Section 19. Construction. The parties acknowledge that each of
them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by the parties hereto.
Section 20. Severability. Should any clause, sentence,
paragraph, subsection or Section of this Agreement be judicially declared to be
invalid, unenforceable or void, such decision will not have the effect of
invalidating or voiding the remainder of this Agreement, and the parties hereto
agree that the part or parts of this Agreement so held to be invalid,
unenforceable or void will be deemed to have been stricken herefrom by the
parties hereto, and the remainder will have the same force and effectiveness as
if such stricken part or parts had never been included herein.
Section 21. Arbitration. Any unresolved dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration; provided, however, the Company shall be entitled to bring an
action to enforce its rights under paragraphs 5, 6, 7, 8, and 9. The arbitration
shall be conducted before a panel of three (3) arbitrators in Houston, Texas in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association ("AAA") then in effect. Unless both parties
agree otherwise, the arbitrators will be those provided by the AAA. The
arbitrators shall not have the authority to add to, detract from or modify any
provision hereof nor to award punitive damages to any injured party. The
arbitrators shall have the authority to order back pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of legal fees and costs, including those incurred to enforce this
Agreement, and interest thereon. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The AAA fees and all direct expenses
(e.g., room rental for a location to conduct the proceedings, reimbursement of
arbitrators' per diems and out-of-pocket expenses) of any arbitration proceeding
shall be borne evenly by the parties pending a final determination by the
arbitrators as to how the costs shall be borne between the parties.
Section 22. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware.
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<PAGE> 90
Section 23. Survival. Sections 5, 6, 7, 8, 9 and 20 shall
survive the termination or expiration of this Agreement.
Section 24. Guarantee of Payments. RV Centers has executed
this Agreement for the limited purposes of Section 23. In this connection, RV
Centers hereby unconditionally guarantees the punctual payment when due by the
Company of all obligations payable by the Company to the Advisor hereunder.
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<PAGE> 91
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
day and year first above written.
"ADVISOR" "COMPANY"
By:
- ------------------------------- -------------------------------------
Roy Padgett Name:
-----------------------------------
Title:
----------------------------------
For Purposes of paragraph 23:
"RV CENTERS"
By:
-------------------------------------
Name: Clayton K. Trier
Title: Chief Executive Officer
<PAGE> 1
EXHIBIT 99.1
CONSENT
The undersigned hereby consents to being named in the Registration
Statement (the "Registration Statement") on Form S-1 of RV Centers, Inc. ("RV
Centers") as a director to be appointed after consummation of the initial public
offering of RV Centers.
IN WITNESS WHEREOF, the undersigned has executed this Consent effective as
of the 25th day of January, 1999.
/s/ PETER A. ALBANO
--------------------------------------
Peter A. Albano
<PAGE> 1
EXHIBIT 99.2
CONSENT
The undersigned hereby consents to being named in the Registration
Statement (the "Registration Statement") on Form S-1 of RV Centers, Inc. ("RV
Centers") as a director to be appointed after consummation of the initial public
offering of RV Centers.
IN WITNESS WHEREOF, the undersigned has executed this Consent effective as
of the 26th day of January, 1999.
/s/ ARMANDO ALONSO
------------------------------------
Armando Alonso
<PAGE> 1
EXHIBIT 99.3
CONSENT
The undersigned hereby consents to being named in the Registration
Statement (the "Registration Statement") on Form S-1 of RV Centers, Inc. ("RV
Centers") as a director to be appointed after consummation of the initial public
offering of RV Centers.
IN WITNESS WHEREOF, the undersigned has executed this Consent effective as
of the 26th day of January, 1999.
/s/ ALLEN M. BINFORD
--------------------------------------
Allen M. Binford
<PAGE> 1
EXHIBIT 99.4
CONSENT
The undersigned hereby consents to being named in the Registration
Statement (the "Registration Statement") on Form S-1 of RV Centers, Inc. ("RV
Centers") as a director to be appointed after consummation of the initial public
offering of RV Centers.
IN WITNESS WHEREOF, the undersigned has executed this Consent effective as
of the 25th day of January, 1999.
/s/ JAMES S. FOGDALL
--------------------------------------
James S. Fogdall
<PAGE> 1
EXHIBIT 99.5
CONSENT
The undersigned hereby consents to being named in the Registration
Statement (the "Registration Statement") on Form S-1 of RV Centers, Inc. ("RV
Centers") as a director to be appointed after consummation of the initial public
offering of RV Centers.
IN WITNESS WHEREOF, the undersigned has executed this Consent effective as
of the 26th day of January, 1999.
/s/ EARL STOLTZFUS
--------------------------------------
Earl Stoltzfus
