UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20547
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended September 29, 1996
or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from _____________ to _____________
Commission File number: 0-22048
STARCRAFT CORPORATION
(Exact name of Registrant as specified in its charter)
Indiana 35-1817634
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
P.O. Box 1903, 2703 College Avenue, Goshen, Indiana 46526
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (219) 533-1105
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
The aggregate market value of the issuer's voting stock held by non-affiliates,
as of December 27, 1996, was $14,415,100.
The number of shares of the Registrant's Common Stock, without par value,
outstanding as of December 27, 1996, was 4,118,600 shares.
Exhibit Index on Page ___
Page 1 of ___ Pages
<PAGE>
STARCRAFT CORPORATION
FORM 10-K
INDEX
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security
Holders
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the
Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial
Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
SIGNATURES
<PAGE>
PART I
Item 1. BUSINESS.
Overview
The Company is a leading second-stage manufacturer of custom van, sport
utility vehicle ("SUV") and pickup truck conversions. Starcraft has historically
specialized in upscale custom vehicles. With the addition of the Imperial Group
("Imperial")in 1994, the Company offers a full range of conversion vehicles at
every consumer price point. The Company believes it is one of the five largest
van conversion manufacturers in the U.S. The Company sells its products to an
extensive network of approximately 1,000 authorized automotive dealers
throughout the continental U.S. and overseas. The Company believes the Starcraft
name has a long-standing reputation in the vehicle conversion industry for high
quality.
Starcraft traces its history to 1903 when Star Tank Company was founded
in Goshen, Indiana as a maker of metal farm equipment. Over the course of the
century the Company's predecessor became a leading manufacturer of aluminum
boats and recreational vehicles and, in the late 1970's, led the automotive
conversion industry by producing luxury van conversions for middle and upper
income consumers. In 1987, the predecessor's management completed a leveraged
buyout and, in 1988, sold the boat manufacturing business. The resulting entity
was highly leveraged and eventually sought protection from creditors in a
bankruptcy reorganization proceeding in late 1990. On January 18, 1991, the
Company purchased the assets of the automotive and recreational vehicle
divisions (except for Canadian operations) from Starcraft Van Conversions
Corporation and its affiliates, as debtors-in-possession (the "Predecessor"),
with bankruptcy court approval. The Company simultaneously sold the RV division
to a third party. In July 1994, the Company's wholly owned subsidiary, Imperial
Automotive Group, Inc. acquired substantially all of the assets of Imperial
Industries, Inc. In December 1995, the Company expanded its manufacturing
capabilities with a new plant in McGregor, Texas, operated by Starcraft
Southwest, Inc., a wholly owned subsidiary.
The Company was incorporated in Indiana in 1990 to acquire the assets
of the Predecessor. Its executive offices are located at 2703 College Avenue,
Goshen, Indiana, 46526; telephone (219)533-1105. The Company has three
wholly-owned operating subsidiaries: Starcraft Automotive Group, Inc.; Imperial
Automotive Group, Inc. and Starcraft Southwest, Inc.
Starcraft's principal manufacturing facilities are in Goshen, Indiana,
and, as of December 1995, McGregor, Texas, and it produces upholstery components
at a facility in Emma, Indiana. The Company consolidated its Elkhart facility
into its Goshen facility in December 1996. See "Item 2.
Properties."
Industry Information
The custom conversion industry developed during the early 1970's.
Starcraft's Predecessor was a leader in transforming the industry from one
<PAGE>
oriented toward younger recreational users to one oriented toward more mature
automotive customers. The Company believes retail prices of custom vans in the
United States for the 1996 model year generally ranged from $20,000 to $40,000.
Retail mark-ups vary widely among dealers and are not within the Company's
control.
According to the Recreational Vehicle Industry Association ("RVIA"),
the average domestic wholesale price to dealers of a van conversion, pickup
truck conversion and SUV conversion (including chassis) during the first nine
calendar months of 1996 were $24,000, $20,200 and $29,000, respectively. Because
the Company emphasizes high-end, luxury vehicles, Starcraft's average domestic
wholesale price to dealers during fiscal 1996, was $25,700, assuming an average
cost of chassis to dealers of $18,000. Imperial's and Lonestar's average
wholesale price to dealers during fiscal 1996 were $21,000 and $22,000,
respectively assuming an average cost of chassis to dealers of $17,500.
According to RVIA statistics, approximately 151,000 custom vans were
sold by United States conversion manufacturers during calendar 1995 compared to
182,000, 192,000, and 179,000 units in 1994, 1993 and 1992, respectively, RVIA
reported sales of 119,000 units through September 1996 and estimates sales of
custom vans for calendar 1996 will total 144,000, a 5% decrease from prior year
levels. In 1995, RVIA began tracking pickup truck and SUV conversions. For the
nine months ended September 1996, 58,400 of such vehicles were sold by the
conversion industry compared to 54,500 in 1995.
RVIA statistics are based on reports of its member manufacturers and
its estimates with respect to non-member manufacturers. The Company believes
RVIA members produce 80%-85% of conversions produced in the United States.
The conversion industry is cyclical and is affected by the general
trends of the economy and consumer preferences and consumer confidence and
trends of the automotive and recreational vehicle industries. The level of
disposable consumer income affects the Company's sales because its products are
generally considered discretionary expenditures by consumers. In difficult
economic times, consumers tend to spend less of their income on discretionary
items. Other economic factors affecting the demand for the Company's products
include the availability and price of gasoline, the level of interest rates and
the availability of consumer financing. Reduced gasoline availability could
adversely affect the demand for the Company's products. A significant increase
in the price of gasoline could reduce demand for the Company's products because
it would increase the cost of operating these products. Because many consumers
finance their purchase of vehicle conversions, the availability of financing and
level of interest rates can affect a consumer's purchasing decision. A decline
in general economic conditions or consumer confidence can be expected to affect
Starcraft's sales adversely. The Company is dependent upon the OEMs to supply
its requirements for vehicle chassis. Labor stoppages, supply shortages and a
variety of other factors that influence OEM production can affect the
availability or timely delivery of vehicle chassis to the Company. In 1996 the
Company's sales were adversely impacted by the availability of certain OEM
chassis.
<PAGE>
Company Products
The Company converts fullsize vans manufactured by each of the major
original equipment manufacturers ("OEMs"): GMC Truck, Chevrolet, Dodge and Ford.
The Company manufactures minivan conversions on the GMC Safari, the Chevrolet
Astro and the Dodge Caravan. Starcraft also customizes Chevrolet and GMC SUV's,
along with several pickup truck models for GMC, Chevrolet, Ford and Dodge. The
Company currently offers several fullsize van and minivan models. Each vehicle
model contains a principal set of conversion features and a variety of optional
accessories designed by the Company in each model year to meet prevailing
customer preferences. Starcraft van models fall principally into three price
ranges (conversion cost to dealer): from $4,000-$6,000, $6,000-$9,000, and
$9,000 and above. Imperial and Lonestar models fall into the following price
ranges: $2,000-3,000, $3,000-4,000, over $4,000. These price ranges provide
marketing flexibility allowing for different demographics and varying dealer
marketing objectives. Certain SUV and pickup truck conversion packages may be
priced below these ranges.
Operating Data
The following sets forth information respecting the Company's gross
sales by product type (including Imperial after July 5, 1994 and Lonestar after
December 1, 1995) for the fiscal periods indicated.
GROSS SALES BY PRODUCT(1)
<TABLE>
<CAPTION>
Period Ended
September 29, 1996 October 1, 1995 October 2, 1994
(52 weeks) (52 weeks) (52 weeks)
--------------------------------- ------------------------------------- ------------------------------------
(Sales in Thousands)
Average Average Average
Price/ Gross % of Price/ Gross % of Price/ Gross % of
Units Unit Sales Sales Units Unit Sales Sales Units Unit Sales Sales
----- ---- ----- ----- ----- ---- ----- ----- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fullsize vans 8,085 $6,600 $53,300 50.1% 9,041 $7,500 $67,600 54.8% 7,888 $7,800 $61,800 63.3%
Minivans 4,676 8,200 38,300 36.0 4,894 8,300 40,700 33.0 3,045 7,600 23,200 23.7
Trucks and
SUVs 3,345 3,200 10,700 10.0 3,009 3,400 10,300 8.4 2,078 4,300 9,000 9.2
Parts N/A N/A 4,200 3.9 N/A N/A 4,700 3.8 N/A N/A 3,700 3.8
--- ----- --- --- ----- --- --- --- ----- ---
Total 16,106 $106,500 100.0% 16,944 $123,300 100.0% 13,011 $97,700 100.0%
====== ======== ===== ====== ======== ===== ====== ====== =====
- -----------
</TABLE>
(1) Gross dollar sales represent the price to dealers of the conversion
before discounts and exclude the cost of the chassis.
Company Strategy
The Company believes it can continue to grow by expanding its domestic
van conversion business, increasing its sales of pickup truck and SUV
conversions and further developing international sales opportunities.
<PAGE>
Domestic Van Sales. The Company will continue to focus on core van
conversion products and, through aggressive marketing and promotion, will seek
to expand U.S. sales of custom vans. While Starcraft product lines will continue
to emphasize upscale custom van conversions, Imperial will continue a
complementary emphasis on mid- and low-price point conversion packages. The
Company will continue to seek to further differentiate its Starcraft lines from
its competition by emphasizing total value versus unit price. With the Imperial
acquisition, the Company is in position to participate in the rapidly growing
price-sensitive segment of its van conversion market. By offering both the
Starcraft and Imperial product lines, the Company is able to offer dealers a
full price range of conversion vehicles from a single manufacturer. The
establishment of the Lonestar facility offers the opportunity for strategic
development in the Southwest, particularly Texas. The Company believes this
operation creates a competitive price advantage by reducing freight costs.
The Company will continue to focus on innovative product development to
enhance customer appeal and vehicle quality and safety. The Company will
continue to seek to differentiate itself from its competition by virtue of the
resources it devotes to training dealer personnel in selling, product knowledge,
service and compliance. Starcraft utilizes a specially equipped service van,
videos, manuals, other visual aids, and classroom instruction at its main
facility and at dealer locations throughout the country. The Company maintains a
strong customer service area which includes warranty claims and approval, parts
ordering and processing and customer information. The Company maintains records
of Starcraft units sold as far back as 1978 and Imperial maintains records back
to 1991, which was the inception of the predecessor company, Imperial
Industries, Inc. Starcraft is expanding its use of regional service clinics,
regional and dealer-specific sales seminars and dealer plant visits.
Domestic Truck and SUV Conversions. Although the Company's conversions
of General Motors' Suburban, other SUV and pickup trucks have proven to be a
popular line of products, limited chassis availability has inhibited the
Company's sales of these products. The Company intends to expand its sales of
non-van custom vehicles, especially luxury custom pickup trucks, and has
designed conversion packages especially for these vehicles. In 1996, the Company
added the GMC Jimmy, Chrysler Jeep and a variety of pickup truck lines. The
general market in the U.S. for pickup trucks and SUVs has been strong in the
last three model years. The Company expects this strong market to continue and
is working with the OEMs to help assure the availability of chassis in
sufficient quantity to meet its expanding requirements. In particular, the
Company is exploring opportunities to develop and produce special SUV upfit
packages for General Motors and the other OEMs. See "Chassis and Other
Suppliers." Starcraft Southwest will address the increasing market demand for
SUVs, pickup trucks and Suburbans in the southwest with increased chassis
allocation of such vehicles.
International Vehicle Sales. The Company intends to further promote
Starcraft vehicles overseas, especially in Central/Northern Europe and Japan.
The Company has an European parts center owned and operated by a
<PAGE>
German corporation affiliated with Starcraft's Norwegian dealer to improve its
service to German customers. The Company maintains a distribution agreement with
General Motors and Mitsui & Co. (U.S.A.), Inc. which the Company believes makes
Mitsui the sole distributor of General Motors vans in Japan. Under this
agreement Mitsui agreed to use its best efforts to promote Starcraft vans in
Japan and Starcraft agreed to sell van conversions in Japan solely through
Mitsui.
Chassis and Other Suppliers
Historically, most of the Company's van conversions have been General
Motors products. In 1991, approximately 92% of its unit sales were represented
by General Motors. Approximately one-half of the Company's General Motors units
are received from each of the Chevrolet Motors and GMC Truck divisions. Between
calendar years 1991 and 1995, Ford and Chrysler products collectively increased
from 8% to 26% of domestic unit sales and were 33% of domestic unit sales in
1996. The increase in the proportion of the Company's sales represented by Ford
and Chrysler products was due primarily to dealers reducing General Motors
fullsize vans as well as aggressive promotional activities carried on by Ford
and Chrysler.
The OEMs supply incomplete chassis to Starcraft or other manufacturers
or dealers for restricted use. The Company obtains substantially all of its
chassis acquired for domestic sale from the OEMs pursuant to consignment or
restricted sale contracts. Under these contracts each OEM maintains strict
control over the disposition of chassis delivered to the Company for
modification and the Company is prohibited from delivering a converted chassis
provided by the OEM to any person except an authorized dealer for that OEM. All
of the Company's consignment and restricted sale contracts with chassis
suppliers are terminable by either party on short notice without cause.
Under restricted sale contracts with the OEMs, the OEM retains the
certificate of origin and the Company has no right to obtain it or any other
evidence of title. These contracts state that vehicle title technically passes
to the Company upon acceptance of a chassis and the Company pays state property
taxes on chassis, but the Company can only sell the chassis back to the OEM for
resale to an authorized dealer. Except for demonstration vehicles, the Company
is prohibited from making modifications to chassis under these contracts until
it matches them with a dealer order. The Company has obtained waivers of this
limitation to permit accumulation of GMC or Chevrolet inventory in connection
with model year changes or other periods of anticipated increasing demand. Prior
to matching a chassis to a dealer order, the Company finances the chassis
through the OEM's financing affiliates at nominal rates. Once the Company
notifies the OEM that it has matched a chassis with a dealer, the OEM
"repurchases" the chassis, crediting the Company's account with the OEM's
financing affiliate and invoicing its dealer (the Company's customer) for the
price of the chassis. Upon receiving the converted vehicle, the dealer is
obligated to
<PAGE>
pay the Company for the improvements the Company has made. If the Company fails
to match a chassis with a dealer order within 90 days, the finance charge the
Company must pay increases. The past 90-day finance charge is currently the
prime rate plus 1%.
Historically, Starcraft's international conversion sales have been
chassis originally manufactured by General Motors. Generally, the foreign
purchaser is an authorized dealer for General Motors and Starcraft. The dealer
submits an order to General Motors' overseas sales affiliate (the "GM Export
Affiliate") for the chassis together with specifications for a Starcraft
conversion. The GM Export Affiliate purchases the chassis from General Motors
and forwards it to Starcraft for second stage manufacturing. Starcraft invoices
the GM Export Affiliate for the completed conversion, and the GM Export
Affiliate arranges for shipment of the unit, at the GM Export Affiliate's
expense, from Starcraft to the foreign dealer.
Starting in 1997, General Motors has changed its chassis system for the
Company's sales to Europe. The Company will be the "Manufacturer of Record" for
units imported into Europe and will be required to arrange and be responsible
for all U.S. export and shipping requirements. The Company will continue to sell
only to authorized General Motors dealers. The Company does not believe this new
system will have a significant impact on its European sales.
A variety of factors govern chassis ordering and availability. Chassis
are ordered from the OEM based on the Company's annual sales plan. The plan is
broken down by OEM and vehicle model. Vehicle specifications are determined on
the basis of historical trend analysis and analysis of the backlog of orders.
The Company's chassis order forecast is shared with each OEM to determine
chassis availability. The OEMs confirm chassis availability and timing on an
annual basis. After confirmation by the OEM, the Company orders a 90-day supply
prioritized through a central computerized system. On a weekly basis, the
Company releases the actual orders it requires and the OEMs schedule delivery
dates for the orders. Chassis allocation to the Company from the OEMs is based
on credit lines, prior usage and wholesale and retail sales rates.
<PAGE>
The following table sets forth for the periods indicated the number of
chassis received by the Company and the dollar value thereof, and, as of the end
of such periods, the number of chassis held over 90 days and the dollar value in
thousands thereof.
<TABLE>
<CAPTION>
Period Ended
------------------------------------------------------------------------------
September 29, 1996 October 1, 1995 October 2, 1994
(52 weeks) (52 weeks) (52 weeks)
----------------- ---------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Chassis Received 17,179 17,419 13,647
Value of Chassis Received(1) $305,300 $309,800 $223,800
Chassis over 90 days (at period end) 262 491 155
Value of Chassis held over 90 days(1) $ 4,615 $ 8,712 $ 2,713
</TABLE>
The conversion process begins after a chassis is inspected and accepted
and the Company has received a confirmed order from an authorized dealer that is
compatible with the chassis. Generally, the order is scheduled for production
typically four to five days before work on the vehicle commences to allow for
completion of components to be installed in the chassis. The Company completes
the conversion process in an average of seven to eight days from the date that
the vehicle is first scheduled for production.
The Company is dependent upon the OEMs to supply its requirements for
vehicle chassis. Labor stoppages, supply shortages and a variety of other
factors that influence OEM production can affect the availability or timely
delivery of vehicle chassis to the Company. The impact of these factors was
significant in 1996. If vehicle chassis are unavailable, or if the Company must
accept delivery earlier or later than it otherwise would prefer, sales could be
adversely affected and financing expenses could increase. The Company must also
comply with its consignment and restricted sale contracts with the OEMs pursuant
to which the OEMs impose certain specifications for the Company's vehicle
conversions, including gross vehicle weight standards. Such contracts also
restrict the Company's ability to dispose of completed chassis and prohibit the
transfer of chassis to unauthorized U.S. and foreign dealers. All of the
Company's consignment and restricted sale contracts with chassis suppliers are
terminable by either party on short notice without cause. The availability of
the OEM financing rates is dependent upon the Company's compliance with its OEM
contracts and its ability to maintain satisfactory credit relationships with the
OEM's finance subsidiaries. Adverse changes in the Company's financial condition
or results of operations could cause such financing subsidiaries to seek to
adversely change the Company's financing terms or to terminate such financing
arrangements. Such a change or termination could have a material adverse effect
on the Company's financial condition and results of operations.
General Motors introduced a newly redesigned fullsize van in early
calendar 1996. The Company believes dealers reduced their inventory levels in
1995 in anticipation of the new chassis thereby negatively impacting the
Company's sales to dealers. In addition, the Company believes the
9
<PAGE>
availability of the newly redesigned General Motors fullsize van restricted and
negatively impacted the Company's 1996 sales. At the end of 1996, the
availability of this chassis to the Company was adequate.
Vehicle converters can be penalized by the OEM for manufacturing
overweight vehicles and the National Highway Traffic Safety Administration
("NHTSA") could require overweight vehicles to be recalled. See "Safety and
Regulation." Such standards are imposed by the OEMs in part to help assure that
vehicle weight does not exceed the capacity of the OEM's braking system.
The export of completed vehicles to unauthorized foreign dealers has
been a significant issue in the conversion industry in recent years, especially
for General Motors. In the past, some automotive dealers have sold vehicles to
brokers who, in turn, have sold them to unauthorized dealers overseas. General
Motors' financing subsidiary has indicated an intention to penalize or terminate
financing arrangements with any firm deemed responsible for unauthorized
exports. The Company makes an effort to assure itself that none of its vehicles
are exported in an unauthorized manner including obtaining written assurances
from certain dealers. General Motors has significantly increased its efforts to
curtail such activity. The Company has no control over the eventual disposition
of its vehicles by dealers, however, so it cannot eliminate the possibility of
unauthorized export. These efforts nevertheless should help assure that the
Company will not be deemed responsible for any unauthorized export.
Supplies for the components and materials the Company utilizes in its
vehicle conversions are generally available from several sources. From time to
time the Company experiences delays in delivery of certain components or
materials from suppliers, but such delays have not historically had any material
effect on the Company's production.
Manufacturing
The incomplete van chassis Starcraft receives directly from the OEMs
have no seats or floor covering or other interior components. Starcraft modifies
the exterior and interior of the chassis body to provide passenger comfort and
enhance safety. SUVs and pickup trucks received have full interior OEM
components. The Company modifies these components and performs certain exterior
enhancements.
Vehicle Modification and Assembly. After a chassis is inspected and
accepted, the Company begins the conversion process by modifying the chassis
exterior, installing tinted vista bay windows, raised roof, decorative decals
and ground effects. Star-structure steel bracing is installed for added
structural support, followed by rust proofing, wiring, insulation and vibration
dampening materials.
After exterior seals are tested for leaks, the vehicle is lined with
fabric and wood-accented sidewalls and headliners. The Company's associates
assemble the complete vehicle interior in multiple production lines using the
Company's own manufactured components and parts supplied by
10
<PAGE>
others. The Company's distinctive hardwood features, contoured seats, carpeting,
curtains and other amenities are installed in each vehicle, along with the
customer's selection from over 100 optional accessories, including a wide
variety of electronic components such as rear heating and air-conditioning,
television, video cassette player and other audio equipment.
Vehicle Components. The Company manufactures its own woodwork,
upholstery and wiring harnesses, among other components. Starcraft's distinctive
hardwood interior appointments are manufactured at the Goshen facility in its
45,000 square-foot woodshop. The Company planes, joins, shapes, sands and
finishes rough-cut teak and walnut lumber in a process that combines automation
and hand craftsmanship. A wood-burning laser is utilized which can transfer any
image directly onto wood components for added customization.
Vehicle seating and upholstery are primarily manufactured at the
Company's Emma, Indiana, facility, located 15 miles from its Goshen, Indiana
plant and 25 miles from the Imperial Elkhart facility, although interior
sidewall and headliner coverings are tailored at the Goshen and Elkhart
facilities. Company associates cut and sew interior wall coverings, headliners,
curtains and seat upholstery from leather, cloth and vinyl materials. The seat
padding and upholstery are then assembled on pre-fabricated frames. Some of
Starcraft's wire harnesses are manufactured at the Goshen plant. The Company
also paints and finishes all of its custom fiberglass and polymer vehicle body
components, such as raised roofs, running boards and other ground effects which
are manufactured to the Company's design specifications by others. The Company
maintains an enclosed painting system to provide fiberglass and polymer
components with high quality base coat and clear coat finishes. This
water-filtered, down draft system is similar to those of the major automotive
manufacturers and is designed to control environmentally harmful emissions.
By manufacturing many of its own components, the Company is able to
exercise significant control over the quality and supply of components built
into its custom vehicles and to accommodate a wide range of customization
demands. The Company is also able to provide consumers with ongoing service and
repair capabilities by maintaining a record of, and access to supplies of,
paint, upholstery and other materials used to modify each vehicle.
Imperial does not manufacture many of its internal components and is
primarily an assembler. To compete in the price-sensitive market segment
Imperial's strategy has been to purchase components from suppliers to reduce its
fixed costs. Imperial purchases some seating and interior shades from Starcraft.
Lonestar purchases substantially all of its components.
Production Associates. The Company periodically employs associate
training that may include classroom instruction, job certification and technical
and personal skills training. The principal objective of the
<PAGE>
training is to develop associates into more effective members of a team
dedicated to continuous improvement in all facets of the Company's business.
Starcraft production line associates are compensated on an hourly basis with
additional incentive tied to quality and productivity. Imperial's and Lonestar's
employees are divided into departments whose compensation include incentives
based primarily on productivity.
The Goshen facility produced 45 custom vehicles per eight-hour shift
during peak production periods in 1996 and (prior to the reorganization
described below) has capacity to produce up to 70 units in one shift. The
110,000-square-foot Imperial facilities in Elkhart, Indiana produced
approximately 35 vehicles per shift during peak periods in 1996 and have
capacity to produce up to 50 units per shift. The new McGregor, Texas facility
has a capacity of 30 units per shift and produced 15 units per shift during peak
times in 1996.
In October 1996 the Company finalized its plan to consolidate the
operations of Imperial into Starcraft's manufacturing complex in Goshen,Indiana.
The Goshen facility has been reorganized to allow a production capacity of
Starcraft and Imperial units of 95 units per day on one shift. The plan is
designed to further enhance profitable growth by reducing excess production
capacity, personnel count and fixed overhead expenses. The Company estimates
that a $700,000 pretax restructuring charge in connection with this plant
consolidation will be recorded in the first quarter of fiscal year 1997. The
charge includes employee termination costs, leasehold asset write-offs and the
recognition of contractual lease obligations.
Sales and Marketing
Domestic. The Company sells its custom vehicles to approximately 1,000
automobile dealers throughout the continental U.S. and overseas. Custom vehicles
are sold through a network of regional exclusive sales representatives and
associate representatives. Each of its U.S. dealers is an authorized dealer for
General Motors, Ford or Chrysler and most sell and service a full complement of
cars, SUVs and vans. Starcraft's top 50 dealers accounted for approximately 59%,
51% and 45% of unit sales in fiscal 1996, 1995 and 1994, respectively.
Imperial's top 50 dealers accounted for approximately 67% of unit sales in
fiscal 1996 compared to 71% in fiscal 1995. During the past two years, the
geographic areas of the U.S. where the Company's sales have been strongest
include (i) the Great Lakes region (i.e., Illinois, Indiana, Michigan, New York,
Ohio, Pennsylvania, and Wisconsin), (ii) Oklahoma and Texas and (iii) Northern
California.
The Company's direct sales efforts to dealers are supplemented by a
variety of advertising and promotional programs including shows and promotions
designed to appeal to the retail market, media advertising, dealer incentive
programs and participation in various automobile shows. The Company is also
refining a targeting approach to better utilize advertising expenditures by
expanding its team selling efforts and developing new marketing materials,
including videos.
<PAGE>
International. Starcraft's Predecessor, in conjunction with General
Motors dealers overseas, began selling custom vans overseas in 1987. Starcraft
now exports converted vehicles to 17 countries around the world and employs a
senior vice president who is exclusively responsible for the development of
international sales. International sales fluctuate from country to country and
over time depending on import taxes and tariffs and fluctuations in currency
exchange rates as well as local economic conditions. Starcraft's primary
overseas markets are Japan, Korea and northern Europe. The Company exported
2,543, 2,195 and 1,329 conversions in fiscal 1996, 1995 and 1994, respectively.
The Company intends to further promote Starcraft and Imperial vehicles
overseas. The Company maintains a European parts center owned and operated by a
German corporation affiliated with Starcraft's Norwegian dealer to improve its
service to German customers. The Company maintains a distribution agreement with
General Motors and Mitsui by which the Company believes makes Mitsui the sole
distributor of General Motors vans in Japan. This agreement will continue from
year-to-year unless terminated on three months notice prior to the end of any
such year.
Imperial and Lonestar currently have minimal export sales.
Research and Development
The Company continues to devote efforts and resources in the area of
research and development to improve the appeal and safety of its products.
Starcraft believes it has a strong record of innovative product development to
enhance customer appeal and vehicle quality. For example, it introduced the
"Star-Effects" package in September 1992. Star-Effects employs an
impact-resistant polymer to produce van ground effects (running boards and
adjacent areas) with more appealing streamlined styling.
The Company has a patent on a system called the Integrated Belting
System ("IBS"). Upon a rear-end collision in excess of 20 m.p.h., passenger
seats in many vehicles can collapse backward, increasing the risk of injury to
vehicle occupants. IBS is designed to reduce significantly the risk of seat back
collapse by restraining the seat back. A new seat belt integrated with the
conventional seat belt system is anchored to the vehicle roof or wall and
traverses the seat back. In the event of collision, the seat back is secured in
place.
IBS has been successfully tested by an independent testing firm. The
Company believes that only one other automotive manufacturer currently offers
seats with a safety feature designed to prevent collapse on rear impact.
Eventually, the Company intends to license the use of IBS by other
manufacturers. There is no assurance, however, as to the extent IBS will be
employed by other manufacturers.
<PAGE>
To meet new NHTSA standards, the Company developed its "Star-structure"
steel bracing system. "Star-structure" is installed throughout a van's roof and
sidewalls and is designed to absorb impact in the event of a collision. The
extent of potential impact absorption varies between OEM chassis. See "Patents
and Trademarks" and "Safety and Regulation."
The Company has product research and development teams devoted to
design and safety improvements. During fiscal 1996, 1995 and 1994, the Company
spent approximately $893,000, $726,000 and $792,000, respectively, on product
research and development.
Competition
The United States vehicle conversion market is very competitive with
five principal national manufacturers and numerous local and regional
manufacturers, many of which are relatively small companies serving local
dealers. The Company believes it is one of the five largest van conversion
companies in the United States. The others are Glaval Inc., Mark III Industries,
Inc., Tiara Motor Coach and Explorer Van Company. The Company's Starcraft lines
generally feature high-end, luxury custom vehicles competing most directly with
Explorer and Tiara. The Imperial product lines compete more directly in the
price-sensitive segment of the van conversion market. According to the OEMs, the
number of authorized converters declined 8% in 1996. The Company believes the
number of competitors will continue to decline as increased quality, financial
and engineering standards are imposed by the OEMs.
In international markets, the Company competes with numerous foreign
manufacturers that produce vehicles comparable to converted vans, although
custom vans such as the Company's tend not to be widely produced within its
foreign markets.
The Company's Starcraft lines will continue to be focused on luxury
vehicle modifications and will seek to increase its market share of high-end van
conversions for which Starcraft vehicles have an established reputation.
Starcraft will also continue to be sensitive to changes in consumer preferences.
The Imperial product lines enable the Company to participate more fully in the
rapidly growing price-sensitive segment of the conversion market and offer its
dealers a full price range of conversion vehicles from one manufacturer. The
Company believes competitive factors in its industry include price, quality and
variety of product line, service and warranty, dealer network and safety. The
Company maintains a leading position in the conversion industry through high
quality workmanship, innovation, versatility in meeting customization
requirements and the diversity of its product line.
Backlog and Seasonality
At September 29, 1996, the Company had a backlog of 1,067 unit orders
compared with a backlog of 1,016 unit orders at October 1, 1995. The Company
considers such orders to be reasonably firm. All of the Company's
<PAGE>
products are subject to certain seasonal sales influences and sales tend to be
stronger during March through July. The Company uses off-season sales promotions
to market its products with a view to reducing seasonal swings in sales.
Warranties
The Company provides a three-year, 36,000 mile limited warranty on its
conversions. In 1997, the Starcraft products will offer a 5-year, 60,000 mile
warranty. The OEMs provide their own standard warranties of the chassis and
engine. At the time of sale of its products, the Company estimates the costs to
be incurred for product warranties and establishes reserves for warranty claims.
The Company believes that such reserves will adequately cover any such warranty
claims. The Company provides complete owners' manuals to retail customers
covering the conversion package as well as parts, warranty and service manuals
for dealers. The Company keeps a record of the paint, upholstery and stylings
included in each vehicle conversion so that, when necessary, it can re-create
matching replacement parts.
Patents and Trademarks
IBS. In 1996, the Company received a U.S. patent on IBS, which is
designed to reduce significantly the risk of seat back collapse in the event of
a rear-end collision by restraining the seat back. A new seat belt integrated
with the conventional seat belt system is anchored to the vehicle roof or wall
and traverses the seat back. In the event of collision, the seat back is secured
in place. See "Research and Development."
Trademarks. The Company's Predecessor manufactured boats, motor homes
and other recreational vehicles under the name "Starcraft."(R) The boat
manufacturing business was sold by the Predecessor to Brunswick Corporation in
1988. The Company initially acquired the recreational vehicle business in the
Predecessor's 1991 reorganization proceeding, but immediately sold it to Jayco,
Inc. The Predecessor's Canadian conversion business was acquired by a Canadian
firm. Brunswick Corporation has independently registered and owns the
"Starcraft" and related trademarks for use with boats and marine products and
thus Starcraft has no control over the quality of boats produced and sold under
the "Starcraft" mark. The Company retains ownership of "Starcraft" and related
registered marks for use with automotive and recreational vehicle products. It
licenses the owners of the Predecessor's RV business and Canadian van conversion
business to use these trademarks. While it has some control over the quality of
its licensees' products, it does not control all aspects of their businesses.
The Canadian entity is required to pay a royalty to the Company and to purchase
its components from the Company (or from others with the Company's approval).
The Company does not export to Canada and its Canadian licensee does not export
to the United States.
<PAGE>
Because of these considerations, there is a risk that the
distinctiveness of the "Starcraft" mark could become diluted or that its
reputation for quality could be adversely affected if the quality of another
manufacturer's products sold under the mark declines. The Company believes,
however, that customers are sufficiently discerning when making a purchase as
significant as a vehicle conversion that confusion between the Company and
makers of other "Starcraft" products is unlikely. It also believes its licensees
are currently in compliance with their obligations under their license
agreements.
Safety and Regulation
The manufacture, distribution and sale of the Company's products are
subject to governmental regulations in the United States at the federal, state
and local levels. The most extensive regulations are promulgated under the
National Traffic and Motor Vehicle Safety Act which, among other things,
empowers NHTSA to require a manufacturer to remedy vehicles containing "defects
related to motor vehicle safety" or vehicles which fail to conform to all
applicable federal motor vehicle safety standards.
Federal Motor Vehicle Safety Standards were promulgated by the NHTSA in
1992. Many of the Company's conversion components were affected by these
standards. Starcraft engaged a testing company, which also performs testing for
NHTSA, to test the Company's components. The Company's components subject to the
new standards have been determined to meet or exceed them. Promulgation of
additional safety standards in the future could require the Company to incur
additional testing and engineering expenses which could adversely affect the
Company's results of operations. NHTSA is likely to promulgate new standards in
the future respecting one or more of the following matters, among others:
occupant protection in vehicle rollovers, mandatory installation of air bags and
side impact protection.
NHTSA can require automotive manufacturers to recall products. The
Company has not experienced any material recalls.
The Company's international sales are subject to foreign tariffs and
taxes, changes in which are difficult to predict and which can adversely affect
Starcraft sales. Starcraft's products must also comply with government safety
standards imposed in its foreign markets. For example, in Japan and Germany each
vehicle conversion is individually inspected by local authorities before the
vehicle is registered in the country.
Both federal and state authorities have various environmental control
standards relating to air, water and noise pollution that affect the business
and operations of the Company. In particular, the Company generates paint,
varnish and other finishing wastes that it is required to dispose of in
compliance with environmental regulations. The Company
<PAGE>
believes that it has complied in all material respects with applicable
environmental regulations and standards and does not currently expect that any
failure of compliance will have any material adverse effect on the Company.
Like other automotive manufacturers, the Company may be subject to
claims that its products caused or contributed to damage or injury sustained in
vehicle accidents or may be required to recall products deemed unsafe. Any such
claims in excess of the Company's insurance coverage or material product recall
expenses could adversely affect the Company's financial condition and results of
operations.
Employees
As of September 29, 1996, the Company employed 899 people. Of these,
approximately 694 were production line associates and 205 were salaried sales,
engineering and administrative staff. During peak production periods, the
Company may increase its work force. Historically, the available labor force has
been adequate to meet such periodic requirements. The Company considers its
relationships with its personnel to be satisfactory.
The Company maintains a training and education process. The principal
goal of this program is to build a team-based learning organization that
develops the combined skills of associates. Management believes this approach
promotes a culture conducive to participation and teamwork that breeds
innovation and improved performance. The process includes personal and practical
skills training, and technical and development training. The Company has applied
for and received matching grants from the State of Indiana for part of this
training effort.
Item 2. PROPERTIES.
The Company owns its properties in Goshen, and Emma, Indiana and leases
the Elkhart properties, as further described below.
Location Size of facility Type of operation
Goshen, Indiana 454,400 Sq. ft. Executive Offices (20,420 sq. ft.);
Manufacturing and Assembly
Emma, Indiana 42,700 Sq. ft. Sewing and Upholstery
Manufacturing
Elkhart, Indiana 110,000 Sq. ft. Offices (20,900 sq. ft.);
(Imperial) Manufacturing and Assembly
Elkhart, Indiana 12,500 Sq. ft. Offices (1,500 sq. ft.)
(Imperial Truck Manufacturing and Assembly
Plant)
McGregor, Texas 60,000 Sq. ft. Offices (10,000 sq. ft.)
(since November 1995) Manufacturing and Assembly
<PAGE>
The Goshen and Emma production facilities were constructed in the
1960's. They have been maintained and improved upon from time to time and are
presently in satisfactory condition and sufficient for the Company's current
requirements. The Company also stores chassis on a 37-acre lot it owns near its
Goshen production facility. The Goshen facility produced 45 units per day during
peak production periods in 1996 (and, prior to the reorganization described
below, has estimated capacity to produce approximately 70 units per day). See
"Manufacturing."
The first Elkhart facility, on approximately 17 acres of land, is
leased for five years through February 15, 1998, with two, one-year renewal
options at the Company's discretion. The lease contains an option to purchase
for $3.45 million. Monthly rent is $23,900 and the Company is responsible for
property taxes and building insurance. The second Elkhart facility is leased for
2 years through June 1997. Rent in the first year is $2,500 per month and is
$3,000 per month in the second year. The McGregor facility is leased for one
year with nine, one-year options to renew at the Company's discretion.
In October 1996 the Company finalized its plan to consolidate the
operations of Imperial into Starcraft's manufacturing complex in Goshen,Indiana.
The Goshen facility has been reorganized to allow a production capacity of
Starcraft and Imperial units of 95 units per day on one shift. The plan is
designed to further enhance profitable growth by reducing excess production
capacity, personnel count and fixed overhead expenses. The Company estimates
that a $700,000 pretax restructuring charge in connection with this plant
consolidation will be recorded in the first quarter of fiscal year 1997. The
charge includes employee termination costs, leasehold asset write-offs and the
recognition of contractual lease obligations.
Item 3. LEGAL PROCEEDINGS.
The Company does not anticipate that any pending legal proceeding to
which it is party will have any material adverse effect on its financial
condition or results of operations. The Company is subject to product liability
claims arising from traffic accidents. The Company maintains product liability
insurance which it currently considers adequate.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Starcraft commenced its initial public offering of Common Stock on July
21, 1993. Its Common Stock is quoted on the Nasdaq Stock Market, National
Market, under the symbol "STCR." As of December 27, 1996, there were 87
shareholders of record of Starcraft's Common Stock.
The following table sets forth the high and low bid prices per share of
Common Stock for the periods indicated.
Quarter Ended High Low
- ------------- ---- ---
January 1, 1995 $ 8.500 $6.000
April 2, 1995 9.000 6.875
July 1, 1995 8.000 4.500
October 1, 1995 6.750 5.125
Dec. 31, 1996 6.750 3.875
March 31, 1996 5.375 4.250
June 30, 1996 5.437 3.750
Sept. 29, 1996 5.000 3.750
Source: Media General Financial Services.
The foregoing quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
Dividend Policy. The Company has paid no cash dividends since its
initial public offering. The Company currently intends to retain earnings for
use in the operation and expansion of its business and therefore does not
anticipate paying cash dividends on Common Stock in the foreseeable future. The
payment of dividends is within the discretion of the Board of Directors and will
be dependent, among other things, upon earnings, capital requirements, any
financing agreement covenants and the financial condition of the Company.
Stock Repurchase. In March 1995, the Company's Board of Directors
approved the repurchase of up to 500,000 shares of the Company's outstanding
shares of common stock. During 1996 the company repurchased 53,000 common shares
in the open market for $246,000. As of December 27, 1996, 153,000 shares have
been repurchased and additional shares may be acquired during the remainder of
fiscal 1997 if in the opinion of the management the Company's stock continues to
be undervalued by the market.
Anti-Takeover Provisions. Indiana law and the Company's Articles of
Incorporation and Code of By-laws contain provisions that restrict the
acquisition of control of the Company. Such provisions can affect the rights of
shareholders acquiring substantial interests in the Company's shares. For
<PAGE>
example, a shareholder who acquires more than 10% of the Company's shares
without prior board approval will be limited in the timing and terms of any
transaction it may enter into with the Company and will be subject to related
provisions. Any shareholder who effects an acquisition after which such
shareholder holds more than 20% of the Company's outstanding shares will have no
voting rights in the shares acquired in such acquisition, unless such rights are
conferred by the disinterested shareholders at the next annual meeting (or
earlier special meeting).
<PAGE>
Item 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------------
(dollars in thousands, Sept. 29, Oct. 1, Oct 2, Oct 3, Sept. 27,
except per share data) 1996 1995 1994 1993 1992 (1)
- ---------------------------------------------------------------------------------------
INCOME
STATEMENT
DATA
<S> <C> <C> <C> <C> <C>
Net sales:
Domestic $ 73,317 $ 91,652 $ 81,640 $ 75,278 $ 69,284
Export 25,648 21,408 10,734 10,001 7,169
98,965 113,060 92,374 85,279 76,453
Cost of goods sold 83,669 92,692 73,775 68,262 61,101
Gross profit 15,296 20,368 18,599 17,017 15,352
Operating expenses 15,049 15,864 12,505 11,099 9,970
Operating income 247 4,504 6,094 5,918 5,382
Interest (expense) (293) (208) 99 (373) (257)
Other, net 176 214 104 31 100
Income before taxes 130 4,510 6,297 5,576 5,225
Income taxes/pro forma
income taxes(2) 20 1,753 2,517 2,241 2,090
Net income/pro forma
net income $ 110 $ 2,757 $ 3,780 $ 3,335 $ 3,135
Weighted common
shares outstanding 4,142 4,261 4,193 3,512 3,583
Earnings per share $ 0.03 $ 0.65 $ 0.90 $ 0.95 $ 0.87
BALANCE
SHEET
DATA
Working capital $ 8,476 $ 8,693 $ 8,140 $ 9,072 $ 6,822
Total assets 36,524 34,213 32,772 24,590 18,973
Long-term debt 0 323 196 209 5,576
Shareholders' equity 21,552 21,688 19,556 14,866 5,558
Book value per share 5.23 5.20 4.58 3.05 1.57
</TABLE>
- ---------
(1) Unaudited information.
(2) For all periods up through July 21, 1993, the Company was an S Corporation
for federal and state income tax purposes and, accordingly, was not subject
to such taxes. The pro forma information has been computed as if the
Company were subject to federal and state income taxes for all periods
presented, based on the tax laws in effect during the respective periods.
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.
The consolidated statements of income summarize operating results for the
last three years. This section of Management's Discussion highlights the main
factors affecting the changes in operating results during the three-year period.
1996 Versus 1995
NET SALES
Net sales for 1996 were $99.0 million, down 12.5% from 1995. Domestic sales
decreased 20.0% to $73.3 million while export sales increased 19.8% to $25.6
million. Unit sales decreased 4.9% to 16,106 in 1996.
Domestic sales were hampered early in the year by the availability of
General Motors products, primarily attributable to the OEM strike, production
issues on the minivan and the delayed introduction of the newly redesigned
fullsize van. As the Company historically relies heavily on General Motors
products, the Company's unit van shipments declined 12.7% in 1996 compared to
the industry's decline of 6.5% as reported by the Recreational Vehicle Industry
Association. Van conversion sales are being negatively impacted by the growing
popularity of OEM sport utility vehicles ("SUVs"). The Company's shipments of
converted pickup trucks and SUVs increased 11.3% in 1996. International sales in
1996 benefited from the early build of 1997 model minivans for Japan totaling $6
million. Sales to Japan in 1997 are estimated to be $4 million lower as a result
of this early build.
The average conversion price declined 9.3% in 1996 due to a change in
product sales mix toward pickup trucks and SUVs and the percentage increase of
Imperial and Lonestar units which compete primarily in the entry level price
range.
GROSS PROFIT
Gross profit margin for 1996 was 15.5% compared to 18.0% in the prior year.
The 1996 decline is due to the impact of fixed overhead on the lower sales and
approximately $200,000 of project expenses incurred on the start-up of the new
Texas facility.
SELLING AND PROMOTION EXPENSE
Selling and promotion expense for 1996 decreased 11.2% to $8.3 million,
primarily attributable to the reduced sales. Selling and promotion expense as a
percent of sales was 8.4% in 1996 compared to 8.2% in the prior year.
GENERAL AND
ADMINISTRATIVE EXPENSE
General and administrative expense was $6.8 million in 1996, a 3.4%
increase from 1995. The increase is due to approximately $360,000 of expenses to
start-up the new Texas facility, offset by the successful implementation of
several expense-containment strategies including personnel reductions.
INCOME TAX EXPENSE
The effective tax rate on income for 1996 was 15.4% compared to 38.9% in
the prior year. The effective rate in 1996 benefited from the implementation of
a foreign sales corporation subsidiary.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(dollars in thousands) 1995 to 1996
1996 1995 Change
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 98,965 100.0% $113,060 100.0% (12.5%)
Cost of gods sold 83,669 84.5% 92,692 82.0% (9.7%)
--------- --- --------- --- ----
Gross profit 15,296 15.5% 20,368 18.0% (24.9%)
Selling and promotion expense 8,252 8.4% 9,292 8.2% (11.2%)
General and administrative expense 6,797 6.9% 6,572 5.8% 3.4%
--------- --- --------- --- ----
Operating income 247 0.2% 4,504 4.0% (94.5%)
Interest expense (293) (0.3%) (208) (0.2%) 40.9%
Other income, net 176 0.2% 214 0.2% (17.8%)
--------- --- --------- --- ----
Income before taxes 130 0.1% 4,510 4.0% (97.1%)
Income taxes 20 0.0% 1,753 1.6% (98.9%)
--------- --- --------- --- ----
NET INCOME $ 110 0.1% $ 2,757 2.4% (96.0%)
========= === ========= === ====
</TABLE>
<PAGE>
1995 VERSUS 1994
NET SALES
The Company's net sales for 1995 increased by 22.4% to $113.1 million from
$92.4 million in the prior year. Unit shipments increased to 16,940 in 1995 from
13,000 in 1994. This sales improvement was attributable to the Imperial
Automotive Group ("Imperial Group") acquisition, which added $20.2 million in
sales on 5,230 incremental unit shipments and additional export sales of $10.7
million on 870 incremental units, offset by an $11.0 million sales decline on
2,160 less units in Starcraft Automotive Group's ("Starcraft Group") domestic
business.
The Company's average conversion price decreased 6.3% reflecting the impact
of the Imperial Group acquisition, which competes in a more price-sensitive
segment of the market. This decline was partially offset by the increased export
sales, which carried a higher average conversion price. Starcraft Group's
average conversion price in 1995 was $8,500 compared to $3,700 for Imperial
Group.
Industry domestic conversion shipments declined 12.3% in 1995 as reported
by the Recreational Vehicle Industry Association. The industry decline in
conjunction with Starcraft Group dealers reducing inventory levels by 34.0%
during 1995 resulted in a decrease of 22.5% in Starcraft Group's domestic unit
sales volume. The Company believes General Motors dealers reduced inventory
levels primarily in anticipation of the 1996 introduction of the newly designed
GMT 600 fullsize van chassis. The retail sales of Starcraft Group units from
domestic dealers to consumers declined 3.7% in 1995.
GROSS PROFIT
Gross profit for 1995 increased by 9.5% to $20.4 million from $18.6 million
in the prior year. Gross profit as a percentage of net sales was 18.0% for 1995
compared to 20.1% for 1994.
The decrease in margin rate was the result of the increased sales from
Imperial Group, which carries a lower margin rate. Additionally, Imperial
Group's costs to move to a new facility reduced the margin rate by 0.4% of net
sales.
SELLING AND
PROMOTION EXPENSE
Selling and promotion expense as a percentage of net sales increased to
8.2% in 1995 from 8.0% in the prior year. Starcraft Group's advertising expense
increased 0.2% of net sales due to additional direct mail programs and
sponsorships.
GENERAL AND
ADMINISTRATIVE EXPENSE
General and administrative expense for 1995 increased to $6.6 million from
$5.1 million in the prior year primarily due to the Imperial Group acquisition.
As a percentage of net sales, such expenses increased to 5.8% from 5.5% in the
prior year due to increased insurance and legal costs.
INTEREST
Net interest expense for 1995 was $208,000 compared to $99,000 in net
interest income for 1994. The increase in expense is primarily due to interest
incurred on additional borrowings incurred to pay the purchase price of the
Imperial Group acquisition.
INCOME TAX EXPENSE
The effective income tax rate for 1995 was 38.9% compared to 39.9% for
1994. The decrease is primarily attributable to a change in federal and state
permanent timing differences.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(dollars in thousands) 1994 to 1995
1995 1994 Change
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 113,060 100.0% $92,374 100.0% 22.4%
Cost of gods sold 92,692 82.0% 73,775 79.9% 25.6%
--------- ----- ------- ----- ----
Gross profit 20,368 18.0% 18,599 20.1% 9.5%
Selling and promotion expense 9,292 8.2% 7,393 8.0% 25.7%
General and administrative expense 6,572 5.8% 5,112 5.5% 28.6%
--------- ----- ------- ----- ----
Operating income 4,504 4.0% 6,094 6.6% (26.1%)
Interest (expense) income (208) (0.2%) 99 0.1% ---
Other income, net 214 0.2% 104 0.1% 105.8%
--------- ----- ------- ----- ----
Income before taxes 4,510 4.0% 6,297 6.8% (28.4%)
Income taxes 1,753 1.6% 2,517 2.7% (30.4%)
--------- ----- ------- ----- ----
NET INCOME $ 2,757 2.4% $3,780 4.1% (27.1%)
========= ===== ======= ===== ====
</TABLE>
<PAGE>
SEASONALITY AND TRENDS
The Company's sales and profits are dependent on the automotive markets in
the United States and Japan and the OEM's ability to supply chassis. Although
the Company currently does not face such issues, during 1996 the Company's sales
were adversely impacted by chassis availability from the OEMs. The business
tends to be seasonal with stronger sales in March through July and is influenced
by a number of factors including atypical weather for any sales region and OEM
programs affecting the price, supply and delivery of vehicle chassis. General
Motors' chassis represented 72% of the Company's total unit shipments in 1996.
The Company's retail dealers had approximately 5,300 units on hand at the
end of 1996 compared to 5,600 at the end of the prior year. Both these levels
remain significantly lower than the 1994 level of 7,200. The lower levels appear
to be the result of dealer caution in stocking the newly redesigned General
Motors fullsize van and the trend of dealers to stock more SUVs.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided cash of $1.9 million compared to $1.1 million
in the prior year. This improvement came principally from a favorable change in
working capital. Receivables increased $2.8 million due to the increase in
international receivables which carry longer payment terms. The increase in
accounts payable of $2.9 million in 1996 is attributable to the ramp up of
production in September 1996 for the increased international business and
improved vendor payment terms. Operating cashflows were applied primarily to
fund capital expenditures, repurchase the Company's Common Stock and reduce
outstanding indebtedness.
At the end of 1996 long-term debt was zero. The Company maintains a $15
million bank revolving credit line. In addition to the availability of bank
financing, the Company has restricted sales agreements with General Motors
Acceptance Corporation, Chrysler Financial Corporation and Ford Motor Credit
Company. Pursuant to these agreements, the Company obtains vehicle chassis from
the OEMs for 90 days at nominal rates. If the Company fails to match a chassis
with a dealer order within 90 days after delivery of the chassis to the Company,
carrying charges increase to prime rate plus 1%.
In 1995 the Board of Directors approved the repurchase of up to 500,000
shares of the Company's outstanding shares of Common Stock. During 1996 the
Company repurchased 53,000 common shares in the open market for $246,000. As of
December 27, 1996, 153,000 common shares have been repurchased under this
program. Additional shares may be acquired in 1997 if, in the opinion of
management, the Company's stock continues to be undervalued by the market.
In October 1996, the Company finalized its plan to consolidate the
operations of the Imperial Automotive Group manufacturing operation, located in
Elkhart, Indiana, into Starcraft Automotive Group's manufacturing complex in
Goshen, Indiana, during December 1996. This plan is designed to enhance
profitable growth by reducing excess production capacity, personnel count and
fixed overhead expenses. The Company estimates that a $700,000 pretax
restructuring charge in connection with this plant consolidation will be
recorded in the first quarter of 1997. The charge includes employee termination
costs, leasehold asset write-offs and the recognition of contractual lease
obligations.
The Company believes that cash flows from operations, funds available under
its bank revolving credit agreement, and the continued use of OEM financing
arrangements to manage its chassis inventory will be sufficient to satisfy its
anticipated operating needs and capital improvements for 1997.
DISCUSSION OF FORWARD-LOOKING INFORMATION
From time to time, Starcraft may make oral or written forward-looking
statements regarding its anticipated sales, costs, expenses, earnings and
matters affecting its condition and operations. Such forward-looking statements
are subject to a number of material factors which could cause the statements or
projections contained therein to be materially inaccurate. Such factors include,
without limitation, the following:
General Operating Contingencies. The Company may not be able to attract and
retain sufficient employees with sufficient skills to conduct its operations
efficiently and may from time to time be subject to work slow-downs or
stoppages. The Company may be adversely affected by delay or unavailability of
supply of numerous component parts. The Company will not always be able to
satisfy its capital requirements with internally generated funds and may, from
time to time, need to rely on bank financing and other third party capital
resources. There is no assurance that such resources will always be available to
the Company or as to the terms that will apply to any financing.
Acquisitions. The Company expects to be engaged in negotiations from time
to time regarding prospective acquisitions of van conversion or other
businesses. Such acquisitions could be material to the Company and, if effected,
could have
<PAGE>
a material effect on the Company's financial condition or results of operations.
There is no assurance as to when or whether the Company will be able to effect
acquisitions, whether it will be able to generate requisite funding to effect
such acquisitions, or as to the terms on which such acquisitions may be
effected.
Economic Conditions. The van conversion industry is cyclical and is
affected by the general trends of the economy and consumer preferences and
consumer confidence and trends of the automotive and recreational vehicle
industries. The level of disposable consumer income affects the Company's sales
because its products are generally considered discretionary expenditures by
consumers. In difficult economic times, consumers tend to spend less of their
income on discretionary items. Other economic factors affecting the demand for
the Company's products include the availability and price of gasoline, the level
of interest rates and the availability of consumer financing. Reduced gasoline
availability could adversely affect the demand for the Company's products. A
significant increase in the price of gasoline could reduce demand for the
Company's products because it would increase the cost of operating these
products. Because many consumers finance their purchase of vehicle conversions,
the availability of financing and level of interest rates can affect a
consumer's purchasing decision. A decline in general economic conditions or
consumer confidence can be expected to affect Starcraft's sales adversely.
Supply and Financing of Vehicle Chassis. The Company is dependent upon the
OEMs to supply its requirements for vehicle chassis. Labor stoppages, supply
shortages and a variety of other factors that influence OEM production can
affect the availability or timely delivery of vehicle chassis to the Company.
The impact of these factors was significant in 1996. If vehicle chassis are
unavailable, or if the Company must accept delivery earlier or later than it
otherwise would prefer, sales could be adversely affected and financing expenses
could increase. The Company must also comply with its consignment and restricted
sale contracts with the OEMs pursuant to which the OEMs impose certain
specifications for the Company's vehicle conversions, including gross vehicle
weight standards. Such contracts also restrict the Company's ability to dispose
of completed chassis and prohibit the transfer of chassis to unauthorized U.S.
and foreign dealers. All of the Company's consignment and restricted sale
contracts with chassis suppliers are terminable by either party on short notice
without cause. The availability of the OEM financing rates is dependent upon the
Company's compliance with its OEM contracts and its ability to maintain
satisfactory credit relationships with the OEM's finance subsidiaries. Adverse
changes in the Company's financial condition or results of operations could
cause such financing subsidiaries to seek to change adversely the Company's
financing terms or to terminate such financing arrangements. Such a change or
termination could have a material adverse effect on the Company's financial
condition and results of operations.
Regulation. The Company is subject to various foreign, federal, state and
local regulations. In particular, conversion components produced by the Company
are required to comply with Federal Motor Vehicle Safety Standards and similar
safety standards imposed in its foreign markets. Promulgation of additional
safety standards in the future could require the Company to incur additional
testing and engineering expenses which could adversely affect the Company's
results of operations. The Company's international sales can be adversely
affected by changes in foreign import tariffs and taxes and fluctuations in
exchange rates. The Company must comply with certain Federal and state
regulations relating to the disposition of hazardous wastes generated in its
production processes. The Company's failure to comply with applicable
regulations or changes in current regulations, including the adoption of new
safety or environmental standards, could have material adverse effect on the
Company's results of operations.
Competition. The United States vehicle conversion industry is very
competitive with several principal nationwide manufacturers and numerous local
and regional competitors. There is no assurance the Company will be able to
maintain its current competitive position in the vehicle conversion market or
that it will be able to expand its sales of custom truck and SUV conversions.
Potential Product Liability. Like other automotive manufacturers, the
Company may be subject to claims that its products caused or contributed to
damage or injury sustained in vehicle accidents, "lemon law" claims or may be
required to recall products deemed unsafe. Any such claims in excess of the
Company's insurance coverage or material product recall expenses could adversely
affect the Company's financial condition and results of operations.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Starcraft Corporation
We have audited the accompanying consolidated balance sheet of
Starcraft Corporation and Subsidiaries as of September 29, 1996 and the related
consolidated statements of income, shareholders' equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit. The consolidated
financial statements of Starcraft Corporation and Subsidiaries as of October 1,
1995 and for each of the two years in the period then ended were audited by
other auditors whose report dated November 3, 1995 expressed an unqualified
opinion on those statements.
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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Starcraft Corporation and Subsidiaries as of September 29, 1996 and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
November 7, 1996
Fort Wayne, Indiana
<PAGE>
[Logo]
McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Starcraft Corporation
Goshen, Indiana
We have audited the accompanying consolidated balance sheet of Starcraft
Corporation and Subsidiaries as of October 1, 1995, and the related consolidated
statements of income, shareholders' equity, and cash flows for the periods ended
October 1, 1995, and October 2, 1994. These consolidated financial statements
are the responsibility of the Companies' management. Our responsibility is to
express an opinion on these consolidated 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 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Starcraft
Corporation and Subsidiaries as of October 1, 1995, and the results of their
operations and their cash flows for the periods ended October 1, 1995 and
October 2, 1994, in conformity with generally accepted accounting principles.
/s/ McGLADREY & PULLEN, LLP
Elkhart, Indiana
November 3, 1995
<PAGE>
Consolidated Balance Sheets
ASSETS
CURRENT ASSETS:
<TABLE>
<CAPTION>
September 29, October 1,
(in thousands, except share data) 1996 1995
------------- ----------
<S> <C> <C>
Cash and cash equivalents $ 1,366 $ 1,255
Trade receivables, less allowance for
doubtful accounts: (1996 - $51; 1995 - $57) 9,165 6,045
Manufacturers rebates receivable 1,079 1,389
Inventories 11,508 11,713
Other 330 493
------- -------
Total current assets 23,448 20,895
PROPERTY AND EQUIPMENT:
Land, buildings, and improvements 6,033 5,702
Machinery and equipment 4,430 3,871
------- -------
10,463 9,573
Less accumulated depreciation 2,697 1,898
------- -------
7,766 7,675
GOODWILL, at amortized cost 5,140 5,365
------- -------
OTHER ASSETS 170 278
$36,524 $34,213
======= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $ 9,330 $ 6,383
Accrued expenses:
Warranty 1,600 1,785
Compensation and related expenses 882 1,143
Taxes 1,280 929
Other 1,557 1,352
Current portion of long-term debt: 323 610
------- -------
Total current liabilities 14,972 12,202
LONG-TERM DEBT, less current portion -- 323
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, no par value: 2,000,000 shares authorized but unissued -- --
Common stock, no par value: Authorized shares - 10,000,000 shares
Issued and outstanding shares 1996 - 4,118,600; 1995 - 4,171,600 13,971 14,104
Additional paid-in capital 1,008 1,008
Retained earnings 6,573 6,576
------- -------
21,552 21,688
------- -------
$36,524 $34,213
======= =======
</TABLE>
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------------
September 29, October 1, October 2,
(in thousands, except share data) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
NET SALES
<S> <C> <C> <C>
Domestic $ 73,317 $ 91,652 $ 81,640
Export 25,648 21,408 10,734
--------- --------- ---------
98,965 113,060 92,374
COST OF GOODS SOLD 83,669 92,692 73,775
--------- --------- ---------
Gross profit 15,296 20,368 18,599
OPERATING EXPENSES
Selling and promotion 8,252 9,292 7,393
General and administrative 6,797 6,572 5,112
--------- --------- ---------
15,049 15,864 12,505
--------- --------- ---------
Operating income 247 4,504 6,094
NON-OPERATING (EXPENSE) INCOME:
Interest, net (293) (208) 99
Other income, net 176 214 104
--------- --------- ---------
(117) 6 203
--------- --------- ---------
Income before income taxes 130 4,510 6,297
FEDERAL AND STATE INCOME TAXES 20 1,753 2,517
--------- --------- ---------
Net Income $ 110 $ 2,757 $ 3,780
========= ========= =========
EARNINGS PER COMMON
AND COMMMON EQUIVALENT SHARE $ 0.03 $ 0.65 $ 0.90
========= ========= =========
AVERAGE NUMBER OF COMMON
AND COMMMON EQUIVALENT SHARES OUTSTANDING 4,142,402 4,260,915 4,193,003
========= ========= =========
</TABLE>
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------
September 29, October 1, October 2,
(in thousands) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 110 $ 2,757 $ 3,780
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,087 1,006 613
Other 51 93 60
Change in operating assets and liabilities
Receivables (2,810) (229) (1,013)
Inventories 205 (1,346) 2,457
Other 163 176 53
Accounts payable 2,947 (696) 126
Accrued expenses 110 (703) 863
------- ------- -------
Net cash provided by operating activities 1,863 1,058 6,939
INVESTING ACTIVITIES
Purchase of property and equipment (932) (1,630) (1,451)
Purchase of assets of Imperial Industries, Inc. -- -- (3,900)
Other 36 45 (146)
------- ------- -------
Net cash used in investing activities (896) (1,585) (5,497)
FINANCING ACTIVITIES
Proceeds from revolving credit agreement 7,800 5,100 700
Payments on revolving credit agreement (7,800) (5,100) (700)
Payments on long-term debt (610) (512) (466)
Repurchase of common stock (246) (625) --
------- ------- -------
Net cash used in financing activities (856) (1,137) (466)
------- ------- -------
Net increase (decrease)
in cash and cash equivalents 111 (1,664) 976
Cash and cash equivalents at beginning of year 1,255 2,919 1,943
------- ------- -------
Cash and cash equivalents at end of year $ 1,366 $ 1,255 $ 2,919
======= ======= =======
Supplemental information:
Interest paid $ 304 $ 222 $ 15
Income taxes paid $ 60 $ 2,205 $ 2,484
</TABLE>
<PAGE>
Consolidated Statements of Shareholders Equity
<TABLE>
<CAPTION>
Common Additional Retained Common Stock Total
(in thousands, except share data) Stock Paid-In Capital Earnings Repurchased
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, October 3, 1993 $ 13,932 $ 4,608 $ 326 $ (4,000) $ 14,866
Net income -- -- 3,780 -- 3,780
Issuance of 130,000
shares of common stock 910 -- -- -- 910
Retirement of 738,400
shares of repurchased
common stock (400) (3,600) -- 4,000 --
-------- -------- -------- ----- --------
BALANCE, October 2, 1994 14,442 1,008 4,106 -- 19,556
Net income -- -- 2,757 -- 2,757
Repurchase and retirement
of 100,000 shares
of common stock (338) -- (287) -- (625)
-------- -------- -------- --- --------
BALANCE, October 1, 1995 14,104 1,008 6,576 -- 21,688
Net income -- -- 110 -- 110
Repurchase and retirement
of 53,000 shares
of common stock (133) -- (113) -- (246)
-------- -------- -------- --- --------
BALANCE, September 29, 1996 $ 13,971 $ 1,008 $ 6,573 $- $ 21,552
======== ======== ======== === ========
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business and Significant Accounting Policies
Nature of Business and Principles of Consolidation
Starcraft Corporation and Subsidiaries (Company) are second-stage
manufacturers of custom van, pickup truck, and sport utility vehicle
conversions. The consolidated financial statements include the accounts of
Starcraft Corporation and its wholly owned subsidiaries: Starcraft Automotive
Group, Inc., Imperial Automotive Group, Inc. and Starcraft Southwest, Inc. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The Company's customers operate in the automotive industry. The Company
sells conversion units throughout the United States, and export sales are
principally to locations in Japan, Korea, and northern Europe. Credit is
extended to customers based on an evaluation of the customer's financial
condition, and when credit is extended collateral is generally not required.
Sales to the Company's largest customer for the years ended September 29, 1996,
October 1, 1995, and October 2, 1994 were $18,526,000, $15,185,000 and
$5,009,000, respectively.
Significant Accounting Policies
Cash Equivalents
Cash equivalents include all highly-liquid investments with a maturity of
three months or less.
The Company maintains deposits in one or more financial institutions which,
at times, may be in excess of FDIC insurance limits.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
by the last-in, first-out (LIFO) method for certain inventories ($8,408,000 at
September 29, 1996) and by the first-in, first-out (FIFO) method for all other
inventories ($3,100,000 at September 29, 1996).
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
principally by the straight-line method over the estimated useful lives of the
assets. The Company is depreciating buildings over a period of 50 years,
building improvements over periods of 5 to 20 years, and equipment over periods
of 3 to 12 years.
Goodwill
Goodwill is amortized by the straight-line method over a period of 25 years
and is stated net of accumulated amortization of $482,000 and $257,000 at
September 29, 1996 and October 1, 1995, respectively.
Warranties
The Company follows the policy of accruing an estimated liability for
warranties at the time the warranted products are sold.
Revenue Recognition
The Company generally manufactures products based on specific orders from
customers. Shipments are generally made by common carrier after receiving
authorization from the customer, and revenue is generally recognized upon
shipment. Net sales do not include the cost of chassis (see Note 7).
Stock Based Compensation
The Company periodically grants stock options for a fixed number of shares
to employees. The Company accounts for stock option grants in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees."
<PAGE>
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Accounting Changes
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of," which required impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. The Company's long-lived
assets are assessed for potential impairment whenever existing facts and
circumstances indicate the carrying value of those assets may not be
recoverable. The adoption of SFAS 121 in fiscal 1996 had no effect on the
Company's financial statements.
Seasonality
The Company's business is seasonal. Sales are generally higher during the
spring and summer months of the year.
Fiscal Year
The Company's fiscal year ends on the Sunday closest to September 30. The
years ended September 29, 1996, October 1, 1995, and October 2, 1994 each
contain 52 weeks.
2. Inventories
The composition of inventories at September 29, 1996 and October 1, 1995 is as
follows:
(in thousands) 1996 1995
- -------------------------------------------------------
Raw materials $ 7,126 $ 6,808
Work-in-process 1,786 2,340
Finished goods 2,596 2,565
--------- --------
$ 11,508 $ 11,713
========= ========
The use of the LIFO method of determining the cost of inventories did not
have a material effect on inventories at September 29, 1996 and October 1, 1995
or net income for the years then ended.
3. Debt Arrangements
The Company has a bank line of credit totaling $15 million, none of which
was outstanding at September 29, 1996. Borrowings under this line of credit bear
interest at the prime rate of the lending bank (8.25% at September 29, 1996), or
at the Company's option, LIBOR plus 1.25%, and are unsecured. This facility
expires in January 1998.
At September 29, 1996, the Company has a note payable to Imperial
Industries, Inc. for $323,000 resulting from additional consideration paid as
part of the acquisition of its assets (see Note 6). The note is due in monthly
installments of $55,178 including interest at 8% with the final installment due
March 1997.
Interest expense for the years ended September 29, 1996, October 1, 1995,
and October 2, 1994, was approximately $305,000, $224,000, and $15,000,
respectively.
4. Income Taxes
Federal and state income taxes, all of which were domestic, consist of the
following:
Year Ended Sept. 29, Oct. 1, Oct. 2,
(in thousands) 1996 1995 1994
- -----------------------------------------------------------
Current:
Federal $ (103) $ 1,272 $ 2,011
State 55 378 457
------- ------- -------
(48) 1,650 2,468
Deferred:
Federal 54 83 41
State 14 20 8
------- ------- -------
68 103 49
------- ------- -------
$ 20 $ 1,753 $ 2,517
======= ======= =======
<PAGE>
The provisions for income taxes are different from amounts that would otherwise
be computed by applying a federal statutory rate of 34% to income taxes. A
reconciliation of the differences is as follows:
Year Ended Sept. 29, Oct. 1, Oct. 2,
(in thousands) 1996 1995 1994
- ------------------------------------------------------------------
Rate applied to
pre-tax income $ 44 $ 1,533 $ 2,141
State taxes, net of
federal benefit 46 182 372
Foreign sales
corporation (205) -- --
Other, net 135 38 4
------- ------- -------
$ 20 $ 1,753 $ 2,517
======= ======= =======
The composition of the deferred tax assets and liabilities at September 29,
1996 and October 1, 1995 is as follows:
(in thousands) 1996 1995
- -----------------------------------------------------------------
Deferred tax liabilities:
Accelerated depreciation $(330) $(247)
Inventory basis difference (64) (127)
Other (84) (59)
----- -----
(478) (433)
Deferred tax assets:
Nondeductible accruals:
Warranty 378 450
Other 175 126
----- -----
553 576
----- -----
Net deferred tax assets $ 75 $ 143
===== =====
5. Compensation Plans
The Company sponsors a qualified profit-sharing plan, more commonly known
as a 401(k) plan, for all of its employees with over six months of service. The
plan provides for a matching contribution by the Company of the employee's
salary deduction, up to 6% of compensation. In addition, the plan provides for a
discretionary contribution annually as determined by the Board of Directors. The
amounts charged to expense for the years ended September 29, 1996, October 1,
1995, and October 2, 1994 for this plan were approximately $107,000, $470,000,
and $364,000, respectively.
The Company sponsors a qualified stock option plan with 380,000 shares of
common stock reserved for options to key employees and directors. Under the
plan, options may not be granted at prices below 85% of the current market value
<PAGE>
of the stock at the date of the grant. All options awarded through September 29,
1996 have been at fair market value on the date of grant. For the year ended
September 29, 1996, the effect of the stock options in computing earnings per
common share was antidilutive.
The following is a summary of transactions of shares under option for the years
ended September 29, 1996, October 1, 1995, and October 2, 1994.
Year Ended
- ------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------
Outstanding, beginning
of year 311,850 241,350 166,850
Granted during
the year 171,000 167,000 79,500
Canceled during
the year (113,001) (96,500) (5,000)
-------- ------- ------
Outstanding,
end of year 369,849 311,850 241,350
======= ======= =======
Eligible, end of
year for exercise
currently (between
$3.875 and $10
per share) 354,349 248,076 118,105
======= ======= =======
The Company sponsors a qualified stock option plan with 40,000 shares of
common stock reserved for options to certain sales representatives who are not
employees of the Company. Under this plan, options may not be granted at prices
below 85% of the current market value of the stock at the date of grant. All
options awarded through September 29, 1996 have been at fair market value on the
date of grant. There were 5,500 options outstanding as of September 29, 1996.
For the year ended September 29, 1996, the effect of the stock options in
computing earnings per common share was antidilutive.
6. Business Combination
On July 3, 1994, the Company acquired the assets and assumed certain
liabilities of Imperial Industries, Inc. (Imperial), a manufacturer of van
conversions. The purchase price of the acquired assets was $3,900,000 in cash
and 130,000 shares of the Company's common stock with a value of $910,000.
Based upon Imperial achieving certain pre-tax net profits for the calendar
year 1994, the Company was required to pay additional consideration of $1.22
million in the form of a 24 month note (see Note 3). This consideration was
recorded as an addition to goodwill in 1995.
Unaudited pro forma consolidated results of operations for the year ended
October 2, 1994 as though the acquisition of Imperial had occurred as of October
3, 1993 are as follows (in thousands, except per share data):
Net sales $ 109,582
Net income 4,504
Earnings per common and
common equivalent share 1.07
The above pro forma results of operations reflect adjustments for
amortization of goodwill, imputed interest on borrowed funds, and income taxes.
The pro forma amounts do not purport to be indicative of what would have
occurred had the acquisition been made as of October 1, 1993 or of results which
may occur in the future.
<PAGE>
7. Consignment Arrangements
The Company obtains vehicle chassis for modification from major vehicle
manufacturers (OEMs) under consignment and restricted sales agreements. These
agreements generally provide that (i) the Company may not obtain certificates of
origin or other evidence of ownership of chassis, (ii) modification must conform
to standards specified by OEMs, and (iii) modifications generally are performed
only after a sale has been negotiated with an OEM approved dealer. The Company
generally ships converted chassis only after dealer acceptance has been approved
by the OEM. The OEMs bill the dealer and provide warranty for the chassis.
The agreements are secured by various credit arrangements with the OEMs.
The OEMs may require the Company to purchase chassis in the event that the
restricted sales agreements are terminated. Chassis purchases required by the
terms of these arrangements were not material during the periods covered by the
accompanying financial statements. The Company pays the OEMs a nominal carrying
charge for the first 90 days that it possesses a chassis. After 90 days, the
carrying charges accelerate to approximate market interest rates. Throughout the
consignment period, the Company is subject to the risk of decline in value of
consigned chassis.
Consistent with the practice in their industry, the Company accounts for
chassis as consignment inventory. Accordingly, the Company records chassis
inventory and related obligations only in the event they are required to
purchase chassis from the OEM. Provisions for decline in chassis value are
recognized when, in management's estimation, such provisions are necessary.
Provisions for decline in chassis value, chassis inventory and chassis sales are
not material to the accompanying financial statements.
At September 29, 1996, the Company has possession of chassis in the
aggregate amount of $45,167,000 (of which $4,615,000 related to chassis on
consignment for periods exceeding 90 days) and has total chassis line
availability between $73.7 million and $83.9 million based on the time of year.
Carrying charges on consignment chassis, which are presented in cost of goods
sold, for the years September 29, 1996, October 1, 1995, and October 2, 1994
were approximately $1,729,000, $2,046,000, and $795,000, respectively. The OEMs
have also instituted incentive rebates to second-stage manufacturers based on
the number of chassis delivered to dealers. Those incentives reduced cost of
goods sold by approximately $1,135,000, $1,415,000, and $1,075,000 in 1996,
1995, and 1994, respectively.
8. Research and Development
The Company incurs costs to improve the appeal and safety of its products.
Research and development costs are charged to operations when incurred. Amounts
charged to operations for the years ended September 29, 1996, October 1, 1995,
and October 2, 1994 were approximately $893,000, $726,000, and $792,000,
respectively.
<PAGE>
9. Commitments
The Company leases certain of its facilities and equipment. The total
rental expense for the years ended September 29, 1996, October 1, 1995, and
October 2, 1994 is $490,000, $295,000, and $50,000, respectively. Rental
commitments at September 29, 1996 for long-term noncancelable operating leases
are as follows:
1997 $386,000
1998 135,000
1999 14,000
2000 6,000
2001 5,000
--------
$546,000
========
10. Unaudited Interim Financial Information
Presented below is certain unaudited quarterly financial information for
the years ended September 29, 1996 and October 1, 1995.
(in thousands, except share data)
Quarter Ended
- --------------------------------------------------------------------------
Dec. 31, March 31, June 30, Sept. 29,
1995 1996 1996 1996
- --------------------------------------------------------------------------
Net sales $ 15,658 $ 23,063 $ 31,507 $ 28,737
Gross profit 1,538 1,717 6,276 5,765
Net income
(loss) (1,142) (1,229) 1,414 1,067
Earnings (loss)
per common
share (.27) (.30) .34 .26
Quarter Ended
- --------------------------------------------------------------------------
Jan. 1, April 2, July 2, Oct. 1,
1995 1995 1995 1995
- --------------------------------------------------------------------------
Net sales $25,558 $31,759 $30,973 $24,770
Gross profit 4,443 5,105 6,473 4,347
Net income 352 848 1,402 155
Earnings
per common
share .08 .20 .33 .04
11. Subsequent Event
In October 1996, the Company finalized its plan to consolidate the
operations of the Imperial Automotive Group manufacturing operation, located in
Elkhart, Indiana, into Starcraft Automotive Group's manufacturing complex in
Goshen, Indiana during December 1996. The Company estimates that a $700,000
pre-tax restructuring charge in connection with this plant consolidation will be
recorded in the first quarter of fiscal 1997.
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Previously reported in the Registrant's Form 10-K for the fiscal year
ending October 1, 1995.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated by reference to the Registrant's proxy statement to be
filed with the Securities and Exchange Commission on or before January 27, 1997.
Item 11. EXECUTIVE COMPENSATION.
Incorporated by reference to the Registrant's proxy statement to be
filed with the Securities and Exchange Commission on or before January 27, 1997.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference to the Registrant's proxy statement to be
filed with the Securities and Exchange Commission on or before January 27, 1997.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference to the Registrant's proxy statement to be
filed with the Securities and Exchange Commission on or before January 27, 1997.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) List the following documents filed as a part of the report:
Financial Statements (as of and for the fiscal periods ended September 29, 1996,
October 1, 1995 and October 2, 1994):
Balance Sheets
Statements of Income
Statements of Cash Flows
Statements of Shareholders' Equity
Notes to Financial Statements
(b) Reports on Form 8-K
Registrant filed no reports on Form 8-K during the quarter ending
September 29, 1996.
(c) The exhibits filed herewith or incorporated by reference herein are set
forth on the Exhibit Index beginning on page E-1.
(d) The following financial statement schedule is filed as a part of this
report:
(i) Valuation and Qualifying Accounts and Reserves.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and
have been omitted.
<PAGE>
STARCRAFT CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at Deductions from
Beginning of Charged to Additions to Balance at Close
Period Operations Reserves(a) of Period
- ----------------------------------------------------------------------------------------------------------------------------------
Allowance for doubtful accounts
- -deducted from accounts receivable,
trade, in the consolidated balance sheets:
<C> <C> <C> <C> <C>
52 weeks ended September 29, 1996 $ 57 $ -- $ (6) $ 51
52 weeks ended October 1, 1995 $ 60 $ -- $ (3) $ 57
52 weeks ended October 2, 1994 $ 41 $ -- $ 19 (b) $ 60
</TABLE>
- ------------
(a) Write-off of bad debts, less recoveries.
(b) Includes $20 acquired as part of acquisition of assets of Imperial
Industries, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on behalf of the undersigned, thereto duly authorized.
STARCRAFT CORPORATION
DATE: December 27, 1996 By: /s/ Kelly L. Rose
--------------------------
Kelly L. Rose,
Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 27th day of December,
1996:
1) Principal Executive Officer:
By: /s/ Kelly L. Rose Chairman, Chief Executive Officer
----------------------
Kelly L. Rose
(2) Principal Financial/Accounting Officer:
By: /s/ Michael H. Schoeffler President, Chief
---------------------- Financial Officer, Treasurer,
Michael H. Schoeffler Secretary
(3) The Board of Directors:
By: /s/ Kelly L. Rose Director
----------------------
Kelly L. Rose
By: /s/ Frank K. Martin Director
----------------------
Frank K. Martin
By: /s/ L. Craig Fulmer Director
----------------------
L. Craig Fulmer
By: /s/ David J. Matteson Director
----------------------
David J. Matteson
By: /s/ Allen H. Neuharth Director
----------------------
Allen H. Neuharth
<PAGE>
EXHIBIT INDEX
Reference to Sequential
Regulation S-K Page
Exhibit Number Document Number
2.1 Asset Purchase and Sale Agreement between Imperial
Industries, Inc. and the Registrant, dated June 2, 1994.
Incorporated by reference to Exhibit 2.1 to the
Registrant's Form 8-K, as amended, filed with the
Securities Exchange Commission on July 20, 1994. *
3.1 Registrant's Articles of Incorporation, as amended.
Incorporated by reference to Exhibit 3.1 to the
Registrant's Form 10-K for the year ending October 1,
1995. *
3.2 Registrant's Code of By-Laws, as amended. [ ]
3.3 Form of Share Certificate. **
4.1 Article 6 - "Terms of Shares" and Article 9 -
"Provisions for Certain Business Combinations" of the
Registrant's Articles of Incorporation, as amended.
4.2 Article III - "Shareholder Meetings", Article VI -
"Certificates for Shares" and Article VII - "Corporate
Books and Records - Section 3" of the Registrant's Code
of By-Laws, as amended.
4.3 Amended and Restated Credit Agreement between the
Registrant and Bank One Indianapolis, N.A., dated
November 30, 1994. Incorporated by reference to Exhibit
4.6 for the fiscal year ending October 2, 1994. *
4.4 First Amendment to Amended and Restated Credit Agreement
between the Registrant and Bank One, Indianapolis, N.A.
dated March 7, 1995. Incorporated by reference to
Exhibit 10(2) to the Registrant's Form 10-Q for the
quarter ending April 2, 1995. *
10.1(a) The Starcraft Automotive Corporation Stock Incentive Plan. **
10.1(b) The Starcraft Corporation 1997 Stock Incentive Plan. [ ]
<PAGE>
10.2 Form of Tax indemnification agreement among the
Registrant, Mr. Kash, Mr. Rose, Mr. Newberry and Mr.
Hardin, dated as of July 21, 1993. Incorporated by
reference to Exhibit 10.7 of the Registrant's
registration statement on Form S-1, Reg. No. 33- 63760. *
10.3(a) Employment Agreement with Kelly L. Rose dated June 2,
1993. Incorporated by reference to Exhibit 10.10(a) of
the Registrant's Form S-1. **
10.3(b) Employment Agreement with Kelly L. Rose dated December
12, 1996. [ ]
10.3(c) Consulting Agreement with Allen H. Neuharth dated
September 15, 1993. Incorporated by reference to Exhibit
10.3(k) of the Registrant's Form 10-K for the fiscal
year ending October 2, 1994. *
10.3(d) Employment Agreement between the Registrant and Michael
H. Schoeffler dated January 16, 1995. Incorporated by
reference to Exhibit 10.3(m) of the Registrant's Form
10-K for the year ending October 1, 1995. *
10.3(e) Employment Agreement between the Registrant and Michael
H. Schoeffler dated December 12, 1996. [ ]
10.4 Inventory Loan and Security Agreement by and between the
Registrant and General Motors Acceptance Corporation, as
amended. Incorporated by reference to Exhibit 10.13 of
the Registrant's Form S-1. **
10.5 Agreement by and between the Registrant and General
Motors Acceptance Corporation dated February 7, 1991.
Incorporated by reference to Exhibit 10.14 of the
Registrant's Form S-1. **
10.6 Intercreditor Agreement between General Motors
Acceptance Corporation and Bank One, Indianapolis, N.A.
dated July 21, 1992. Incorporated by reference to
Exhibit 10.16 of the Registrant's Form S-1. **
<PAGE>
10.7 Authorized Converter Pool Agreement between the
Registrant and Ford Motor Company dated May 7, 1991 and
amended May 7, 1991. Incorporated by reference to
Exhibit 10.17 of the Registrant's Form S-1. **
10.8 Wholesale Financing and Security Agreement between the
Registrant and Ford Motor Credit Company dated April 17,
1991. Incorporated by reference to Exhibit 10.18 of the
Registrant's Form S-1. **
10.9 Intercreditor Agreement between Ford Motor Credit
Company and Bank One, Indianapolis, N.A. dated July 17,
1992. Incorporated by reference to Exhibit 10.20 of the
Registrant's Form S-1. **
10.10 Truck Consignment Agreement between the Registrant and
Chrysler Corporation dated August 29, 1991. Incorporated
by reference to Exhibit 10.21 of the Registrant's Form
S-1. **
10.11 License Agreement by and between the Registrant and
AlliedSignal, Inc. dated February 18, 1993. Incorporated
by reference to Exhibit 10.22 of the Registrant's Form
S-1. **
10.12 Agent Agreement by and between the Registrant, Mitsui &
Co. (U.S.A.), Inc. and Mitsui & Co., Ltd. dated March 1,
1993. Incorporated by reference to Exhibit 10.23 of the
Registrant's Form S-1. **
10.13 License Agreement by and between the Registrant and
Starcraft RV, Inc. dated September 12, 1991.
Incorporated by reference to Exhibit 10.24 of the
Registrant's Form S-1. **
10.14 License Agreement by and between the Registrant and
Starcraft Recreational Products, Ltd. dated January 18,
1991. Incorporated by reference to Exhibit 10.25 of the
Registrant's Form S-1. **
10.15 Contract for Conditional Sale of Real Estate by and
between the Registrant and the Harold A. Schrock
Revocable Trust dated December 20, 1991 and amended
February 28, 1992. Incorporated by reference to Exhibit
10.26 of the Registrant's Form S-1. **
<PAGE>
10.16(a) Directors' Share Plan, restated effective October 1,
1995. Incorporated by reference to exhibit 10.16(a) of
the Registrant's Form 10-K for the year ending October
1, 1995. *
10.16(b) Directors' Compensation Deferral Plan effective October
1, 1995. Incorporated by reference to Exhibit 10.16(b)
of the Registrant's Form 10-K for the year ending
October 1, 1995. *
10.17 Ford Authorized Convertor Pool Agreement between
Imperial Automotive Group, Inc. and Ford Motor Co. dated
June 29, 1994. Incorporated by reference to Exhibit
10.19 of the Registrant's Form 10-K for the fiscal year
ending October 2, 1994. *
10.18 Inventory Loan and Security Agreement between Imperial
Automotive Group, Inc. and General Motors Acceptance
Corporation dated June 20, 1994. Incorporated by
reference to Exhibit 10.20 of the Registrant's Form 10-K
for the fiscal year ending October 2, 1994. *
10.19 Ford Authorizing Converter Pool Agreement between Ford
Motor Co. and Imperial Automotive Group, Inc. dated June
29, 1994. Incorporated by reference to Exhibit 10.21 of
the Registrant's Form 10-K for the fiscal year ending
October 2, 1994. *
10.20 Intercreditor Agreement between General Motors
Acceptance Corporation and Bank One Indianapolis, N.A.
dated July 15, 1994. Incorporated by reference to
Exhibit 10.24 of the Registrant's Form 10-K for the
fiscal year ending October 2, 1994. *
10.21 GMC Truck Special Vehicle Manufacturers Agreement by and
between Starcraft Automotive Group, Inc. and GMC Truck
Division, Truck & Bus Group, General Motors Corporation
dated February 1, 1995. Incorporated by reference to
Exhibit 10.21 of the Registrant's Form 10-K for the year
ending October 1, 1995. *
<PAGE>
10.22 GMC Truck Special Vehicle Manufacturer's Agreement
between Imperial Automotive Group, Inc. and the GMC
division of General Motors Corporation effective
February 1, 1995. Incorporated by reference to Exhibit
10.22 of the Registrant's Form 10-K for the year ending
October 1, 1995. *
10.23 Lease between Imperial Automotive Group, Inc. and Beck
Real Estate Corporation dated February 3, 1995.
Incorporated by reference to Exhibit 10 to the
Registrant's Form 10-Q for the quarter ending January 1,
1995. *
10.24 Guaranty of Starcraft Automotive Group, Inc. to the
obligations of Starcraft Corporation to General Motors
Acceptance Corporation dated February 9, 1995.
Incorporated by reference to Exhibit 10.23 of the
Registrant's Form 10-K for the year ending October 1,
1995. *
10.25 Guaranty of Starcraft Automotive Group, Inc. to the
obligations of Imperial Automotive Group, Inc.to General
Motors Acceptance Corporation dated February 9, 1995.
Incorporated by reference to Exhibit 10.25 of the
Registrants Form 10-K for the year ending October 1,
1995. *
10.26 Promissory Note from the Registrant to Imperial
Industries, Inc. dated April 1, 1995. Incorporated by
reference to Exhibit 10(3) to the Registrant's Form 10-Q
for the quarter ending April 2, 1995. *
10.27 Chevrolet Quality Approved Converters Program Agreement
by and between Starcraft Automotive Group, Inc. and
Chevrolet Motor Division, General Motors Corporation
dated April 10, 1995. Incorporated by reference to
Exhibit 10.27 of the Registrant's Form 10-K for the year
ending October 1, 1995. *
<PAGE>
10.28 Chevrolet Quality Approved Converters Program between
Imperial Automotive Group, Inc. and Chevrolet division
of General Motors Corporation dated April 10, 1995.
Incorporated by reference to Exhibit 10.28 of the
Registrant's Form 10-K for the year ending October 1,
1995. *
10.29 Agreement between Chrysler Corporation and Starcraft
Automotive Group, Inc. dated July 1, 1995. Incorporated
by reference to Exhibit 10.29 of the Registrant's Form
10-K for the year ending October 1, 1995. *
10.30 Pool Company Wholesale Finance Plan and Security
Agreement between Chrysler Credit Corporation and
Starcraft Automotive Group, Inc. dated July 1, 1995.
Incorporated by reference to Exhibit 10.30 of the
Registrant's Form 10-K for the year ending October 1,
1995. *
10.31 Agreement between Chrysler Corporation and Imperial
Industries, Inc. dated July 1, 1995. Incorporated by
reference to Exhibit 10.31 of the Registrant's Form 10-K
for the year ending October 1, 1995. *
10.32 Pool Company Wholesale Finance Plan and Security
Agreement between Chrysler Credit Corporation and
Imperial Industries, Inc. dated July 1, 1995.
Incorporated by reference to Exhibit 10.32 of the
Registrant's Form 10-K for the year ending October 1,
1995. *
10.33 Promissory Note from Duke T. Hale dated November 4,
1995. Incorporated by reference to Exhibit 10(1) to the
Registrant's Form 10-Q for the quarter ending April 2,
1995. *
11 Computation of Earnings Per Share [ ]
21 Subsidiaries of the Registrant. [ ]
23 (a) Consent of Ernst & Young LLP. [ ]
23 (b) Consent of McGladrey & Pullen, LLP
27 Financial Data Schedule
<PAGE>
* Incorporated by reference as indicated in the
description.
** Incorporated by reference to the exhibit, bearing the
corresponding exhibit number to the Registrant's
registration statement on Form S-1, Reg. No. 33-63760,
unless another exhibit number is listed in the above
description.
EXHIBIT 3
RESTATED
CODE OF BY-LAWS
OF
STARCRAFT AUTOMOTIVE CORPORATION
ARTICLE I
Offices
Section 1. Principal Office. The principal office (the "Principal Office")
of Starcraft Automotive Corporation (the "Corporation") shall be at 2703 College
Avenue, P.O. Box 1903, Goshen, Indiana 46526, or such other place as shall be
determined by resolution of the Board of Directors of the Corporation (the
"Board").
Section 2. Other Offices. The Corporation may have such other offices at
such other places within or without the State of Indiana as the Board may from
time to time designate, or as the business of the Corporation may require.
ARTICLE II
Seal
Section 1. Corporate Seal. The corporate seal of the Corporation (the
"Seal") shall be circular in form and shall have inscribed thereon the words
"STARCRAFT AUTOMOTIVE CORPORATION" and "INDIANA". In the center of the seal
shall appear the word "Seal". Use of the Seal or an impression thereof shall not
be required, and shall not affect the validity of any instrument whatsoever.
ARTICLE III
Shareholder Meetings
Section 1. Place of Meeting. Every meeting of the shareholders of the
Corporation (the "Shareholders") shall be held at the Principal Office, unless a
different place is specified in the notice or waiver of notice of such meeting
or by resolution of the Board or the Shareholders, in which event such meeting
may be held at the place so specified, either within or without the State of
Indiana.
<PAGE>
Section 2. Annual Meeting. The annual meeting of the Shareholders (the
"Annual Meeting") shall be held each year at 10:00 a.m. on the 10th day of
January (or, if such day is a legal holiday, on the next succeeding day not a
legal holiday), for the purpose of electing directors of the Corporation
("Directors") and for the transaction of such other business as may legally come
before the Annual Meeting. If for any reason the Annual Meeting shall not be
held at the date and time herein provided, the same may be held at any time
thereafter, or the business to be transacted at such Annual Meeting may be
transacted at any special meeting of the Shareholders (a "Special Meeting")
called for that purpose.
Section 3. Notice of Annual Meeting. Written or printed notice of the Annual
Meeting, stating the date, time and place thereof, shall be delivered or mailed
by the Secretary or an Assistant Secretary to each Shareholder of record
entitled to notice of such Meeting, at such address as appears on the records of
the Corporation, at least ten and not more than sixty days before the date of
such Meeting.
Section 4. Special Meetings. Special Meetings, for any purpose or purposes
(unless otherwise prescribed by law), may be called by only the Chairman of the
Board of Directors (the "Chairman") or by the Board, pursuant to a resolution
adopted by a majority of the total number of Directors of the Corporation, to
vote on the business proposed to be transacted thereat. All requests for Special
Meetings shall state the purpose or purposes thereof, and the business
transacted at such Meeting shall be confined to the purposes stated in the call
and matters germane thereto.
Section 5. Notice of Special Meetings. Written or printed notice of all
Special Meetings, stating the date, time, place and purpose or purposes thereof,
shall be delivered or mailed by the Secretary or the President or any Vice
President calling the Meeting to each Shareholder of record entitled to notice
of such Meeting, at such address as appears on the records of the Corporation,
at least ten and not more than sixty days before the date of such Meeting.
Section 6. Waiver of Notice of Meetings. Notice of any Annual or Special
Meeting (a "Meeting") may be waived in writing by any Shareholder, before or
after the date and time of the Meeting specified in the notice thereof, by a
written waiver delivered to the Corporation for inclusion in the minutes or
filing with the corporate records. A Shareholder's attendance at any Meeting in
person or by proxy shall constitute a waiver of (a) notice of such Meeting,
unless the Shareholder at the beginning of the Meeting objects to the holding of
or the transaction of business at the Meeting, and (b) consideration at such
Meeting of any business that is not within the purpose or purposes described in
the Meeting notice, unless the Shareholder objects to considering the matter
when it is presented.
Section 7. Quorum. At any Meeting, the holders of a majority of the voting
power of all shares of the Corporation (the "Shares") issued and outstanding and
entitled to vote at such Meeting represented in person or by proxy, shall
constitute a quorum for the election of Directors or for the transaction of
other business, unless otherwise provided by law, the Articles or this Code of
<PAGE>
By-Laws, as the same may, from time to time, be amended (these "By-Laws"). If,
however, a quorum shall not be present or represented at any Meeting, the
Shareholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the Meeting from time to time, without notice
other than announcement at the Meeting of the date, time and place of the
adjourned Meeting, unless the date of the adjourned Meeting requires that the
Board fix a new record date (the "Record Date") therefor, in which case notice
of the adjourned Meeting shall be given. At such adjourned Meeting, if a quorum
shall be present or represented, any business may be transacted that might have
been transacted at the Meeting as originally scheduled.
Section 8. Voting. At each Meeting, every Shareholder entitled to vote shall
have one vote for each Share standing in his name on the books of the
Corporation as of the Record Date fixed by the Board for such Meeting, except as
otherwise provided by law or the Articles, and except that no Share shall be
voted at any Meeting upon which any installment is due and unpaid. Voting for
Directors and, upon the demand of any Shareholder, voting upon any question
properly before a Meeting, shall be by ballot. A plurality vote shall be
necessary to elect any Director, and on all other matters, the action or a
question shall be approved if the number of votes cast thereon in favor of the
action or question exceeds the number of votes cast opposing the action or
question, except as otherwise provided by law or the Articles.
Section 9. Shareholder List. The Secretary shall prepare before each Meeting
a complete list of the Shareholders entitled to notice of such Meeting, arranged
in alphabetical order by class of Shares (and each series within a class), and
showing the address of, and the number of Shares entitled to vote held by, each
Shareholder (the "Shareholder List"). Beginning five (5) business days before
the Meeting and continuing throughout the Meeting, the Shareholder List shall be
on file at the Principal Office or at a place identified in the Meeting notice
in the city where the Meeting will be held, and shall be available for
inspection by any Shareholder entitled to vote at the Meeting. On written
demand, made in good faith and for a proper purpose and describing with
reasonable particularity the Shareholder's purpose, and if the Shareholder List
is directly connected with the Shareholder's purpose, a Shareholder (or such
Shareholder's agent or attorney authorized in writing) shall be entitled to
inspect and to copy the Shareholder List, during regular business hours and at
the Shareholder's expense, during the period the Shareholder List is available
for inspection. The original stock register or transfer book (the "Stock Book"),
or a duplicate thereof kept in the State of Indiana, shall be the only evidence
as to who are the Shareholders entitled to examine the Shareholder List, or to
notice of or to vote at any Meeting.
Section 10. Proxies. A Shareholder may vote either in person or by proxy
executed in writing by the Shareholder or a duly authorized attorney-in-fact. No
proxy shall be valid after eleven (11) months from the date of its execution,
unless a longer time is expressly provided therein.
Section 11. Notice of Shareholder Business. At an Annual Meeting of the
Shareholders, only such business shall be conducted as shall have been properly
brought before the Meeting. To be properly brought before an Annual Meeting,
business must be (a) specified in the notice of Meeting (or any supplement
<PAGE>
thereto) given by or at the direction of the Board, (b) otherwise properly
brought before the Meeting by or at the direction of the Board, or (c) otherwise
properly brought before the Meeting by a Shareholder. For business to be
properly brought before an Annual Meeting by a Shareholder, the Shareholder must
have the legal right and authority to make the Proposal for consideration at the
Meeting and the Shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a Shareholder's notice must be
delivered to, or mailed and received at, the principal executive offices of the
Corporation not less than sixty (60) days prior to the Meeting; provided,
however, that in the event that less than seventy (70) days' notice or prior
public disclosure of the date of the Meeting is given or made to Shareholders
(which notice or public disclosure shall include the date of the Annual Meeting
specified in these By-Laws, if such ByLaws have been filed with the Securities
and Exchange Commission and if the Annual Meeting is held on such date), notice
by the Shareholder to be timely must be so received not later than the close of
business on the tenth 10th day following the day on which such notice of the
date of the Annual Meeting was mailed or such public disclosure was made. A
Shareholder's notice to the Secretary shall set forth as to each matter the
Shareholder proposes to bring before the Annual Meeting (a) a brief description
of the business desired to be brought before the Annual Meeting and the reasons
for conducting such business at the Annual Meeting, (b) the name and record
address of the Shareholder proposing such business, (c) the class and number of
shares of the Corporation which are beneficially owned by the Shareholder, and
(d) any material interest of the Shareholder in such business. Notwithstanding
anything in these By-Laws to the contrary, no business shall be conducted at an
Annual Meeting except in accordance with the procedures set forth in this
Section 11. The Chairman of an Annual Meeting shall, if the facts warrant,
determine and declare to the Meeting that business was not properly brought
before the Meeting and in accordance with the provisions of this Section 11, and
if he should so determine, he shall so declare and any such business not
properly brought before the Meeting shall not be transacted. At any Special
Meeting of the Shareholders, only such business shall be conducted as shall have
been brought before the Meeting by or at the direction of the Board of
Directors.
Section 12. Notice of Shareholder Nominees. Only persons who are nominated
in accordance with the procedures set forth in this Section 12 shall be eligible
for election as Directors. Nominations of persons for election to the Board may
be made at a Meeting of Shareholders by or at the direction of the Board of
Directors, by any nominating committee or person appointed by the Board of
Directors or by any Shareholder of the Corporation entitled to vote for the
election of Directors at the Meeting who complies with the notice procedures set
forth in this Section 12. Such nominations, other than those made by or at the
direction of the Board, shall be made pursuant to timely notice in writing to
the Secretary of the Corporation. To be timely, a Shareholder's notice shall be
delivered to, or mailed and received at, the principal executive offices of the
Corporation not less than sixty (60) days prior to the Meeting; provided,
however, that in the event that less than seventy (70) days' notice or prior
public disclosure of the date of the Meeting is given or made to Shareholders
(which notice or public disclosure shall include the date of the Annual Meeting
specified in these By-Laws, if such ByLaws have been filed with the Securities
and Exchange Commission and if the
<PAGE>
Annual Meeting is held on such date), notice by the Shareholders to be timely
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the Meeting was mailed or
such public disclosure was made. Such Shareholder's notice shall set forth (a)
as to each person whom the Shareholder proposes to nominate for election or
re-election as a Director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a Director if elected); and (b) as to
the Shareholder giving the notice (i) the name and record address of such
Shareholder and (ii) the class and number of shares of the Corporation which are
beneficially owned by such Shareholder. No person shall be eligible for election
as a Director of the Corporation unless nominated in accordance with the
procedures set forth in this Section 12. The Chairman of the Meeting shall, if
the facts warrant, determine and declare to the Meeting that a nomination was
not made in accordance with the procedures prescribed by these By-Laws, and if
he should so determine, the defective nomination shall be disregarded.
ARTICLE IV
Board of Directors
Section 1. Number. The business and affairs of the Corporation shall be
managed by a Board of not less than three (3) nor more than fifteen (15)
Directors, as may be specified from time to time by resolution adopted by a
majority of the total number of the Corporation's Directors, divided into three
classes as provided in the Articles. If and whenever the Board of Directors has
not specified the number of Directors, the number shall be five (5). The Board
may elect or appoint, from among its members, a Chairman of the Board (the
"Chairman"), who need not be an officer (an "Officer") or employee of the
Corporation. The Chairman shall preside at all Shareholder Meetings and Board
Meetings and shall have such other powers and perform such other duties as are
incident to such position and as may be assigned by the Board.
Section 2. Vacancies and Removal. Any vacancy occurring in the Board shall
be filled as provided in the Articles. Shareholders shall be notified of any
increase in the number of Directors and the name, principal occupation and other
pertinent information about any Director elected by the Board to fill any
vacancy. Any Director, or the entire Board, may be removed from office only as
provided in the Articles.
Section 3. Powers and Duties. In addition to the powers and duties expressly
conferred upon it by law, the Articles or these By-Laws, the Board may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not inconsistent with the law, the Articles or these By-Laws.
<PAGE>
Section 4. Annual Board Meeting. Unless otherwise determined by the Board,
the Board shall meet each year immediately after the Annual Meeting, at the
place where such Meeting has been held, for the purpose of organization,
election of Officers of the Corporation (the "Officers") and consideration of
any other business that may properly be brought before such annual meeting of
the Board (the "Annual Board Meeting"). No notice shall be necessary for the
holding of the Annual Board Meeting. If the Annual Board Meeting is not held as
above provided, the election of Officers may be held at any subsequent duly
constituted meeting of the Board (a "Board Meeting").
Section 5. Regular Board Meetings. Regular meetings of the Board ("Regular
Board Meetings") may be held at stated times or from time to time, and at such
place, either within or without the State of Indiana, as the Board may
determine, without call and without notice.
Section 6. Special Board Meetings. Special meetings of the Board ("Special
Board Meetings") may be called at any time or from time to time, and shall be
called on the written request of at least two Directors, by the Chairman or the
Chief Executive Officer, by causing the Secretary or any Assistant Secretary to
give to each Director, either personally or by mail, telephone, telegraph,
teletype or other form of wire or wireless communication at least two (2) days'
notice of the date, time and place of such Meeting. Special Board Meetings shall
be held at the Principal Office or at such other place, within or without the
State of Indiana, as shall be specified in the respective notices or waivers of
notice thereof.
Section 7. Waiver of Notice and Assent. A Director may waive notice of any
Board Meeting before or after the date and time of the Board Meeting stated in
the notice by a written waiver signed by the Director and filed with the minutes
or corporate records. A Director's attendance at or participation in a Board
Meeting shall constitute a waiver of notice of such Meeting and assent to any
corporate action taken at such Meeting, unless (a) the Director at the beginning
of such Meeting (or promptly upon his arrival) objects to holding of or
transacting business at the Meeting and does not thereafter vote for or assent
to action taken at the Meeting; (b) the Director's dissent or abstention from
the action taken is entered in the minutes of such Meeting; or (c) the Director
delivers written notice of his dissent or abstention to the presiding Director
at such Meeting before its adjournment, or to the Secretary immediately after
its adjournment. The right of dissent or abstention is not available to a
Director who votes in favor of the action taken.
Section 8. Quorum. At all Board Meetings, a majority of the number of
Directors designated for the full Board (the "Full Board") shall be necessary to
constitute a quorum for the transaction of any business, except (a) that for the
purpose of filling of vacancies a majority of Directors then in office shall
constitute a quorum, and (b) that a lesser number may adjourn the Meeting from
time to time until a quorum is present. The act of a majority of the Board
present at a Meeting at which a quorum is present shall be the act of the Board,
unless the act of a greater number is required by law, the Articles or these
By-Laws.
<PAGE>
Section 9. Audit and Other Committees of the Board. The Board shall, by
resolution adopted by a majority of the Full Board, designate an Audit Committee
comprised of two or more Directors, which shall have such authority and exercise
such duties as shall be provided by resolution of the Board. The Board may, by
resolution adopted by such majority, also designate other regular or special
committees of the Board ("Committees"), in each case comprised of two or more
Directors and to have such powers and exercise such duties as shall be provided
by resolution of the Board.
Section 10. Resignations. Any Director may resign at any time by giving
written notice to the Board, the Chairman, the Chief Executive Officer, the
President or the Secretary. Any such resignation shall take effect when
delivered unless the notice specifies a later effective date. Unless otherwise
specified in the notice, the acceptance of such resignation shall not be
necessary to make it effective.
ARTICLE V
Officers
Section 1. Officers. The Officers shall be the Chief Executive Officer, the
President, one or more Vice Presidents, the Secretary and the Treasurer, and may
include one or more Assistant Secretaries, one or more Assistant Treasurers and
such other Officers as may be chosen by the Board at such time in such manner
and for such terms as the Board may prescribe. Any two or more offices may be
held by the same person. The Board may from time to time elect or appoint such
other Officers as it shall deem necessary, who shall exercise such powers and
perform such duties as may be prescribed from time to time by these By-Laws or,
in the absence of a provision in these By-Laws in respect thereto, as may be
prescribed from time to time by the Board.
Section 2. Election of Officers. The Officers shall be elected by the Board
at the Annual Board Meeting and shall hold office for one year or until their
respective successors shall have been duly elected and shall have qualified;
provided, however, that the Board may at any time elect one or more persons to
new or different offices and/or change the title, designation and duties and
responsibilities of any of the Officers consistent with the law, the Articles
and these By-Laws.
Section 3. Vacancies, Removal. Any vacancy among the Officers may be filled
for the unexpired term by the Board. Any Officer may be removed at any time by
the affirmative vote of a majority of the Full Board.
Section 4. Delegation of Duties. In the case of the absence, disability,
death, resignation or removal from office of any Officer, or for any other
reason that the Board shall deem sufficient, the Board may delegate, for the
time being, any or all of the powers or duties of such Officer to any other
Officer or to any Director.
Section 5. Chief Executive Officer. The Chief Executive Officer, subject to
the control of the Board, shall have general charge and supervision and
<PAGE>
authority over the business and affairs of the Corporation, and shall have such
other powers and perform such other duties as are incident to this office and as
may be assigned to him by the Board. In the case of the absence or disability of
the Chairman or if no Chairman shall be elected or appointed by the Board, the
Chief Executive Officer shall preside at all Shareholder meetings and Board
Meetings.
Section 6. President. The President shall be Chief Operating Officer,
subject to the control of the Chief Executive Officer and the Board, and shall
have general charge of and supervision and authority over the operations of the
Corporation, and shall have such other powers and perform such other duties as
are incident to this office and as may be assigned to him by the Chief Executive
Officer and the Board. In the case of the absence or disability of the Chief
Executive Officer, the President shall preside at all Shareholder Meetings and
Board Meetings.
Section 7. Vice Presidents. Each of the Vice Presidents shall have such
powers and perform such duties as may be prescribed for him by the Board or
delegated to him by the Chief Executive Officer. In the case of the absence,
disability, death, resignation or removal from office of the President, the
powers and duties of the President shall, for the time being, devolve upon and
be exercised by the Executive Vice President, if there be one, and if not, then
by such one of the Vice Presidents as the Board or the Chief Executive Officer
may designate, or, if there be but one Vice President, then upon such Vice
President; and he shall thereupon, during such period, exercise and perform all
of the powers and duties of the President, except as may be otherwise provided
by the Board.
Section 8. Secretary. The Secretary shall have the custody and care of the
Seal, records, minutes and the Stock Book of the Corporation; shall attend all
Shareholder Meetings and Board Meetings, and duly record and keep the minutes of
their proceedings in a book or books to be kept for that purpose; shall give or
cause to be given notice of all Shareholder Meetings and Board Meetings when
such notice shall be required; shall file and take charge of all papers and
documents belonging to the Corporation; and shall have such other powers and
perform such other duties as are incident to the office of secretary of a
business corporation, subject at all times to the direction and control of the
Board and the Chief Executive Officer.
Section 9. Assistant Secretaries. Each of the Assistant Secretaries shall
assist the Secretary in his duties and shall have such other powers and perform
such other duties as may be prescribed for him by the Board or delegated to him
by the Chief Executive Officer. In case of the absence, disability, death,
resignation or removal from office of the Secretary, his powers and duties
shall, for the time being, devolve upon such one of the Assistant Secretaries as
the Board, or the Chief Executive Officer may designate, or, if there be but one
Assistant Secretary, then upon such Assistant Secretary; and he shall thereupon,
during such period, exercise and perform all of the powers and duties of the
Secretary, except as may be otherwise provided by the Board.
Section 10. Treasurer. The Treasurer shall have control over all records of
the Corporation pertaining to moneys and securities belonging to the
<PAGE>
Corporation; shall have charge of, and be responsible for, the collection,
receipt, custody and disbursements of funds of the Corporation; shall have the
custody of all securities belonging to the Corporation; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation; and shall disburse the funds of the Corporation as may be ordered
by the Board, taking proper receipts or making proper vouchers for such
disbursements and preserving the same at all times during his term of office.
When necessary or proper, he shall endorse on behalf of the Corporation all
checks, notes or other obligations payable to the Corporation or coming into his
possession for or on behalf of the Corporation, and shall deposit the funds
arising therefrom, together with all other funds and valuable effects of the
Corporation coming into his possession, in the name and the credit of the
Corporation in such depositories as the Board from time to time shall direct, or
in the absence of such action by the Board, as may be determined by the Chief
Executive Officer. The Treasurer shall also have such other powers and perform
such other duties as are incident to the office of treasurer of a business
corporation, subject at all times to the direction and control of the Board and
the Chief Executive Officer.
If required by the Board, the Treasurer shall give the Corporation a bond,
in such an amount and with such surety or sureties as may be ordered by the
Board, for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 11. Assistant Treasurers. Each of the Assistant Treasurers shall
assist the Treasurer in his duties, and shall have such other powers and perform
such other duties as may be prescribed for him by the Board or delegated to him
by the Chief Executive Officer. In case of the absence, disability, death,
resignation or removal from office of the Treasurer, his powers and duties
shall, for the time being, devolve upon such one of the Assistant Treasurers as
the Board, or the Chief Executive Officer may designate, or, if there be but one
Assistant Treasurer, then upon such Assistant Treasurer; and he shall thereupon,
during such period, exercise and perform all the powers and duties of the
Treasurer except as may be otherwise provided by the Board. If required by the
Board, each Assistant Treasurer shall likewise give the Corporation a bond, in
such amount and with such surety or sureties as may be ordered by the Board, for
the same purposes as the bond that may be required to be given by the Treasurer.
ARTICLE VI
Certificates for Shares
Section 1. Certificates. Certificates for Shares ("Certificates") shall be
in such form, consistent with law and the Articles, as shall be approved by the
Board. Certificates for each class, or series within a class, of Shares shall be
numbered consecutively as issued. Each Certificate shall state the name of the
Corporation and that it is organized under the laws of the State of
<PAGE>
Indiana; the name of the registered holder; the number and class and the
designation of the series, if any, of the Shares represented thereby; and a
summary of the designations, relative rights, preferences and limitations
applicable to such class and, if applicable, the variations in rights,
preferences and limitations determined for each series and the authority of the
Board to determine such variations for future series; provided, however, that
such summary may be omitted if the Certificate states conspicuously on its front
or back that the Corporation will furnish the Shareholder such information upon
written request and without charge. Each Certificate shall be signed (either
manually or in facsimile) by (i) the Chief Executive Officer or the President or
a Vice President and (ii) the Secretary or an Assistant Secretary, or by any two
or more Officers that may be designated by the Board, and may have affixed
thereto the Seal, which may be a facsimile, engraved or printed.
Section 2. Record of Certificates. Shares shall be entered in the Stock Book
as they are issued, and shall be transferable on the Stock Book by the holder
thereof in person, or by his attorney duly authorized thereto in writing, upon
the surrender of the outstanding Certificate therefor properly endorsed.
Section 3. Lost or Destroyed Certificates. Any person claiming a Certificate
to be lost or destroyed shall make affidavit or affirmation of that fact and, if
the Board or the Chief Executive Officer shall so require, shall give the
Corporation and/or the transfer agents and registrars, if they shall so require,
a bond of indemnity, in form and with one or more sureties satisfactory to the
Board or the Chief Executive Officer and/or the transfer agents and registrars,
in such amount as the Board or the Chief Executive Officer may direct and/or the
transfer agents and registrars may require, whereupon a new Certificate may be
issued of the same tenor and for the same number of Shares as the one alleged to
be lost or destroyed.
Section 4. Shareholder Addresses. Every Shareholder shall furnish the
Secretary with an address to which notices of Meetings and all other notices may
be served upon him or mailed to him, and in default thereof notices may be
addressed to him at his last known address or at the Principal Office.
ARTICLE VII
Corporate Books and Records
Section 1. Places of Keeping. Except as otherwise provided by law, the
Articles or these By-Laws, the books and records of the Corporation (including
the "Corporate Records," as defined in the Articles) may be kept at such place
or places, within or without the State of Indiana, as the Board may from time to
time by resolution determine or, in the absence of such determination by the
Board, as shall be determined by the Chief Executive Officer.
Section 2. Stock Book. The Corporation shall keep at the Principal Office
the original Stock Book or a duplicate thereof, or, in case the Corporation
employs a stock registrar or transfer agent within or without the State of
<PAGE>
Indiana, another record of the Shareholders in a form that permits preparation
of a list of the names and addresses of all the Shareholders, in alphabetical
order by class of Shares, stating the number and class of Shares held by each
Shareholder (the "Record of Shareholders").
Section 3. Inspection of Corporate Records. Any Shareholder (or the
Shareholder's agent or attorney authorized in writing) shall be entitled to
inspect and copy at his expense, after giving the Corporation at least five (5)
business days' written notice of his demand to do so, the following Corporate
Records: (1) the Articles; (2) these By-Laws; (3) minutes of all Shareholder
Meetings and records of all actions taken by the Shareholders without a meeting
(collectively, "Shareholders Minutes") for the prior three (3) years; (4) all
written communications by the Corporation to the Shareholders including the
financial statements furnished by the Corporation to the Shareholders for the
prior three (3) years; (5) a list of the names and business addresses of the
current Directors and the current Officers; and (6) the most recent Annual
Report of the Corporation as filed with the Secretary of State of Indiana. Any
Shareholder (or the Shareholder's agent or attorney authorized in writing) shall
also be entitled to inspect and copy at his expense, after giving the
Corporation at least five (5) business days' written notice of his demand to do
so, the following Corporate Records, if his demand is made in good faith and for
a proper purpose and describes with reasonable particularity his purpose and the
records he desires to inspect, and the records are directly connected with his
purpose: (1) to the extent not subject to inspection under the previous
sentence, Shareholders Minutes, excerpts from minutes of Board Meetings and of
Committee meetings, and records of any actions taken by the Board or any
Committee without a meeting; (2) appropriate accounting records of the
Corporation; and (3) the Record of Shareholders.
Section 4. Record Date. The Board may, in its discretion, fix in advance a
Record Date not more than seventy (70) days before the date (a) of any
Shareholder Meeting, (b) for the payment of any dividend or the making of any
other distribution, (c) for the allotment of rights, or (d) when any change or
conversion or exchange of Shares shall go into effect. If the Board fixes a
Record Date, then only Shareholders who are Shareholders of record on such
Record Date shall be entitled (a) to notice of and/or to vote at any such
Meeting, (b) to receive any such dividend or other distribution, (c) to receive
any such allotment of rights, or (d) to exercise the rights in respect of any
such change, conversion or exchange of Shares, as the case may be,
notwithstanding any transfer of Shares on the Stock Book after such Record Date.
Section 5. Transfer Agents; Registrars. The Board may appoint one or more
transfer agents and registrars for its Shares and may require all Certificates
to bear the signature either of a transfer agent or of a registrar, or both.
<PAGE>
ARTICLE VIII
Checks, Drafts, Deeds and Shares of Stock
Section 1. Checks, Drafts, Notes, Etc. All checks, drafts, notes or orders
for the payment of money of the Corporation shall, unless otherwise directed by
the Board or otherwise required by law, be signed by one or more Officers as
authorized in writing by the Chief Executive Officer. In addition, the Chief
Executive Officer may authorize any one or more employees of the Corporation
("Employees") to sign checks, drafts and orders for the payment of money not to
exceed specific maximum amounts as designated in writing by the Chief Executive
Officer for any one check, draft or order. When so authorized by the Chief
Executive Officer, the signature of any such Officer or Employee may be a
facsimile signature.
Section 2. Deeds, Notes, Bonds, Mortgages, Contracts, Etc. All deeds, notes,
bonds and mortgages made by the Corporation, and all other written contracts and
agreements, other than those executed in the ordinary course of corporate
business, to which the Corporation shall be a party, shall be executed in its
name by the Chief Executive Officer, or the President, a Vice President or any
other Officer so authorized by the Board and, when necessary or required, the
Secretary or an Assistant Secretary shall attest the execution thereof. All
written contracts and agreements into which the Corporation enters in the
ordinary course of corporate business shall be executed by any Officer or by any
other Employee designated by the Chief Executive Officer, or the President or a
Vice President to execute such contracts and agreements.
Section 3. Sale or Transfer of Stock. Subject always to the further orders
and directions of the Board, any share of stock issued by any corporation and
owned by the Corporation (including reacquired Shares of the Corporation) may,
for sale or transfer, be endorsed in the name of the Corporation by the Chief
Executive Officer or the President or a Vice President, and said endorsement
shall be duly attested by the Secretary or an Assistant Secretary either with or
without affixing thereto the Seal.
Section 4. Voting of Stock of Other Corporations. Subject always to the
further orders and directions of the Board, any share of stock issued by any
other corporation and owned or controlled by the Corporation (an "Investment
Share") may be voted at any shareholders' meeting of such other corporation by
the Chief Executive Officer. Whenever, in the judgment of the Chief Executive
Officer, it is desirable for the Corporation to execute a proxy or give a
shareholder's consent in respect of any Investment Share, such proxy or consent
shall be executed in the name of the Corporation by the Chief Executive Officer
or the President or a Vice President, and, when necessary or required, shall be
attested by the Secretary or an Assistant Secretary either with or without
affixing thereto the Seal. Any person or persons designated in the manner above
stated as the proxy or proxies of the Corporation shall have full right, power
and authority to vote an Investment Share the same as such Investment Share
might be voted by the Corporation.
<PAGE>
ARTICLE IX
Fiscal Year
Section 1. Fiscal Year. The Corporation's fiscal year shall begin the Monday
following the Sunday closest to September 30 of each year and shall end on the
Sunday closest to September 30 of the following year.
ARTICLE X
Amendments
Section 1. Amendments. These By-Laws may be altered, amended or repealed,
in whole or in part, and new By-Laws may be adopted, at any Board Meeting by
the affirmative vote of a majority of the Full Board.
<PAGE>
Starcraft Corporation
Amendment of By-laws Effective February 20, 1996
RESOLVED, that the Code of By-laws of the Corporation be, and hereby is,
amended by adding a new Article XI which shall read as follows:
ARTICLE XI
REDEMPTION OF CONTROL SHARES
Section 1. Redemption of Control Shares. Pursuant to IND. CODE ss. 23-1-42-
10, the Corporation is fully empowered to redeem control shares, as defined in
IND. CODE ss. 23-1-42. The Board of Directors has full power and authority to
determine and adopt the procedures pursuant to which control shares shall be
redeemed and to determine the "fair value" to be paid for such shares.
<PAGE>
Starcraft Corporation
Amendment of By-laws Effective December 11, 1996
RESOLVED, that Article IV Section 9 of the By-Laws of the Corporation be
amended to read in its entirety as follows:
Section 9. Audit and Other Committees of the Board. The Board shall, by
resolution adopted by a majority of the Full Board, designate an Audit Committee
comprised of two or more Directors, which shall have such authority and exercise
such duties as shall be provided by resolution of the Board. The Board may, by
resolution adopted by such majority, also designate other regular or special
committees of the Board ("Committees"), in each case comprised of one or more
Directors and to have such powers and exercise such duties as shall be provided
by resolution of the Board.
EXHIBIT 10.1(b)
STARCRAFT CORPORATION
1997 STOCK INCENTIVE PLAN
1. Purpose. The purpose of the Starcraft Automotive Corporation 1997 Stock
Incentive plan (the "Plan") is to provide to certain directors, officers
(including officers who are members of the Board of Directors) and other key
employees of Starcraft Automotive Corporation (the "Corporation") and its
majority-owned and wholly-owned subsidiaries (individually a "Subsidiary" and
collectively the "Subsidiaries") who are materially responsible for the
management or operation of the business of the Corporation or a Subsidiary, a
favorable opportunity to acquire shares of Common Stock, without par value, of
the Corporation ("Common Stock"), thereby providing them with an increased
incentive to work for the success of the Corporation and the Subsidiaries and
better enabling each such entity to attract and retain capable directors and
executive personnel.
2. Administration of the Plan. The Plan shall be administered, construed and
interpreted by a Committee (the "Committee"). The Committee shall consist of at
least two (2) members of the Board of Directors, who shall be designated from
time to time by the Board of Directors. No member of the Committee shall, during
the one year prior to his service at any time as a member of the Committee. have
been granted or awarded equity securities pursuant to this Plan or any other an
of the Corporation or any of its Subsidiaries, except:
(i) a formula plan meeting the conditions of Rule
16b-3(c)(2)(ii) promulgated under Section 16 of the Securities
Exchange Act of 1934, as amended (the "1934 Act");
(ii) an ongoing securities acquisition plan meeting
the conditions of Rule 16b-3(d)(2)(i) promulgated under
Section 16 of the 1934 Act; or
(iii) another plan or arrangement a grant or award
under which does not, in the opinion of the Corporation's
counsel, cause a member of the Committee to fail to qualify as
a "disinterested person" under Rule 16b- 3(c)(2)(i)
promulgated under Section 16 of the 1934 Act.
The decision of a majority of the members of the Committee shall constitute the
decision of the Committee, and the Committee may act either at a meeting at
which a majority of the members of the Committee is present or by a written
consent signed by all members of the Committee. The Committee shall have the
sole, final and conclusive authority to determine, consistent with and subject
to the provisions of the Plan:
(a) the individuals to whom options (the "Optionees") and
restricted share awards shall be granted under the Plan (the
"Awardees");
<PAGE>
(b) the time when options or restricted shares of Common Stock
shall be granted hereunder;
(c) the number of shares of Common Stock of the Corporation to
be covered under each option or restricted share grant and the amount
of any cash awards;
(d) the option price to be paid upon the exercise of each
option;
(e) the price to be paid, if any, for restricted shares;
(f) the period within which each option may be exercised;
(g) the period of restrictions for restricted share grants;
(h) the extent to which an option is an incentive stock option
or a non-qualified stock option; and
(i) the terms and conditions of the respective Option
Agreements or Restricted Share Agreements by which options or
restricted shares, whichever is applicable, granted shall be evidenced.
The Committee shall also have authority to prescribe, amend and rescind rules
and regulations relating to the Plan, and to make all other determinations
necessary or advisable in the administration of the Plan. Such authority shall
include, but not be limited to authorizing the Employee Options Committee to
grant options to eligible persons, as provided in Section 3 hereof, other than
executive officers.
3. Eligibility. The Committee may, consistent with the terms hereof, grant
options, restricted shares, or cash awards (the "Awards") to directors, officers
(including officers who are members of the Board of Directors) and other key
employees of the Corporation or of a Subsidiary who in the opinion of the
Committee are from time to time materially responsible for the management or
operation of the business of the Corporation or of a Subsidiary; provided,
however, that in no event may any employee who owns (after application of the
ownership rules in Section 424(d) of the Internal Revenue Code of 1986, as
amended (the "Code")) shares of stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation or any of its
Subsidiaries be granted an incentive stock option hereunder unless at the time
such option is granted the option price is at least 110% of the fair market
value of the stock subject to the incentive stock option and such incentive
stock option by its terms is not exercisable after the expiration of five (5)
years from the date such option is granted.
4. Stock Subject to the Plan. The maximum number of shares with respect to
which options and restricted share awards may be made under this Plan is 250,000
shares of Common Stock, which shall be authorized but unissued shares of the
Corporation. Subject to Section 7 hereof, the shares for which awards may be
granted under the Plan shall not exceed that number. If any option shall expire
or terminate for any reason without having been exercised in full, or if any
restricted share grant is forfeited in whole or in part, the
<PAGE>
unpurchased or forfeited shares subject thereto shall (unless the Plan shall
have terminated) become available for other Awards under the Plan.
5. Terms of Option. Each option granted under the Plan shall be evidenced by
a Stock Option Agreement between the Corporation and the Optionee and shall be
subject to the following terms and conditions and to such other terms and
conditions not inconsistent therewith as the Committee may deem appropriate in
each case:
(a) Option Price. The price to be paid for shares of stock
upon the exercise of such option shall be determined by the Committee
at the time such option is granted, but such price in the case of an
incentive stock option shall not be less than the fair market value, as
determined by the Committee consistent with Treas. Reg. Section
20.2031-2 and the requirements of Section 422 of the Code, of such
stock on the date on which such option is granted; and provided further
that the Committee may in no event award non-qualified stock options at
a price less than 85% of the fair market value of the Common Stock on
the date of grant, as determined by the Committee consistent with
Treas. Reg. ss. 2031-2.
(b) Period for Exercise of Option. An option shall not be
exercisable (i) before a six (6) month period beginning on the date of
grant or, if later, the date on which the Plan is approved by the
Corporation's shareholders or (ii) after the expiration of such period
as shall be fixed by the Committee at the time such option is granted,
but such period in no event shall exceed ten (10) years and one (1) day
from the date on which such option is granted; provided, however, that
incentive stock options granted hereunder shall have terms not in
excess of ten (10) years. Options granted to directors of the
Corporation who are not employees of the Corporation or its
Subsidiaries ("Outside Directors") shall be for a term of five (5)
years and one day from the date of grant thereof, and shall be
exercisable in full following the later of (i) six (6) months after the
date of grant, or (ii) six (6) months after the date on which the Plan
is approved by the Corporation's shareholders. Options shall be subject
to earlier termination as hereinafter provided.
(c) Exercise of Options. The option price of each share of
stock purchased upon exercise of an option shall be paid in full (i) in
cash at the time of such exercise, (ii) if the Optionee may do so in
conformity with Regulation T (12 C.F.R. Section 220.3(e)(4)) and
without violating Section 16(b) or (c) of the 1934 Act and subject to
approval by the Committee, pursuant to a broker's cashless exercise
procedure, by delivering a properly executed exercise notice together
with irrevocable instructions to a broker to deliver promptly to the
Corporation the total option price in cash and, if desired, the amount
of any taxes to be withheld from the Optionee's compensation as a
result of any withholding tax obligation of the Corporation or any of
its Subsidiaries, as specified in such notice, or (iii) subject to the
approval of the Committee, by tendering to the Corporation whole shares
of the Corporation's Common Stock owned by him, or any combination of
whole shares of the Corporation's Common Stock owned by him and cash,
having a fair market value equal to the cash exercise price of the
shares with respect to which the option is being exercised. For this
purpose, any shares so
<PAGE>
tendered by an Optionee shall be deemed to have a fair market value as
determined by the Committee consistent with Treas. Reg. Section
20.2031-2 and the requirements of Section 422 of the Code. The
Committee shall have the authority to grant options exercisable in full
at any time during their term, or exercisable in such installments at
such times during their term as the Committee may determine.
Installments not purchased in earlier periods shall be cumulated and be
available for purchase in later periods. Subject to the other
provisions of this Plan, an option may be exercised at any time or from
time to time during the term of the option as to any or all whole
shares which have become subject to purchase pursuant to the terms of
the option or the Plan, but not at any time as to fewer than one
hundred (100) shares unless the remaining shares which have become
subject to purchase are fewer than one hundred (100) shares. An option
may be exercised only by written notice to the Corporation, mailed to
the attention of its Secretary, signed by the Optionee (or such other
person or persons as shall demonstrate to the Corporation his or their
right to exercise the option), specifying the number of shares in
respect of which it is being exercised, and accompanied by payment in
full by cash or check in the amount of the aggregate option price for
the shares, by delivery of the irrevocable broker instructions referred
to above or if the Committee has approved the use of the stock swap
feature provided for above, followed as soon as practicable by the
delivery of the option price for such shares.
(d) Certificates. The certificate or certificates for the
shares as to which the option is exercised shall be registered in the
name of the person or persons so exercising the option and shall be
delivered to or upon the order of such person or persons, as soon as
practicable after such written notice is received by the Corporation.
An Optionee shall not have any rights of a shareholder in respect to
the shares of stock subject to an option until such shares are
purchased upon exercise of such option.
(e) Termination of Option. If an Optionee (other than an
Outside Director) ceases to be an employee of the Corporation and the
Subsidiaries for any reason other than retirement, permanent and total
disability (within the meaning of ss. 22(e)(3) of the Code), or death,
any option granted to him shall forthwith terminate; provided, that the
Committee may authorize an option agreement to provide that the option
will continue to be exercisable until a date following termination, but
such date shall not be later than the later of (i) the date 30 days
after termination of employment, or (ii) the last day of the month in
which the last of the incentive stock options, if any, subject to the
option agreement become exercisable. Leave of absence approved by the
Committee shall not constitute cessation of employment. If an Optionee
(other than an Outside Director) ceases to be an employee of the
Corporation and the Subsidiaries by reason of retirement, any option
granted to him may be exercised by him in whole or in part within three
(3) months after the date of his retirement, whether or not the option
was otherwise exercisable at the date of his retirement. (The term
"retirement" as used herein means such termination of employment as
shall entitle such individual to early or normal retirement benefits
under any then existing pension plan of the Corporation or a
Subsidiary). If an Optionee (other than an Outside Director) ceases to
be an employee of the Corporation and the Subsidiaries by reason of
permanent and total disability (within the meaning of ss. 22(e)(3) of
<PAGE>
the Code), any option granted to him may be exercised by him in whole
or in part within one (1) year after the date of his termination of
employment by reason of such disability whether or not the option was
otherwise exercisable at the date of such termination. In the event of
the death of an Optionee while in the employ of the Corporation or a
Subsidiary, or within three (3) months after the date of his retirement
or within one (1) year after the termination of his employment by
reason of permanent and total disability (within the meaning of ss.
22(e)(3) of the Code), any option granted to him may be exercised in
whole or in part at any time within one (1) year after the date of such
death by the executor or administrator of his estate or by the person
or persons entitled to the option by will or by applicable laws of
descent and distribution until the expiration of the option term as
fixed by the Committee, whether or not the option was otherwise
exercisable at the date of his death. Options granted to Outside
Directors shall cease to be exercisable six (6) months after the date
such Outside Director is no longer a director of the Corporation for
any reason. In the event of the death of an Optionee who is an Outside
Director while serving as a director of the Corporation or within six
(6) months after he ceases to be a director of the Corporation, any
option granted to him may be exercised in whole or in part at any time
within one (1) year after the date of such death by the executor or
administrator of his estate or by the person or persons entitled to the
option by will or by applicable laws of descent and distribution until
the expiration of the option term fixed by the Committee, whether or
not the option was otherwise exercisable at the date of his death.
Notwithstanding anything in the foregoing to the contrary, no option
shall in any event be exercisable after the expiration of the period
fixed by the Committee in accordance with subsection (b) above.
(f) Nontransferability of Option. An Option may not be
transferred by the Optionee otherwise than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title 1 of the Employee Retirement
Income Security Act of 1974, as amended, and during the lifetime of the
Optionee shall be exercisable only by him or his guardian or legal
representative.
(g) Maximum Incentive Stock Options. The aggregate fair market
value of stock with respect to which incentive stock options (within
the meaning of Section 422 of the Code) are exercisable for the first
time by an Optionee during any calendar year under the Plan or any
other plan of the Company or its Subsidiaries shall not exceed
$100,000. For this purpose, the fair market value of such shares shall
be determined as of the date the option is granted and shall be
computed in such manner as shall be determined by the Committee,
consistent with the requirements of Section 422 of the Code. If the
immediate exercisability of incentive stock options arising from the
retirement, death or permanent and total disability of an Optionee
pursuant to Section 5(e) above would cause this $100,000 limitation to
be exceeded for an Optionee, the Committee shall convert as of the date
on which such incentive stock options become exercisable all or a
portion of the outstanding incentive stock options held by such
Optionee to non-qualified stock options to the extent necessary to
comply with the $100,000 limitation.
<PAGE>
(h) Investment Representations. Unless the Shares Subject to
an option are registered under applicable federal and state securities
laws, each Optionee by accepting an option shall be deemed to agree for
himself and his legal representatives that any option granted to him
and any and all shares of Common Stock purchased upon the exercise of
the option shall be acquired for investment and not with a view to, or
for sale in connection with, any distribution thereof. Unless the
shares subject to an option are registered under applicable federal and
state securities laws, each notice of the exercise of any portion of an
option shall be accompanied by a representation in writing, signed by
the Optionee or his legal representatives, as the case may be, that the
shares of Common Stock are being acquired in good faith for investment
and not with a view to, or for sale in connection with, any
distribution thereof (except in case of the Optionee's legal
representatives for distribution, but not for sale, to his legal heirs,
legatees and other testamentary beneficiaries). Any shares issued
pursuant to an exercise of an option may bear a legend evidencing such
representations and restrictions.
6. Incentive Stock Options and Non-Qualified Stock Options. Options granted
under the Plan may be incentive stock options under Section 422 of the Code or
non-qualified stock options. All options granted hereunder will be clearly
identified as either incentive stock options or non-qualified stock options. In
no event shall the exercise of an incentive stock option affect the right to
exercise any non-qualified stock option. nor shall the exercise of any
non-qualified stock option affect the right to exercise any incentive stock
option. Nothing in this Plan shall be construed to prohibit the grant of
incentive stock options and non-qualified stock options to the same person;
provided, however, that incentive stock options and non-qualified stock options
shall not be granted in a manner whereby the exercise of one non-qualified stock
option or incentive stock option affects the exercisability of the other.
7. Adjustment of Shares. In the event of any change after the effective date
of the Plan in the outstanding stock of the Corporation by reason of any
reorganization, recapitalization, stock split, stock dividend, combination of
shares, exchange of shares, merger or consolidation, liquidation, or any other
change after the effective date of the Plan in the nature of the shares of stock
of the Corporation, the Committee shall determine what changes, if any, are
appropriate in the number and kind of shares reserved under the Plan, and in the
option price under and restricted share price and the number and kind of shares
covered by outstanding Awards granted under the Plan. Any determination of the
Committee hereunder shall be conclusive.
8. Restricted Share Awards. The Committee may also grant restricted share
awards of Common Stock which entitle Awardees to receive shares of Common Stock.
Each restricted share award shall be evidenced by a Restricted Share Agreement
between the Corporation and the Awardee which such Agreement shall set forth the
terms and conditions of the award to the extent not inconsistent with the
provisions of the Plan. A restricted share award may provide for the crediting
or payment to do Awardee, on each dividend payment date, of an amount equal to
the dividends on awarded shares. A restricted share award may also provide for
the distribution of shares subject to the following conditions:
<PAGE>
(a) the shares may not be distributed earlier than six (6)
months after grant;
(b) the shares may not be transferred until the lapsing of the
forfeiture provisions;
(c) the shares shall be deposited with the Secretary of the
Corporation;
(d) dividends on awarded shares shall be distributed at such
times as are determined by the Committee; and
(e) the shares shall be subject to forfeiture under the
circumstances described in the Restricted Share Agreement between the
Corporation and the Awardee.
Each restricted share award shall provide for the distribution of the awarded
shares free of all restrictions at such time or times as the Committee shall
determine, and specify in the Restricted Share Agreement.
9. Tax Withholding. Whenever the Corporation proposes or is required to
issue or transfer shares under the Plan, the Corporation shall have the right to
require the Awardee or his legal representative to remit to the Corporation an
amount sufficient to satisfy any federal, state and/or local tax withholding
requirements prior to the delivery of any certificate or certificates for such
shares or lifting the legends on Common Stock subject to restrictions, and
whenever under the Plan payments are to be made in cash, such payments shall be
net of an amount sufficient to satisfy any federal, state and/or local
withholding requirements; provided, however, that to the extent expressly
provided in a Stock Option Agreement or Restricted Share Agreement, the
Corporation may make an additional cash payment to the Awardee equal to all or a
portion of his withholding obligation.
Notwithstanding the above and to the extent permitted by the Committee, an
Optionee may make a written election to have shares having an aggregate fair
market value sufficient to satisfy the applicable withholding taxes withheld
from the shares otherwise to be received upon the exercise of the option.
Elections by Optionees to have shares withheld for this purpose will be subject
to the following provisions:
(a) they must be made prior to the date as of which the amount
of tax withheld is determined (the "Tax Date");
(b) the option price under any option may not be reduced to
less, than the fair market value, as determined by the Committee
consistent with the requirements of Section 422 of the Code, of the
stock on the date such option is granted, except as provided in Section
7 hereof;
(c) they will be irrevocable; and
(d) they will be subject to the disapproval of the Committee.
<PAGE>
10. Tax Benefit. The Committee may, in its sole discretion, include a
provision in any Option Agreement or Restricted Share Agreement that provides
for an additional cash payment from the Corporation to the grantee of such
option or award equal to the tax benefit to be received by the Corporation
attributable to its federal income tax deduction, if any, resulting from the
exercise, vesting, cancellation, disposition or other transaction involving the
option or the shares subject to the option or restricted share award.
11. Replacement and Extension of the Terms of Options and Cash Awards. The
Committee from time to time may permit an Optionee (other than an Outside
Director) under the Plan or any other stock option plan heretofore or hereafter
adopted by the Corporation or any Subsidiary to surrender for cancellation any
unexercised outstanding stock option and receive from his employing corporation
in exchange therefor an option for such number of shares of Common Stock as may
be designated by the Committee. Such Optionees also may be granted related cash
awards as provided in Section 10 hereof.
12. Amendment. The Board of Directors of the Corporation may amend the Plan
from time to time and, with the consent of the Optionee, the terms and
provisions of his Awards, except that without the approval of the holders of at
least a majority of the shares of the Corporation voting in person or by proxy
at a duly constituted meeting or adjournment thereof:
(a) the number of shares of stock which may be reserved for
issuance under the plan may not be increased except as provided in
Section 7 hereof;
(b) the period during which an option may be exercised may not
be extended beyond ten (10) years and one day from the day on which
such option was granted;
(c) the class of persons to whom Awards may be granted under
the Plan shall not be modified materially;
(d) the benefits accruing to Awardees under the plan may not
be materially increased;
(e) the number of shares subject to options to be granted to
outside Directors or the date of grant or the exercise price and other
terms thereof shall not be changed except as provided in Section 7
hereof unless the Corporation at the time has ceased to have its Common
Stock registered under ss. 12 of the 1934 Act.
No amendment of the Plan, however, may, without the consent of the Awardees,
make any changes in any outstanding Awards theretofore granted under the Plan
which would adversely affect the rights of such Awardees.
13. Termination. The Board of Directors of the Corporation may terminate the
Plan at anytime and no award shall be granted thereafter. Such termination,
however, shall not affect the validity of any award theretofore granted under
the Plan. In any event, no incentive stock option may be granted under the Plan
after the conclusion of a ten (10) year period commencing on the
<PAGE>
date the Plan is adopted or, if earlier, the date the Plan is approved by the
Corporation's shareholders.
14. Successors. This Plan shall be binding upon the successors and assigns
of the Corporation.
15. Governing Law. The terms of any awards granted hereunder and the rights
and obligations hereunder of the Corporation, the Awardees and their successors
in interest shall, except to the extent governed by Federal law, be governed by
Indiana law.
16. No Right to Continued Service. Nothing in this Plan or in any agreement
entered into pursuant hereto shall confer on any person any right to continue in
the employ or service of the Corporation or its Subsidiaries or affect any
rights that the Corporation, a Subsidiary, or the shareholders of the
Corporation may have to terminate his service at any time.
17. Government and Other Regulations. The obligations of the Corporation to
issue or transfer and deliver shares under options granted under the Plan shall
be subject to compliance with all applicable laws, governmental rules and
regulations, and administrative action.
18. Effective Date. The Plan shall become effective on the Closing Date;
provided, however, that the granting of any option under the Plan or restricted
share award is conditional upon the approval of the Plan by the Corporation's
shareholders no later than twelve (12) months after such effective date and the
options granted pursuant to the Plan may not be exercised until the Board of
Directors of the Corporation has been advised by counsel that such approval has
been obtained and all other applicable legal requirements have been met,
provided, further, that if shareholder approval does not occur or if the closing
of the Public Offering does not occur as provided above, the Plan and all
outstanding options and restricted share awards shall terminate.
EXHIBIT 10.3(b)
EMPLOYMENT AGREEMENT
This Agreement, made and dated as of December 12, 1996 ("Effective Date"),
by and between Starcraft Corporation, an Indiana corporation ("Employer"), and
Kelly L. Rose, a resident of Elkhart County, Indiana ("Employee").
W I T N E S S E T H
WHEREAS, Employee is employed by Employer as its Chairman of the Board and
Chief Executive Officer, for itself and each of its subsidiaries ("Job
Responsibilities") and Employee has made valuable contributions to the strategic
planning, business operations, and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make valuable
contributions to Employer's business operations and not to seek or accept
employment elsewhere;
WHEREAS, Employee desires to be assured of a secure minimum compensation
from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee on
behalf of Employer on an objective and impartial basis and without distraction
or conflict of interest in the event of an attempt by any person to obtain
control of Employer;
WHEREAS, Employer recognizes that when faced with a proposal for a change of
control of Employer, Employee will have a significant role in helping the Board
of Directors assess the options and advising the Board of Directors on what is
in the best interests of Employer and its shareholders, and it is necessary for
Employee to be able to provide this advice and counsel without being influenced
by the uncertainties of his own situation; and
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of these premises, the mutual covenants and
undertakings herein contained and the continued employment of Employee to
perform Job Responsibilities for Employer, Employer and Employee, each intending
to be legally bound, covenant and agree as follows:
1. Upon the terms and subject to the conditions set forth in this
Agreement, Employer employs Employee to perform Job Responsibilities for
Employer, and Employee accepts such employment.
2. Employee agrees to serve as Employer's Chief Executive Officer for
Employer and each of its subsidiaries in connection with the Job
Responsibilities; provided, however that such duties shall be performed in or
from the offices of Employer currently located at Goshen, Indiana, and shall be
of the same character
<PAGE>
as those previously performed by Employee and generally associated with the
office held by Employee. Employee shall not be required to be absent from the
location of the principal executive offices of Employer on travel status or
otherwise more than ten (10) days in any calendar year. Employer shall not,
without the written consent of Employee, relocate or transfer Employee to a
location more than fifteen (15) miles from his principal residence. Employee
shall perform Job Responsibilities for Employer as Chief Executive Officer for
Employer and each of its subsidiaries in substantially the same manner and to
substantially the same extent as Employee rendered his services to Employer
before the date hereof. Although while employed by Employer, Employee shall
devote substantially all his business time and efforts to Employer's business
and shall not engage in any other related business, Employee may use his
discretion in fixing his hours and schedule of work consistent with the proper
discharge of his duties. Employer shall cause Employee to be nominated to
successive terms as a member of Employer's Board of Directors and shall use its
best efforts to cause Employee to be elected and re-elected as a member of such
Board.
3. The term of this Agreement shall begin on the "Effective Date" and shall
end on the date which is five (5) years following such date; provided, however,
that such term shall be extended for additional five (5) year terms on each
anniversary of the Effective Date (the "Anniversary Date"), unless either party
hereto gives written notice to the other party not to so extend within ninety
(90) days prior to each such Anniversary Date, in which case no further
extension shall occur and the term of this Agreement shall end five (5) years
subsequent to the Anniversary Date as of which the notice not to extend is given
(such term, including any extension thereof shall herein be referred to as the
"Term"). A notice not to so extend given by either party shall be a termination
of employment prior to the expiration of the Term of this Agreement, for all
purposes, including Section 7 and Section 8 of this Agreement. Such notice not
to extend shall be in the form of the "Notice of Termination" defined in Section
10 hereof and shall contain specific reference to specific provisions of Section
7 hereof relied upon for any such termination on the Anniversary Date or
otherwise.
4. During the Term, Employee shall receive an annual salary of not less
than Three Hundred Thousand Dollars ($300,000.00) ("Base Compensation") payable
at regular intervals in accordance with Employer's normal payroll practices now
or hereafter in effect. Employer may consider and declare from time to time
increases in the salary it pays Employee and thereby increases in his Base
Compensation. Any and all increases in Employee's salary pursuant to this
section shall cause the level of Base Compensation to be increased by the amount
of each such increase for purposes of this Agreement. The increased level of
Base Compensation as provided in this section shall become the level of Base
Compensation for the remainder of the Term of this Agreement until there is a
further increase in Base Compensation as provided herein.
5. So long as Employee is employed by Employer pursuant to this Agreement,
he shall be included as a participant in all present and future employee
benefit, retirement, and compensation plans generally available to employees of
Employer, consistent with his Base Compensation, his Job Responsibilities and
his position as Chief Executive Officer of Employer and each of its
subsidiaries, including, without limitation, Employer's 401(k) plan, stock
incentive plan, Executive Bonus Plan, split dollar life insurance program, and
group life insurance plans
<PAGE>
(collectively, "Benefit Plans"), each of which Employer agrees to continue in
effect on terms no less favorable than those currently in effect as of the date
hereof (as permitted by law) during the Term of this Agreement.
6. So long as Employee is employed by Employer pursuant to this Agreement,
Employee shall receive reimbursement from Employer for all reasonable business
expenses incurred in the course of his employment by Employer, upon submission
to Employer of written vouchers and statements for reimbursement. Employee shall
attend, at his discretion, those professional meetings, conventions, and/or
similar functions that he deems appropriate and useful for purposes of keeping
abreast of current developments in the industry and/or promoting the interests
of Employer. So long as Employee is employed by Employer pursuant to the terms
of this Agreement, Employer shall continue in effect vacation policies
applicable to Employee no less favorable from his point of view than those
written vacation policies in effect on the date hereof. So long as Employee is
employed by Employer pursuant to this Agreement, Employee shall be entitled to
office space and working conditions no less favorable from his point of view
than were in effect for him on the date hereof. So long as Employee is employed
by Employer pursuant to this Agreement, employee shall be entitled to the use of
a company car provided by the Employer. So long as Employee is employed by
Employer pursuant to this Agreement, Employee shall be entitled to membership in
the Elcona Country Club, and Employer shall continue to pay the dues and
assessments for such membership.
7. Subject to the respective continuing obligations of the parties,
including but not limited to those set forth in subsections 8(A), 8(B), 8(C) and
8(D) hereof, Employee's employment by Employer may be terminated effective on
any Anniversary Date or otherwise prior to the expiration of the Term of this
Agreement as follows:
(A) Employer, by action of its Board of Directors and upon written notice to
Employee, may terminate Employee's employment with Employer at any time for
cause. For purposes of this subsection 7(A), "cause" shall be defined as:
(i) the willful, flagrant and repeated failure of Employee to
perform his duties or to comply with the reasonable
directions of the Board of Directors which failure
continues after the Board of Directors has given written
notice to Employee specifying in reasonable detail the
manner in which Employee has failed to perform such duties
or comply with such directions;
(ii) the conviction of the Employee for a felony which the
Board of Directors determines in the exercise of its
reasonable judgment could be expected to have a material
adverse impact on the Employer.
(B) Employee, by written notice to Employer, may terminate his
employment with Employer at any time for cause. For purposes of
this subsection 7(B), "cause" shall be defined as (i) any action by
Employer's Board of Directors to remove the Employee as Chairman of
the Board or Chief Executive Officer of Employer or any of its
subsidiaries, except where the Employer's Board of Directors
properly acts to remove Employee from such office for "cause" as
defined in subsection 7(A) hereof, (ii) any action by Employer's
Board
<PAGE>
of Directors to materially limit, increase, or modify
Employee's Job Responsibilities and/or authority as Chairman
of the Board or Chief Executive Officer of Employer or any of
its subsidiaries (including his authority, subject to
corporate controls no more restrictive than those in effect on
the date hereof, to hire and discharge employees who are not
bona fide officers of Employer), (iii) any failure of Employer
to obtain the assumption of the obligation to perform this
Agreement by any successor, assignee, or distributee of all or
substantially all of Employer's assets (on a consolidated
basis with those of its subsidiaries), or the reaffirmation of
such obligation by such successor, assignee, or distributee,
as contemplated in Section 16 hereof; (iv) any material breach
by Employer of a term, condition or covenant of this
Agreement; or (v) adoption or approval of a plan of
liquidation, dissolution, or reorganization for Employer or
any of its subsidiaries by the Employer's Board of Directors.
(C) Except as otherwise provided in Section 3 regarding nonrenewal
on any Anniversary Date, and in addition thereto, Employee, at
any time and upon sixty (60) days written notice to Employer,
may terminate his employment with Employer without cause.
(D) Employee's employment with Employer shall terminate in the
event of Employee's death or permanent disability. For
purposes hereof, "disability" shall be defined as Employee's
permanent inability by reason of illness or other physical or
mental incapacity to perform duties reasonably required for
employment for any consecutive one hundred eighty (180) day
period, provided that notice of any termination by Employer
because of Employee's "disability" shall have been given to
Employee prior to the full resumption by him of the
performance of such duties.
8. In the event of termination of Employee's employment with Employer
pursuant to Section 7 hereof, which shall include a nonrenewal of this Agreement
on any Anniversary Date as provided in Section 3 hereof, compensation shall
continue to be paid by Employer to Employee as follows:
(A) In the event of termination for cause by Employer or without
cause by Employee pursuant to subsection 7(A) or 7(C),
respectively, compensation provided for herein (including Base
Compensation) shall continue to be paid, and Employee shall
continue to participate in the Benefit Plans and other
perquisites as provided in Sections 5 and 6 hereof, through
the date of termination specified in the notice of
termination. Any benefits payable under such Benefit Plans as
a result of Employee's participation in such plans through
such date shall be paid when due under those plans. The date
of termination specified in any notice of termination pursuant
to subsection 7(A) shall be no later than the last business
day of the month in which such notice is provided to Employee.
(B) In the event of termination with cause by Employee pursuant to
subsection 7(B), compensation provided for herein (including
Base Compensation) shall continue to be paid, and Employee
shall continue to participate in the Benefit Plans and other
perquisites as provided in Sections 5 and 6 hereof, through
the date of termination specified in the notice of
termination.
<PAGE>
Any benefits payable under such Benefit Plans as a result of
Employee's participation in such plans through such date shall
be paid when due under those plans. In addition, Employee
shall at his option exercised effective the date of
termination, be entitled to receive one of the following:
either,
(i) Employee shall be entitled to continue to receive
from Employer his Base Compensation at the rates in
effect at the time of termination for five (5)
additional twelve (12) month periods. In addition,
during such periods, Employer will maintain in full
force and effect for the continued benefit of
Employee and his dependents each Benefit Plan in
which Employee was entitled to participate
immediately prior to the date of his termination,
unless an essentially equivalent and no less
favorable benefit is provided by a subsequent
employer of Employee. If the terms of any Benefit
Plan, or applicable laws, do not permit continued
participation by Employee, Employer will arrange to
provide to Employee a benefit substantially similar
to, and no less favorable than, the benefit he was
entitled to receive under such Benefit Plans at the
end of the period of coverage;
or,
(ii) Employee shall be entitled to receive from Employer
his Base Compensation at the rates in effect at the
time of termination for five (5) additional twelve
(12) month periods, payable in one lump sum payment
on or before thirty (30) days following the date of
termination, and Employer will not thereafter
maintain any Benefit Plan for the continued benefit
of Employee and his dependents.
(C) In the event of termination pursuant to subsection 7(D),
compensation provided for herein (including Base Compensation)
shall continue to be paid, and Employee shall continue to
participate in the Benefit Plans and other perquisites as
provided in sections 5 and 6 hereof, (i) in the event of
Employee's death, through the date of death, or (ii) in the
event of Employee's permanent disability, through the date of
proper notice of disability as required by subsection 7(D).
Any benefits payable under such Benefit Plans as a result of
Employer's participation in such plans through such date shall
be paid when due under those plans.
(D) Employer will permit Employee or his personal
representative(s) or heirs, during a period of three months
following termination of Employee's employment by Employer
with cause as set forth in subsection 7(A), or Employee's
termination of his employment with Employer for cause as set
forth in subsection 7(B), or Employee's termination of his
employment with Employer without cause as set forth in
subsection 7(C), or death or disability of the Employee as set
forth in subsection 7(D), to require Employer, upon written
request and at Employee's option, to purchase all or less than
all of outstanding stock options previously granted to
Employee under any Employer stock option plan then in effect
whether or not such options are then exercisable or have
terminated, at a cash purchase
<PAGE>
price equal to the amount by which the aggregate "fair market
value" of the shares subject to such options exceeds the
aggregate option price for such shares. For purposes of this
Agreement, the term "fair market value" shall mean the higher
of (1) the average of the highest asked prices for Employer
shares in the over-the-counter market as reported on the
NASDAQ system or other national exchange if the shares are
traded on such system for the thirty (30) business days
preceding such termination, or (2) the average per share price
actually paid for the most highly priced one percent (1%) of
the Employer shares acquired in connection with any change of
control of the Employer by any person or group acquiring such
control.
9. In order to induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) Unless otherwise required to do so by law, including the order
of a court or governmental agency, Employee shall not divulge
or furnish any trade secrets (as defined in IND. CODEss.
24-2-3-2) of Employer or any confidential information acquired
by him while employed by Employer concerning the policies,
plans, procedures or customers of Employer to any person, firm
or corporation, other than Employer or upon its written
request, or use any such trade secret or confidential
information directly or indirectly for Employee's own benefit
or for the benefit of any person, firm or corporation other
than Employer, since such trade secrets and confidential
information are confidential and shall at all times remain the
property of Employer.
(B) If Employee's employment by Employer is terminated for any
reason by either Employee or Employer, Employee will turn over
immediately thereafter to Employer all business
correspondence, letters, papers, reports, customers' lists,
financial statements, records, drawings, credit reports or
other confidential information or documents of Employer or its
affiliates in the possession or control of Employee, all of
which writings are and will continue to be the sole and
exclusive property of Employer or its affiliates.
10. Any termination of Employee's employment with Employer as
contemplated by Section 3 and Section 7 hereof, except in the circumstances of
Employee's death, shall be communicated by written "Notice of Termination" by
the terminating party to the other party hereto. Any "Notice of Termination"
must refer to one or more of subsections 7(A), 7(B), 7(C) or 7(D), shall
indicate the specific provisions of this Agreement and one or more of such
subsections of Section 7 relied upon, and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for such termination
under one or more of such subsections of Section 7.
11. Anything in this Agreement to the contrary notwithstanding, payment
of Base Compensation by the Employer to or for the benefit of the Employee
pursuant to subsection 8(B) hereof shall be inclusive of payment attributable to
the confidentiality covenants of subsection 9(A), and shall be payable whether
or not deductible by the Employer for federal income tax purposes.
<PAGE>
12. If a dispute arises regarding termination of employment pursuant to
Section 3 and Section 7 hereof, said dispute shall be resolved by binding
arbitration determined in accordance with the rules of the American Arbitration
Association and if Employee obtains a final award in his favor or his claim is
settled by Employer prior to the rendering of an award by such arbitration, all
reasonable legal fees and expenses incurred by Employee in contesting or
disputing any such termination or otherwise pursuing his claim shall be paid by
Employer, to the extent permitted by law. If a dispute arises regarding other
provisions of this Agreement, including enforcement of the confidentiality
provisions hereof, then such shall be heard only by the judge and not by a jury,
in any court of general jurisdiction in Elkhart County, Indiana, to which such
sole and exclusive jurisdiction each party irrevocably consents. Each party
agrees not to assert and hereby waives any right of removal, consolidation or
joinder with any other action, or any transfer by reason of preferred venue. The
prevailing party shall be entitled to its costs, expenses and reasonable
attorney's fees. It is provided, however, that in either of arbitration or
judicial proceedings, if it is determined that Employer breached any of the
material terms or conditions of this Agreement, then as liquidated damages,
Employee shall be entitled to receive not less than the Base Compensation and
Benefit Plan payments described in subsection 8(B) hereof.
13. Should Employee die after termination of his employment with Employer
while any amounts are payable to him hereunder, this Agreement shall inure to
the benefit of and be enforceable by Employee's executors, administrators,
heirs, distributees, devisees and legatees and all amounts payable hereunder
shall be paid in accordance with the terms of this Agreement to Employee's
devisee, legatee or other designee or, if there is no such designee, to his
estate.
14. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been given
when delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Employee: Kelly L. Rose
2703 College Avenue
Elkhart, IN 46516
If to Employer: Starcraft Corporation
2703 College Avenue
Post Office Box 1903
Goshen, IN 46526
Attention: Michael H. Schoeffler, President
or to such address as either party hereto may have furnished to the other party
in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
15. The validity, interpretation, and performance of this Agreement shall be
governed by the laws of the State of Indiana.
16. Employer shall require any successor, assignee, distributee or other
transferee of all or substantially all of its or its subsidiaries' assets or
<PAGE>
business ("Succession") (whether direct or indirect, by purchase, merger,
dissolution, liquidation, consolidation or otherwise) by agreement in form and
substance satisfactory to Employee to expressly assume and agree to perform this
Agreement in the same manner and same extent that Employer would be required to
perform it if no such Succession had taken place. Failure of Employer to obtain
such agreement prior to the effectiveness of any such Succession shall be a
material intentional breach of this Agreement and shall entitle Employee to
terminate his employment with Employer for cause pursuant to subsection 7(B)
hereof. As used in this Agreement, "Employer" shall mean Employer or any of its
subsidiaries from time to time and any successor to its or their business or
assets as aforesaid.
17. No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
Employee and Employer. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of dissimilar provisions or conditions at the same or any prior or
subsequent time. No agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
18. The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement which shall remain in full force and effect.
19. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same agreement.
20. This Agreement is personal in nature and neither party hereto shall,
without consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder except as provided in Section 13 and Section 16 above.
Without limiting the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by his will or by the
laws of descent or distribution as set forth in Section 13 hereof, and in the
event of any attempted assignment or transfer contrary to this paragraph,
Employer shall have no liability to pay any amounts so attempted to be assigned
or transferred.
IN WITNESS WHEREOF, the parties have caused the Agreement to be executed and
delivered this 18th day of December, 1996.
"Employee" "Employer"
STARCRAFT CORPORATION
/s/ Kelly L. Rose By: /s/ Michael H. Schoeffler
- ---------------------------- -----------------------
Kelly L. Rose Michael H. Schoeffler
Its:President
<PAGE>
EXHIBIT A
In Japan, Europe, and any of the 48 contiguous States of the United States
of America; it being acknowledged by Employee that the Company conducts business
in all such States, and also it is acknowledged by Employee that the Company
presently conducts a substantial amount of its business in each of the following
States:
Wisconsin
Michigan
Illinois
Indiana
Ohio
Pennsylvania
New York
Oklahoma
Texas
California
EXHIBIT 10.3(e)
EMPLOYMENT AGREEMENT
This Agreement, made and dated as of December 12, 1996 (the "Effective
Date"), by and between Starcraft Corporation, an Indiana corporation
("Employer"), and Michael H. Schoeffler, a resident of Elkhart County, Indiana
("Employee").
W I T N E S S E T H
WHEREAS, Employee is employed by Employer as its President, and is employed
as its Chief Financial Officer for itself and each of its subsidiaries ("Job
Responsibilities") and Employee has made valuable contributions to the strategic
planning, business operations, and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make valuable
contributions to Employer's business operations and not to seek or accept
employment elsewhere;
WHEREAS, Employee desires to be assured of a secure minimum compensation
from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee on
behalf of Employer on an objective and impartial basis and without distraction
or conflict of interest in the event of an attempt by any person to obtain
control of Employer;
WHEREAS, Employer recognizes that when faced with a proposal for a change of
control of Employer, Employee will have a significant role in helping the Board
of Directors assess the options and advising the Board of Directors on what is
in the best interests of Employer and its shareholders, and it is necessary for
Employee to be able to provide this advice and counsel without being influenced
by the uncertainties of his own situation;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential business
and customer information which it has developed over the years at substantial
expense and assurance that Employee will not compete with Employer for a
reasonable period of time after termination of his employment with Employer,
except as otherwise provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual covenants and
undertakings herein contained and the continued employment of Employee to
perform Job Responsibilities for Employer, Employer and Employee, each intending
to be legally bound, covenant and agree as follows:
<PAGE>
1. Upon the terms and subject to the conditions set forth in this
Agreement, Employer employs Employee to perform Job Responsibilities for
Employer, and Employee accepts such employment.
2. Employee agrees to serve as Employer's President and Chief Financial
Officer for Employer and its subsidiaries in connection with the Job
Responsibilities and to perform such Job Responsibilities in that office as may
reasonably be assigned to him by Employer's Board of Directors; provided,
however that such duties shall be performed in or from the offices of Employer
currently located at Goshen, Indiana, and shall be of the same character as
those previously performed by Employee and generally associated with the office
held by Employee. Employee shall not be required to be absent from the location
of the principal executive offices of Employer on travel status or otherwise
more than 45 days in any calendar year. Employer shall not, without the written
consent of Employee, relocate or transfer Employee to a location more than 30
miles from his principal residence. Employee shall perform Job Responsibilities
for Employer as President and Chief Financial Officer for Employer and each of
its subsidiaries in substantially the same manner and to substantially the same
extent as Employee rendered his services to Employer before the date hereof.
Although while employed by Employer, Employee shall devote substantially all his
business time and efforts to Employer's business and shall not engage in any
other related business, Employee may use his discretion in fixing his hours and
schedule of work consistent with the proper discharge of his duties.
3. The term of this Agreement shall begin on the "Effective Date" and shall
end on the date which is one (1) year following such date (the "Anniversary
Date"); provided, however, that such term shall be extended for additional one
(1) year terms on each Anniversary Date, unless either party hereto gives
written notice to the other party not to so extend within ninety (90) days prior
to such Anniversary Date, in which case no further extension shall occur and the
term of this Agreement shall end on the Anniversary Date as of which the notice
not to extend is given (such term, including any extension thereof shall herein
be referred to as the "Term"). A notice not to extend by either party shall be a
termination of employment prior to expiration of the Term of this Agreement for
all purposes of this Agreement, including section 7 and section 8 hereof. Such
notice not to extend shall be in the form of the "Notice of Termination" defined
in section 10 hereof, and shall contain specific reference to specific
provisions of section 7 hereof relied upon for any such termination on the
Anniversary Date or otherwise.
4. Employee shall receive an annual salary of Two Hundred Thousand Dollars
($200,000.00) ("Base Compensation") payable at regular intervals in accordance
with Employer's normal payroll practices now or hereafter in effect. Employer
may consider and declare from time to time increases in the salary it pays
Employee and thereby increases in his Base Compensation. Prior to a Change of
Control, Employer may also declare decreases in the salary it pays Employee if
the operating results of Employer are significantly less favorable than those
for the fiscal year then ending, and Employer makes similar decreases in the
salary it pays to all other senior executive officers of Employer. After a
Change in Control, Employer may only consider and declare salary increases (but
not decreases) based upon the following standards: inflation; adjustments to the
salaries of all other senior executive officers; and past performance of
Employee
<PAGE>
and the contribution which Employee makes to the business and profits of
Employer during the Term.
Any and all increases or decreases in Employee's salary pursuant to this
section shall cause the level of Base Compensation to be increased or decreased
by the amount of each such increase or decrease for purposes of this Agreement.
The increased or decreased level of Base Compensation as provided in this
section shall become the level of Base Compensation for the remainder of the
Term of this Agreement until there is a further increase or decrease in Base
Compensation as provided herein.
For purposes of this Agreement, a "Change of Control" shall be deemed to
have occurred if during, or following the consummation of, a stock purchase
program, tender offer, exchange offer, merger, consolidation, sale of assets,
contested election, or any combination of the foregoing transactions, any
person, entity or group of persons acting in concert (other than the Employee),
directly or indirectly (1) acquires the power to vote in excess of twenty-five
percent (25%) of the voting securities of Employer and one or more of its
representatives are elected to the Board, (2) acquires ownership of the power to
vote in excess of 50% of the voting securities of Employer, or (3) otherwise
acquires effective control of the business and affairs of Employer; provided,
however, that a Change of Control shall not be deemed to occur as a result of
any acquisition of shares of Employer capital stock by Employee, or Kelly L.
Rose and/or Karen Rose, or any voting trust(s) of Employee, Kelly L. Rose,
and/or Karen Rose to which any of their Employer capital stock is transferred
and further provided that a Change of Control shall not be deemed to occur so
long as Kelly L. Rose is Chairman of the Board and Chief Executive Officer of
Employer.
5. So long as Employee is employed by Employer pursuant to this Agreement,
he shall be included as a participant in all present and future employee
benefit, retirement, and compensation plans generally available to employees of
Employer, consistent with his Base Compensation, his Job Responsibilities and
his position as President of Employer and Chief Financial Officer of Employer
and its subsidiaries, including, without limitation, Employer's 401(k) plan,
stock incentive plan, Executive Bonus Plan, split dollar life insurance program,
and group life insurance plans (collectively, "Benefit Plans"), each of which
Employer agrees to continue in effect on terms no less favorable than those
currently in effect as of the date hereof (as permitted by law) during the Term
of this Agreement, unless prior to a Change of Control the operating results of
Employer are significantly less favorable than those for the last fiscal year,
and unless either before or after a Change of Control changes in the accounting
or tax treatment of such plans would adversely affect Employer's operating
results or financial condition in a material way, and the Board of Directors of
Employer concludes that modifications to such plans need to be made to avoid
such adverse effects, and such modifications similarly affect all other senior
executive officers of Employer.
6. So long as Employee is employed by Employer pursuant to this Agreement,
Employee shall receive reimbursement from Employer for all reasonable business
expenses incurred in the course of his employment by Employer, upon submission
to Employer of written vouchers and statements for reimbursement. Employee shall
attend, at his discretion, those professional meetings, conventions, and/or
<PAGE>
similar functions that he deems appropriate and useful for purposes of keeping
abreast of current developments in the industry and/or promoting the interests
of Employer. So long as Employee is employed by Employer pursuant to the terms
of this Agreement, Employer shall continue in effect vacation policies
applicable to Employee no less favorable from his point of view than those
written vacation policies in effect on the date hereof. So long as Employee is
employed by Employer pursuant to this Agreement, Employee shall be entitled to
office space and working conditions no less favorable from his point of view
than were in effect for him on the date hereof. So long as Employee is employed
by Employer pursuant to this Agreement, employee shall be entitled to the use of
a company car provided by the Employer. So long as Employee is employed by
Employer pursuant to this Agreement, Employee shall be entitled to membership in
the Elcona Country Club, and Employer shall continue to pay the dues and
assessments for such membership.
7. Subject to the respective continuing obligations of the parties,
including but not limited to those set forth in subsections 8(A), 8(B), 8(C) and
8(D) hereof, Employee's employment by Employer may be terminated effective on
any Anniversary Date or otherwise prior to the expiration of the Term of this
Agreement as follows:
(A) Employer, by action of its Board of Directors and upon written notice to
Employee, may terminate Employee's employment with Employer at any time
for cause. For purposes of this subsection 7(A), "cause" shall be
defined as (i) willful misconduct, (ii) breach of fiduciary duty
involving personal profit, (iii) intentional failure to perform stated
duties, (iv) conviction of a violation of any law, rule, or regulation
(other than traffic violations or similar offenses) or final
cease-and-desist order, or (v) any material breach of any term,
condition or covenant of this Agreement.
(B) Employer, by action of its Board of Directors, may fail to renew this
Agreement effective any Anniversary Date, or may terminate Employee's
employment with Employer at any time without cause.
(C) Employee, by written notice to Employer, may terminate his employment
with Employer at any time for cause. For purposes of this subsection
7(C), "cause" shall be defined as (i) any action by Employer's Board of
Directors to remove the Employee as President of Employer and Chief
Financial Officer of Employer and its subsidiaries, except where the
Employer's Board of Directors properly acts to remove Employee from such
office for "cause" as defined in subsection 7(A) hereof, (ii) any action
by Employer's Board of Directors to materially limit, increase, or
modify Employee's Job Responsibilities and/or authority as President of
Employer and as Chief Financial Officer of Employer and its subsidiaries
(including his authority, subject to corporate controls no more
restrictive than those in effect on the date hereof, to hire and
discharge employees who are not bona fide officers of Employer), (iii)
any failure of Employer to obtain the assumption of the obligation to
perform this Agreement by any successor, assignee, or distributee of all
or substantially all of Employer's assets (on a consolidated basis with
those of its subsidiaries), or the reaffirmation of such obligation by
such successor, assignee, or distributee, as contemplated in section 16
hereof; (iv) any material breach
<PAGE>
by Employer of a term, condition or covenant of this Agreement; or (v)
adoption or approval of a plan of liquidation, dissolution, or
reorganization for Employer or its subsidiaries by the Employer's Board
of Directors..
(D) Except as otherwise provided in section 3 regarding nonrenewal on any
Anniversary Date, and in addition thereto, Employee, at any time and
upon sixty (60) days written notice to Employer, may terminate his
employment with Employer without cause.
(E) Employee's employment with Employer shall terminate in the event of
Employee's death or disability. For purposes hereof, "disability" shall
be defined as Employee's inability by reason of illness or other
physical or mental incapacity to perform the duties required by his
employment for any consecutive one hundred eighty (180) day period,
provided that notice of any termination by Employer because of
Employee's "disability" shall have been given to Employee prior to the
full resumption by him of the performance of such duties.
8. In the event of termination of Employee's employment with Employer
pursuant to section 7 hereof, which shall include a nonrenewal of this Agreement
on any Anniversary Date as provided in section 3 hereof, compensation shall
continue to be paid by Employer to Employee as follows:
(A) In the event of termination for cause by Employer or without cause by
Employee pursuant to subsection 7(A) or 7(D), respectively, compensation
provided for herein (including Base Compensation) shall continue to be
paid, and Employee shall continue to participate in the Benefit Plans
and other perquisites as provided in sections 5 and 6 hereof, through
the date of termination specified in the notice of termination. Any
benefits payable under such Benefit Plans as a result of Employee's
participation in such plans through such date shall be paid when due
under those plans. The date of termination specified in any notice of
termination pursuant to subsection 7(A) shall be no later than the last
business day of the month in which such notice is provided to Employee.
(B) In the event of termination without cause by Employer or with cause by
Employee pursuant to subsection 7(B) or 7(C), respectively, compensation
provided for herein (including Base Compensation) shall continue to be
paid, and Employee shall continue to participate in the Benefit Plans
and other perquisites as provided in sections 5 and 6 hereof, through
the date of termination specified in the notice of termination. Any
benefits payable under such Benefit Plans as a result of Employee's
participation in such plans through such date shall be paid when due
under those plans. In addition, Employee shall be entitled to continue
to receive from Employer his Base Compensation at the rates in effect at
the time of termination for one (1) additional twelve (12) month period,
provided, however in the event that termination pursuant to subsection
7(B) or 7(C) follows a Change of Control, then the additional period
referred to herein as "one (1) additional twelve (12) month period"
shall rather be "three (3) additional twelve (12) month periods." In
addition, during such periods, Employer will maintain in full force and
effect for the continued benefit
<PAGE>
of Employee and his dependents each Benefit Plan in which Employee was
entitled to participate immediately prior to the date of his
termination, unless an essentially equivalent and no less favorable
benefit is provided by a subsequent employer of Employee, provided,
however, that in the event that Employee shall be entitled to receive
from Employer his Base Compensation at the rates in effect at the time
of termination for three (3) additional twelve (12) month periods, then
Employee at his option may elect to receive such Base Compensation for
such three (3) additional twelve (12) month periods payable in one lump
sum payment on or before thirty (30) days following the date of
termination, and Employer will not thereafter maintain any Benefit Plan
for the continued benefit of Employee and his dependents. If the terms
of any Benefit Plan, or applicable laws, do not permit continued
participation by Employee, Employer will arrange to provide to Employee
a benefit substantially similar to, and no less favorable than, the
benefit he was entitled to receive under such Benefit Plans at the end
of the period of coverage. The right of Employee to continued coverage
under the health and medical insurance plans of Employer shall commence
upon the expiration of such period.
(C) In the event of termination pursuant to subsection 7(E), compensation
provided for herein (including Base Compensation) shall continue to be
paid, and Employee shall continue to participate in the Benefit Plans
and other perquisites as provided in sections 5 and 6 hereof, (i) in the
event of Employee's death, through the date of death, or (ii) in the
event of Employee's disability, through the date of proper notice of
disability as required by subsection 7(E). Any benefits payable under
such Benefit Plans as a result of Employer's participation in such plans
through such date shall be paid when due under those plans.
(D) Employer will permit Employee or his personal representative(s) or
heirs, during a period of three (3) months following termination of
Employee's employment by Employer without cause as set forth in
subsection 7(B), or Employee's termination of his employment with
Employer for cause as set forth in subsection 7(C), to require Employer,
upon written request and at Employee's option to purchase all or less
than all of outstanding stock options previously granted to Employee
under any Employer stock option plan then in effect whether or not such
options are then exercisable or have terminated, at a cash purchase
price equal to the amount by which the aggregate "fair market value" of
the shares subject to such options exceeds the aggregate option price
for such shares. For purposes of this Agreement, the term "fair market
value" shall mean the higher of (1) the average of the highest asked
prices for Employer shares in the over-the-counter market as reported on
the NASDAQ system or other national exchange if the shares are traded on
such system for the thirty (30) business days preceding such
termination, or (2) the average per share price actually paid for the
most highly priced one percent (1%) of the Employer shares acquired in
connection with any Change of Control of the Employer by any person or
group acquiring such control.
9. In order to induce Employer to enter into this Agreement, Employee hereby
agrees as follows:
<PAGE>
(A) Unless otherwise required to do so by law, including the order of a
court or governmental agency, Employee shall not divulge or furnish any
trade secrets (as defined in IND. CODEss. 24-2-3-2) of Employer or any
confidential information acquired by him while employed by Employer
concerning the policies, plans, procedures or customers of Employer to
any person, firm or corporation, other than Employer or upon its written
request, or use any such trade secret or confidential information
directly or indirectly for Employee's own benefit or for the benefit of
any person, firm or corporation other than Employer, since such trade
secrets and confidential information are confidential and shall at all
times remain the property of Employer.
(B) For a period of two years after termination of Employee's employment by
Employer for reasons other than those set forth in subsections 7(B) or
(C) of this Agreement, Employee shall not (a) compete, directly or
indirectly, with the business of Employer as conducted during the term
of this Agreement (defined as van, sport utility, and truck
conversions), or have any interest (including any interest or
association, including but not limited to, that of owner, part owner,
partner, shareholder, director, officer, employee, agent, consultant,
lender or advisor) in any person, firm or entity which competes with
Employer in the geographic area described on the attached Exhibit A
(each such person, firm or entity is --------- referred to as
"Competitor"); (b) solicit or accept business for or on behalf of any
Competitor; (c) solicit, induce or persuade, or attempt to solicit,
induce or persuade, any person to work for or provide services to or
provide financial assistance to, any Competitor; or (d) solicit or
accept for or on behalf of or for the benefit of any Competitor, any
business from any person, firm or entity which during the term of this
Agreement was a vendor or supplier to, or subcontractor for, or
commercial purchaser from, Employer.
(C) If Employee's employment by Employer is terminated for any reason by
either Employee or Employer, Employee will turn over immediately
thereafter to Employer all business correspondence, letters, papers,
reports, customers' lists, financial statements, records, drawings,
credit reports or other confidential information or documents of
Employer or its affiliates in the possession or control of Employee, all
of which writings are and will continue to be the sole and exclusive
property of Employer or its affiliates.
(D) If Employee's employment by Employer is terminated during the Term of
this Agreement for reasons set forth in subsections 7(B) or (C) of this
Agreement, Employee shall have no obligations to Employer with respect
to noncompetition under subsections 9(A) and 9(B).
10. Any termination of Employee's employment with Employer as contemplated
by section 3 and section 7 hereof, except in the circumstances of Employee's
death, shall be communicated by written "Notice of Termination" by the
terminating party to the other party hereto. Any "Notice of Termination" must
refer to one or more of subsections 7(A), 7(B), 7(C), 7(D) or 7(E), shall
indicate the specific provisions of this Agreement and one or more of such
subsections of section 7 relied upon, and shall set forth in reasonable detail
the facts and circumstances
<PAGE>
claimed to provide a basis for such termination under one or more of such
subsections of section 7.
11. Anything in this Agreement to the contrary notwithstanding, payment of
Base Compensation by the Employer to or for the benefit of the Employee pursuant
to subsection 8(B) hereof shall be inclusive of payment attributable to the
confidentiality and noncompetition covenants of section 9 hereof and shall be
payable whether or not deductible by the Employer for federal income tax
purposes.
12. If a dispute arises regarding the grounds for termination of Employee
pursuant to section 7 hereof, said dispute shall be resolved by binding
arbitration determined in accordance with the rules of the American Arbitration
Association and if Employee obtains a final award in his favor or his claim is
settled by Employer prior to the rendering of an award by such arbitration, all
reasonable legal fees and expenses incurred by Employee in contesting or
disputing any such termination or otherwise pursuing his claim shall be paid by
Employer, to the extent permitted by law.
If a dispute arises regarding other provisions of this Agreement, including
enforcement of the confidentiality and noncompetition provisions hereof, then
such shall be heard only by the judge and not by a jury, in any court of general
jurisdiction in Elkhart County, Indiana, to which such sole and exclusive
jurisdiction each party irrevocably consents. The prevailing party shall be
entitled to its costs, expenses and reasonable attorney's fees.
13. Should Employee die after termination of his employment with Employer
while any amounts are payable to him hereunder, this Agreement shall inure to
the benefit of and be enforceable by Employee's executors, administrators,
heirs, distributees, devisees and legatees and all amounts payable hereunder
shall be paid in accordance with the terms of this Agreement to Employee's
devisee, legatee or other designee or, if there is no such designee, to his
estate.
14. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been given
when delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Employee: Michael H. Schoeffler
57073 Copper Cove
Elkhart, IN 46516
If to Employer: Starcraft Corporation
2703 College Avenue
Post Office Box 1903
Goshen, IN 46526
Attention: Kelly L. Rose,
Chairman of the Board and
Chief Executive Officer
or to such address as either party hereto may have furnished to the other party
in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
<PAGE>
15. The validity, interpretation, and performance of this Agreement shall be
governed by the laws of the State of Indiana.
16. Employer shall require any successor, assignee, distributee or other
transferee of all or substantially all of its or its subsidiaries' assets or
business ("Succession") (whether direct or indirect, by purchase, merger,
dissolution, liquidation, consolidation or otherwise) by agreement in form and
substance satisfactory to Employee to expressly assume and agree to perform this
Agreement in the same manner and same extent that Employer would be required to
perform it if no such Succession had taken place. Failure of Employer to obtain
such agreement prior to the effectiveness of any such Succession shall be a
material intentional breach of this Agreement and shall entitle Employee to
terminate his employment with Employer pursuant to subsection 7(C) hereof. As
used in this Agreement, "Employer" shall mean Employer and its subsidiaries from
time to time and any successor to its or their business or assets as aforesaid.
17. No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
Employee and Employer. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of dissimilar provisions or conditions at the same or any prior or
subsequent time. No agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
18. The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement which shall remain in full force and effect.
19. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same agreement.
20. This Agreement is personal in nature and neither party hereto shall,
without consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder except as provided in section 13 and section 16 above.
Without limiting the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by his will or by the
laws of descent or distribution as set forth in section 13 hereof, and in the
event of any attempted assignment or transfer contrary to this paragraph,
Employer shall have no liability to pay any amounts so attempted to be assigned
or transferred.
IN WITNESS WHEREOF, the parties have caused the Agreement to be executed and
delivered this 18th day of December, 1996.
"Employee" "Employer"
STARCRAFT CORPORATION
/s/ Michael H. Schoeffler By: /s/ Kelly L. Rose
- ----------------------------- -----------------------------
Michael H. Schoeffler Kelly L. Rose
Its: Chief Executive Officer
<PAGE>
EXHIBIT A
In Japan, Europe, and any of the 48 contiguous States of the United States
of America; it being acknowledged by Employee that the Company conducts business
in all such States, and also it is acknowledged by Employee that the Company
presently conducts a substantial amount of its business in each of the following
States:
Wisconsin
Michigan
Illinois
Indiana
Ohio
Pennsylvania
New York
Oklahoma
Texas
California
EXHIBIT 11
STARCRAFT CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------
Sept. 29, 1996 Oct. 1, 1995 Oct. 2, 1994
-------------- ------------ ------------
<S> <C> <C> <C>
Primary
Average shares
outstanding 4,142 4,261 4,174
Net effect of dilutive stock
options - based on the
treasury stock method
using average market
price -- -- 19
------ ------ ------
Total 4,142 4,261 4,193
====== ====== ======
Net income $ 110 $2,757 $3,780
====== ====== ======
Per share amount
$ .03 $ 0.65 $ 0.90
====== ====== ======
Fully Diluted
Average shares
outstanding 4,142 4,261 4,174
Net effect of dilutive stock
options based on the
treasury stock method
using the highest of the
average market price for
the period or the market
price at the end of the
period -- -- 19
------ ------ ------
Total 4,142 4,261 4,193
====== ====== ======
Net income $ 110 $2,757 $3,780
====== ====== ======
Per share amount $ .03 $ 0.65 $ 0.90
====== ====== ======
</TABLE>
NOTE: Average shares outstanding used for earnings per share included in the
Company's financial statements do not reflect the effect of the
stock options granted since their effect is antidilutive.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
1. Starcraft Automotive Group, Inc.
State of Incorporation: Indiana
A. Starcraft FSC, Inc.
Jurisdiction of Incorporation: Barbados
2. Imperial Automotive Group, Inc.
State of Incorporation: Indiana
3. Starcraft Southwest, Inc.
State of Incorporation: Indiana
EXHIBIT 23a
Consent of Independent Auditors
We have audited the consolidated financial statements of Starcraft Corporation
and Subsidiaries as of September 29, 1996 and for the year then ended and have
issued our report thereon dated November 7, 1996. Our audit also included the
information for the year ended September 29, 1996 in the financial statement
schedule listed in Item 14 of this Annual Report. This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information as of and for the year
ended September 29, 1996 set forth therein.
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-73148) pertaining to the Starcraft Automotive Corporation 401(k)
Profit Sharing Plan and Trust and in the Registration Statement (Form S-8 No.
33-70030) pertaining to the Starcraft Automotive Corporation Stock Incentive
Plan of our report dated November 7, 1996, with respect to the consolidated
financial statements of Starcraft Corporation and Subsidiaries included in this
Annual Report (Form 10-K) for the year ended September 29, 1996.
/s/ Ernst & Young LLP
Fort Wayne, Indiana
December 20, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Starcraft Corporation
Goshen, Indiana
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (File No. 33-73148 and File No. 33-70030) of our report,
dated November 3, 1995, with respect to the consolidated financial statements of
Starcraft Corporation and Subsidiaries in this Annual Report on Form 10-K for
the period then ended.
/s/ McGLADREY & PULLEN, LLP
Elkhart, Indiana
December 20, 1996
<PAGE>
[Logo]
McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
INDEPENDENT ACCOUNTANT'S REPORT ON
THE SUPPLEMENTAL SCHEDULES
The Board of Directors
Starcraft Corporation
Goshen, Indiana
Our audits of the consolidated financial statements of Starcraft Corporation and
Subsidiaries included Schedule II, contained herein, for the periods ended
October 1, 1995 and October 2, 1994. Such schedule is presented for purposes of
complying with the Securities and Exchange Commission's rule and is not a
required part of the basic consolidated financial statements. In our opinion,
such schedule presents fairly the information set forth therein, in conformity
with generally accepted accounting principles.
/s/ McGLADREY & PULLEN, LLP
Elkhart, Indiana
November 3,1995
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWELVE MONTHS ENDED
SEPTEMBER 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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