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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED) OR [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the year ended December 31, 1997
Commission file number 0-22268
NATIONAL R.V. HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware No. 33-0371079
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
3411 N. Perris Blvd., Perris, California 92571
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (909) 943-6007
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share NASDAQ
(Title of class) (Name of each Exchange on which registered)
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 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. [ ]
Aggregate market value (based upon the closing sale price) of the voting stock
held by nonaffiliated stockholders of Registrant as of March 18, 1998 was
approximately $129,985,192.
The number of shares outstanding of the Registrant's common stock, as of March
18, 1998, was 6,490,639.
Documents Incorporated by Reference: Part III incorporates by reference portions
of the National R.V. Holdings, Inc. Proxy Statement for the 1998 Annual Meeting
of Stockholders.
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PART I
Item 1. Business of the Registrant
General
National R.V. Holdings, Inc. (the "Company") is one of the nation's
leading manufacturers of Class A motorhomes. Through its National R.V., Inc
("NRV") subsidiary, the Company designs, manufactures and markets Class A
motorhomes and fifth-wheel travel trailers under brand names including Dolphin,
Sea Breeze, Tropi-Cal, Tradewinds, and Sea View. Through its Country Coach, Inc.
("CCI") subsidiary, the Company designs, manufactures and markets high-end
(Highline) Class A motorhomes and bus conversions under brand names including
Concept, Affinity, Magna, Intrigue and Allure. The Company, which began
manufacturing recreational vehicles ("RVs") in 1964, is the fifth largest
domestic manufacturer of Class A motorhomes and sells its motorhomes through a
network of 183 dealer locations in 39 states, Canada and Europe.
The Company was incorporated in Delaware in 1988. NRV was incorporated
in California in 1970 and its predecessor was organized in 1964. In May 1989,
affiliates of Siegler, Collery & Co., a New York-based investment firm ("Siegler
Collery"), through the Company, acquired all of the common stock of NRV. CCI was
incorporated in Oregon in 1973. In November 1996, the Company acquired all the
common stock of CCI. As used herein, the term "Company" refers to National R.V.
Holdings, Inc., NRV and CCI unless the context otherwise requires.
The Company's headquarters are located at 3411 N. Perris Blvd.,
Perris, California 92571, and its telephone number is (909) 943-6007.
Recreational Vehicle Industry Overview
Products
Based upon standards established by the Recreational Vehicle Industry
Association (the "RVIA"), RVs are commonly classified into three main
categories: (i) motorhomes, composed of Class A, B and C types; (ii) towables,
composed of fifth-wheel travel trailers, conventional travel trailers, truck
campers and folding camping trailers, and (iii) van conversions.
Motorhomes. Motorhomes are self-powered RVs built on a motor vehicle
chassis. The interior typically includes a driver's area and kitchen, bathroom,
dining and sleeping areas. Motorhomes are self-contained, with their own power
generation, heating, cooking, refrigeration, sewage holding and water storage
facilities, so that they can belived in without being attached to utilities.
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Motorhomes are generally categorized into A, B and C classes. Class A motorhomes
are constructed on a medium-duty truck chassis, which includes the engine, drive
train and other operating components. Retail prices for Class A motorhomes
generally range from $40,000 to $150,000. Highline motorhomes, which are a
subset of Class A motorhomes, generally range in retail price from $160,000 to
$1,000,000. Class C motorhomes are built on a van or pick-up truck chassis,
which includes an engine, drive-train components and a finished cab section, and
generally range in retail price from $40,000 to $70,000. Class B motorhomes are
van campers, which generally contain fewer features than Class A or Class C
motorhomes.
Towables. Towables are non-motorized RVs. Fifth-wheel travel trailers,
similar to motorhomes in features and use, are constructed with a raised forward
section that attaches to the bed of a pick-up truck. This allows a bi-level
floor plan and generally more living space than conventional travel trailers.
Fifth-wheel travel trailers are typically less expensive than motorhomes and
range in retail price from $15,000 to $80,000. Conventional travel trailers are
similar to fifth-wheel travel trailers but do not have the raised forward
section. Truck campers have many of the amenities found on travel trailers and
slide into the bed of a pickup truck. Folding camping trailers contain fewer
features than other towables and are constructed with collapsible "tent"
sidewalls which fold for easy towing.
Van Conversions. Van conversions are automotive vans converted by van
upfitters to include such features as entertainment centers, comfortable
seating, window treatments and lighting.
Trends and Demographics
According to the RVIA's wholesale statistics, RV unit sales (excluding
van conversions) in 1997 increased 2.8% to 254,500 from 247,500 in 1996. The
aggregate wholesale value of these 1997 shipments was $5.5 billion, with Class A
motorhomes comprising $2.6 billion or 47.7% of the total and fifth-wheel travel
trailers comprising $1.0 billion or 17.8% of the total. Unit shipments of Class
A motorhomes in 1997 increased 3.0% to 37,600 from 36,500 in 1996. The average
wholesale price of Class A motorhomes increased in 1997 to $69,925 from $63,172
in 1996. Unit shipments of fifth-wheel travel trailers increased in 1997 8.9% to
52,800 from 48,500 in 1996. The average wholesale price of fifth-wheel travel
trailers increased in 1997 2.3% to $18,558 from $18,138 in 1996.
While overall unit shipments have increased over the past five years,
the RV industry's manufacturing base has undergone a consolidation. Between 1992
and 1997, the number of Class A motorhome manufacturers declined from 45 to 24.
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In addition, during this period, the aggregate retail market share of the ten
largest Class A motorhome manufacturers increased from 82.5% to 93.0%.
RVs are purchased for a variety of purposes, including camping,
visiting family and friends, sightseeing, vacationing and enjoying outdoor
activities and sporting events. According to a University of Michigan study,
approximately 8.2 million households (or 9.6% of all households) in the United
States owned RVs in 1993, up from 7.7 million households in 1988 and 5.8 million
households in 1980. In addition, the study indicated that 68% of all current RV
owners and 43% of all former RV owners plan to purchase another RV in the
future. This study further indicated that 75% of RVs purchased are used (RVIA
and market share statistics reflect new product sales only) with more than 29%
of these used RVs older than 15 years. The eventual scrappage of these older
units is expected to result in an increasing proportion of new product sales
over the next ten years.
Ownership of RVs reaches its highest level among those Americans aged
55 to 64, with 16.0% of households in this category owning RVs. The number of
Americans in this group, which constitutes the Company's primary target market,
is projected to grow 38.7% from 1996 to 2005 as compared to 7.8% for the overall
population. Baby Boomers are defined as those born between the years 1946 and
1964, and thus the leading edge of the Baby Boomer generation began turning 50
in 1996. This generation is expected to be more affluent and retire earlier than
past generations. As Baby Boomers enter and travel through the important 50 to
65 age group for RV sales, they represent the potential for a secular uptrend in
the RV industry.
As motorhomes have increased in popularity due, in part, to the entry
of the Baby Boomer generation into the target market, the purchasers of these
products have grown more sophisticated in their tastes. The Company believes
that as a result, customers have demanded more value for their money, and brand
recognition and loyalty have become increasingly important. These trends have
favored companies that can deliver quality, value and reliability on a sustained
basis.
Business Development and Strategy
The Company's business development and operating strategy is to deliver
high quality, innovative products that offer superior value to enhance the
Company's position as one of the nation's leading manufacturers of RVs. This
strategy focuses on the following key elements: (i) building upon and exploiting
recognition of the Company's brand names; (ii) offering the highest value
products at multiple price points to appeal to first time and repeat buyers;
(iii) expanding its manufacturing capacity and continuing to utilize vertically
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integrated manufacturing processes; (iv) capitalizing on the Company's
reputation to expand its presence in the Highline market; and (v) identifying
and acquiring related businesses serving niche markets.
Building upon and Exploiting Recognition of the Company's Brand Names.
The Company believes that its brand names and reputation for manufacturing
quality products with excellent value have fostered strong consumer awareness of
the Company's products and have contributed to the growth of its net sales and
market share. The Company intends to capitalize on its brand name recognition in
order to increase its sales and market share, facilitate the introduction of new
products and enhance its dealer network.
Offering the Highest Value Products at Multiple Price Points to Appeal
to First Time and Repeat Buyers. The Company currently offers ten distinct lines
of RVs, which are available in a variety of lengths, floorplans, color schemes
and interior designs and range in suggested retail price from $40,000 to
$1,000,000. Each model is intended to attract customers seeking an RV within
their price range by offering value superior to competitive products from other
manufacturers. RVIA data indicates that most motorhome purchasers have
previously owned a recreational vehicle, and the Company's models are positioned
to address the demands of these repeat customers as well as first time buyers.
Expanded Manufacturing Capacity and Vertically Integrated Manufacturing
Processes. The Company has expanded its manufacturing facilities in order to
increase its production flexibility and substantially increase overall
production volume to meet demand and anticipated growth. The Company designs and
manufactures a significant number of the components used in the assembly of its
products, rather than purchasing them from third parties. The Company believes
that its vertically integrated manufacturing processes allow it to achieve cost
savings and better quality control. In addition, the Company's in-house research
and development staff and on-site component manufacturing departments enable the
Company to ensure a timely supply of necessary products and to respond rapidly
to market changes.
Capitalizing on the Company's Reputation to Expand its Presence in the
Highline Market. The Company's Country Coach product offerings focus exclusively
on the Highline segment of the Class A motorhome market. The Company has a
strong market share in the Highline segment. For the twelve months ended
December 31, 1997, the Company was the fourth largest manufacturer of Highline
motorhomes, with approximately 12.1% of this market, up from 9.3% in 1996. The
Company is actively seeking to expand its share of this market by capitalizing
on its established reputation, continuing to offer superior products and
expanding its production capacity in order to target the market's growing
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population and satisfy the desire of many current RV owners to purchase more
upscale vehicles.
Identifying and Acquiring Related Businesses Serving Niche Markets. As
illustrated by the Company's recent acquisition of Country Coach, the Company
plans to expand its business through the strategic acquisition of targeted
businesses in the RV industry and related areas. The Company will target
acquisitions which it believes will result in expansion of the Company's product
lines and/or enhancement of operating efficiencies.
Business
Products
The Company's product strategy is to offer the highest value RVs across
a wide range of retail prices to appeal to a broad range of potential customers
and to capture the business of brand-loyal repeat purchasers who tend to trade
up with each new purchase. The Company's National RV subsidiary currently
manufactures Class A motorhomes under its Dolphin, Sea Breeze, Tropi-Cal,
Tradewinds and Sea View brand names and a line of fifth-wheel travel trailers
under the Sea Breeze brand name. The Company's Country Coach subsidiary
currently manufactures Highline motorhomes under the Concept, Affinity, Magna,
Intrigue and Allure brand names and bus conversions under the Country Coach
Prevost Conversion brand name.
The Company's products are offered with a wide range of accessories and
options and manufactured with high-quality materials and components. Certain of
the Company's Highline motorhomes can be customized to a particular purchaser's
specifications. Each vehicle is equipped with a wide range of kitchen and
bathroom appliances, audio and video electronics, communication devices,
furniture, climate control systems and storage spaces.
Country Coach Prevost Conversion. The Country Coach Prevost Conversion
is a completely customized home on wheels, built on a diesel-powered bus chassis
and produced in 40 and 45 foot lengths. The Country Coach Prevost Conversion is
available in customized floorplans including a model featuring an expansive
slide-out room that adds 35 square feet of living area. Suggested retail prices
range from approximately $650,000 to $1,000,000. The Country Coach Prevost
Conversion was introduced in 1979.
Concept. The Concept is a wide-body bus-style motorhome, offering
virtually all the features and amenities of a bus conversion, including
customization and a diesel-powered chassis. Among its many features, the Concept
has a Pentium computer-driven digital dash featuring a Global Positioning System
(GPS). The Concept is available in three floorplans and is produced in 40 and 45
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foot lengths. The Concept, as with all the Company's Highline motorhomes,
provides substantial under coach ("basement') storage in insulated, carpeted
storage bays. Suggested retail prices range from approximately $523,000 to
$552,000. The Concept was introduced in 1988.
Affinity. The Affinity is a wide-body bus-style motorhome, built on a
diesel powered chassis. The Affinity is a luxury model specially engineered for
a longer wheel base, shorter front and rear overhang and a lower center of
gravity. The Affinity is available in 48 floorplan combinations and is produced
in 38 and 40 foot lengths. Suggested retail prices range from approximately
$345,000 to $403,000. The Affinity was introduced in 1991.
Magna. The Magna is a wide-body, bus-style motorhome, built on a diesel
powered chassis. The Magna is available with a slide-out room feature that
expands the interior of the motorhome and adds approximately 32 square feet of
additional living space. The Magna is available in 36 floorplan combinations and
is produced in 36, 38 and 40 foot lengths. Suggested retail prices range from
approximately $270,000 to $290,000. The Magna was introduced in 1991.
Intrigue. The Intrigue is a wide-body bus-style motorhome built on the
DynoMax diesel-powered chassis built by CCI. The Intrigue is available in 20
floorplan combinations and is produced in 32, 36 and 40 foot lengths. One model
features an expansive slide-out room that adds 32 square feet of living area.
Suggested retail prices range from approximately $185,000 to $211,000. The
Intrigue was introduced in 1994.
Allure. The Allure is a wide-body bus-style motorhome built on the
DynoMax diesel-powered chassis built by CCI. The Allure is available in 15
floorplan combinations and is produced in 32, 36, and 40 foot lengths. One model
features an expansive slide-out room that adds 32 square feet of living area.
The Allure is positioned as the Company's entry-level Highline motorhome.
Suggested retail prices range from approximately $158,000 to $180,000. The
Allure was introduced in 1995.
Tradewinds. The Tradewinds is available in two floorplans on a diesel
powered chassis. These models are full-basement wide-body, bus-style motorhomes.
Both models have automatic slide-out features that expand the interior of the
motorhome and add approximately 36 square feet of additional living space. Both
models are produced in 36 foot lengths and are available with a choice of oak or
walnut interiors. Suggested retail prices range from $139,000 to $142,000.
Dolphin. The Dolphin is available in four floorplans on a gas-powered
chassis. These models are full-basement wide-body, bus-style motorhomes. Three
models have automatic slide-out features that expand the interior of the
motorhome and add approximately 36 square feet of additional living space. The
Dolphin models are produced in 33 to 36 foot lengths and have suggested retail
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prices that range from $78,000 to $92,000.
Tropi-Cal. The Tropi-Cal is a wide-body bus-style motorhome outfitted
similar to the Dolphin with certain distinct features, exterior styling and
floorplans. The Tropi-Cal is available in four floorplans on a gas-powered
chassis and produced in 33 to 36 foot lengths. Three models have an automatic
slide-out feature that expands the interior of the motorhome and adds
approximately 36 square feet of additional living space.
Suggested retail prices range from approximately $84,000 to $94,000.
Sea Breeze. The Sea Breeze is a moderately-priced, bus-style motorhome,
built on a gas-powered chassis. The Sea Breeze has lower exterior height,
offering partial basement storage. A premium model is produced under the
"Limited" name and has as standard features Corian countertops, power heated
side-view mirrors, deluxe trim and heated water and waste holding tanks. The Sea
Breeze is produced in 29, 31 and 33 foot lengths. Suggested retail prices range
from approximately $64,000 to $72,000. The Sea Breeze was introduced in May
1992.
Sea View. The Sea View is available in three floorplans on a
gas-powered chassis. These models are full-basement wide-body, bus-style
motorhomes. All three models have automatic slide-out features that expand the
interior of the motorhome and add approximately 36 square feet of additional
living space. The Sea View models are produced in 31 to 33 foot lengths and have
suggested retail prices that range from $77,000 to $78,000.
Sea Breeze Fifth-Wheel Travel Trailer. The Sea Breeze fifth-wheel
travel trailer comes in six floorplans equipped similar to a Sea Breeze
motorhome. All floorplans feature standard living room and bedroom slide-out
sections and are produced in 30 to 37 foot lengths. Suggested retail prices
range from $42,000 to $51,000.
Planned Product Introductions
During 1998, NRV will develop a 40 foot Highline galley slide motorhome
built on a Country Coach Dynomax chassis with a retail price of $200,000. A 38
foot Tropi-Cal will be developed with a galley slide-out and bedroom slide-out
and a retail price of $105,000. A 32 foot triple slide fifth-wheel travel
trailer will be developed with a retail price of $46,000.
During 1998, CCI will begin building all of its motorhomes on its
Dynomax chassis. Galley slide-outs, with a tested and proven exclusive Country
Coach design, will be available on all models.
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Distribution and Marketing
The Company markets NRV products through a network of 165 dealer
locations in 39 states, Canada and Europe. These dealers generally carry all or
a portion of NRV's product lines along with competitors' products. The Company
markets CCI products through 18 dealer locations. CCI utilizes a limited dealer
network for its Highline motorhomes due to the selling expertise required and
the tendency of Highline customers to make destination-type purchases. The
Company believes that each of the CCI dealers has significant experience with
top-of-the-line products and has demonstrated high standards for service.
The Company generally promotes its products through visits to dealers,
attendance at industry shows, direct mail promotions, corporate newsletters,
press releases, trade and consumer magazine advertising and RV owner rallies.
From time to time, the Company also offers dealer or consumer incentives. In
addition, to help promote customer satisfaction and brand loyalty, the Company
sponsors Dolphin and Country Coach International clubs for owners of the
Company's products. The clubs publish newsletters and magazines on a monthly or
quarterly basis and organize RV rallies and other activities. The Company
continually seeks consumer preference input from several sources, including
dealers, RV owners and the Company's sales representatives and, in response, the
Company implements changes in the design, decor and features of its products.
Substantially all of the Company's motorhome sales are made on terms
requiring payment within 15 days or less of the dealer's receipt of the unit.
Most dealers finance all, or substantially all, of the purchase price of their
inventory under "floor plan" arrangements with banks or finance companies under
which the lender pays the Company directly. Dealers typically are not required
to commence loan repayments to such lenders for a period of at least six months.
The loan is collateralized by a lien on the vehicle. Consistent with industry
practice, the Company has entered into repurchase agreements with these lenders.
In general, the repurchase agreements provide that the Company is required to
repurchase a unit after the unit is financed and if the "floor plan" lender has
repossessed the unit. Certain of these agreements limit the Company's liability
to 12 to 18 months after the date of invoice of the unit. At December 31, 1997,
the Company's contingent liability under these agreements was approximately
$74.5 million. The risk of loss under such agreements is spread over numerous
dealers and lenders and is further reduced by the resale value of the motorhomes
the Company would be required to repurchase. The Company's losses under these
agreements have not been material in the past.
Many finance companies and banks provide retail financing to
purchasers of RVs. Certain provisions of the U.S. tax laws applicable to second
residences, including the deductibility of mortgage interest and the deferral of
gain on a qualifying sale, currently apply to motorhomes and travel trailers
used as qualifying residences.
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Manufacturing Facilities and Production
NRV owns and operates a 354,000 square foot manufacturing facility
located on approximately 30 acres in Perris, California. NRV owns another 13
acres of land to be used for future expansion. CCI leases and operates
manufacturing facilities totaling 386,000 square feet located on approximately
40 acres in Junction City, Oregon.
The Company's vehicles are built by integrating manufacturing and
assembly line processes. The Company has designed and built its own fabricating
and assembly equipment and molds for a substantial portion of its manufacturing
processes. The Company believes that its vertically integrated manufacturing
systems and processes which it has developed enable it to efficiently produce
high-quality products.
Among other items, the Company fabricates, molds and finishes
fiberglass to produce its front and rear-end components, manufactures its own
walls and roofs, assembles sub-floors and molds plastic components. In addition
to assembling its vehicles and installing various options and accessories, the
Company manufactures the majority of the installed amenities such as cabinetry,
draperies, showers and bathtubs. After purchasing the basic chair and sofa
frames, the Company also manufactures most of the furniture used in its
motorhomes. The Company believes that by manufacturing these components on site,
rather than purchasing them from third parties, the Company achieves cost
savings, better quality control and timely supply of necessary components.
Chassis, plumbing fixtures, floor coverings, hardware and appliances are
purchased in finished form from various suppliers. Due to California
environmental emission restrictions on the amount of fiberglass that the Company
can fabricate, third parties manufacture certain fiberglass parts using the
Company's molds.
The Company currently operates one production shift. Capacity
increases can be achieved by adding a second shift.
The Company purchases the principal raw materials and certain other
components used in the production of its RVs from third parties. Other than the
chassis, these components and raw materials typically have short delivery lead
times. With the exception of the chassis, these materials, including plywood,
lumber and plastic, are generally available from numerous sources, and the
Company has not experienced any significant shortages of raw materials or
components.
Product Development
The Company utilizes a combined research and development staff of 60
employees who concentrate on product development and enhancements. New ideas are
presented to the staff from management and are derived from a variety of
sources, including sales representatives, dealers and consumers. The staff
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utilizes computer-aided design equipment and techniques to assist in the
development of new products and floor plans and to analyze suggested
modifications of existing products and features. After the initial step of
development, prototype models for new products are constructed and refined. In
the case of modifications to certain features, new molds for various parts, such
as front-end caps and storage doors, are produced and tested. Upon completion
and acceptance of the prototypes, the new products or components are integrated
into the production process. The Company believes that the maintenance of an
in-house research and development staff enables the Company to respond rapidly
to ongoing shifts in consumer tastes and demands. Research and development
expenses were $2,711000 and $1,077,000 for the years ended December 31, 1997 and
1996, respectively, $423,000 for the seven months ended December 31, 1995, and
$780,000 for the fiscal year ended May 31, 1995.
Arrangements with Chassis Suppliers
NRV purchases chassis which are manufactured by Ford Motor Company and
the Chevrolet Motor Division of General Motors Corporation pursuant to
agreements with finance companies affiliated with such suppliers. NRV has a
finance agreement with Freightliner Custom Chassis Corporation for the purchase
of diesel pusher chassis. The chassis supplied by Freightliner Custom Chassis
Corporation is the only rear engine diesel-powered chassis used by NRV in its
motorhomes, although other manufacturers of rear engine diesel-powered chassis
exist. CCI purchases chassis from Gillig and, also manufactures its own chassis,
the DynoMax, which is used as the base upon which the Allure and Intrigue
motorhomes are built. The Company takes advantage of cash discounts, for payment
upon delivery, that are generally provided for in the agreements. Such financing
agreements generally provide that the Company must pay for a chassis in full
prior to making any alterations or additions to the chassis. The agreements
further provide that either party may terminate the agreement at any time. In
the event of such termination, the Company may incur certain financing and other
costs in order to maintain an adequate supply of chassis. The Company generally
maintains a one to two month production supply of a chassis in inventory. If any
of the Company's present chassis manufacturers were to cease manufacturing or
otherwise reduce the availability of their chassis, the business of the Company
could be adversely affected. The industry, as a whole, from time to time
experiences short-term shortages of chassis. During 1998, NRV expects to
experience a shortage of diesel powered chassis, used on its Tradewinds line,
due to a shortage of transmissions. NRV will be allocated 12 chassis per week
through the end of the second quarter. The shortage is expected to be resolved
by the end of the year and is not expected to have a material adverse impact on
the Company's results of operations.
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Backlog
The Company's backlog of motorhome orders was $98.4 million as of
February 28, 1998 and $59.9 million as of February 28, 1997. All backlog orders
are subject to cancellation. To the extent not canceled, the Company expects
that its backlog as of February 28, 1998 will be filled within 60 days of such
date.
Competition
The motorhome market is intensely competitive, with a number of other
manufacturers selling products which compete with those of the Company.
According to Statistical Surveys, Inc., the two leading manufacturers accounted
for approximately 45.0% and 44.3% of total retail units sold in the Class A
motorhome market during 1997 and 1996, respectively. These companies and certain
other competitors have substantially greater financial and other resources than
the Company. Sales of used motorhomes also compete with the Company's products.
The Company competes on the basis of value, quality, price and design. According
to Statistical Surveys, Inc., the Company's Class A retail market share of new
product sales has increased from 1.9% in 1992 to 3.4% in 1993, 4.0% in 1994,
4.2% in 1995, 6.1% in 1996, and 7.8% in 1997.
Regulation
The Company is subject to the provisions of the National Traffic and
Motor Vehicle Safety Act (the "Motor Vehicle Act") and the safety standards for
RVs and components which have been promulgated thereunder by the Department of
Transportation. The regulations that have been promulgated under the Motor
Vehicle Act permit the National Highway Traffic Safety Administration (the
"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. The Motor Vehicle Act also provides for
the recall and repair of vehicles which contain certain hazards or defects. In
addition, the Company has from time to time instituted voluntary recalls of
certain motorhome units, none of which have had a material adverse effect on the
Company.
The Company relies upon certifications from chassis manufacturers with
respect to compliance of the Company's vehicles with all applicable emission
control standards. The RVIA, of which the Company is a member, has promulgated
stringent standards for quality and safety. Each of the units manufactured by
the Company has a RVIA seal placed upon it to certify that such standards have
been met.
Federal and state authorities have various environmental control
standards relating to air, water, noise pollution and hazardous waste generation
and disposal which affect the business and operations of the Company. California
environmental emission regulations limit the amount of fiberglass which the
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Company may fabricate. The Company believes that its facilities and products
comply in all material respects with applicable environmental regulations and
standards. The Company is also subject to the regulations promulgated by the
Occupational Safety and Health Administration ("OSHA"), which regulates
workplace health and safety. The Company's plant is periodically inspected by
representatives of OSHA and the RVIA.
Product Warranty
The Company provides retail purchasers of its motorhomes with a
limited warranty against defects in materials and workmanship, excluding the
chassis and certain specified components which are separately warranted by the
Company's suppliers. Service covered by warranty must be performed at either the
Company's in-house service facility or any of its dealers or other authorized
service centers. The warranty period covers the lesser of one year or 18,000
miles. The Company's warranty reserve was $4.0 million at December 31, 1997,
which the Company believes sufficient to cover warranty claims.
Trademarks
NRV's Dolphin, Tropi-Cal, Sea Breeze, Tradewinds, Sea View, Dura
Frame, and CCI's Affinity, Magna, Intrigue, Allure, and Great Room trademarks
are registered with the United States Patent and Trademark Office and are
material to the Company's business. The Company does not rely upon any material
patents or licenses in the conduct of its business.
Legal Proceedings and Insurance
From time to time, the Company is involved in certain litigation
arising out of its operations in the normal course of business. Accidents
involving personal injuries and property damage occur from time to time in the
use of RVs. The Company maintains product liability insurance in amounts deemed
adequate by management. To date, aggregate costs to the Company for product
liability actions have not been material. The Company believes that there are no
claims or litigation pending, the outcome of which could have a material adverse
effect on the financial position of the Company.
Employees
As of February 28, 1998, the Company employed a total of 1,740 people,
of which 1,597 were involved in manufacturing, 35 in administration, 60 in
research and development and 48 in sales and marketing. None of the Company's
personnel are represented by labor unions. The Company considers its relations
with its personnel to be good.
12
<PAGE>
Item 2. Properties
NRV owns and operates a 354,000 square foot manufacturing facility
located on approximately 30 acres in Perris, California. NRV owns 13 acres of
land that will be used for future expansion. CCI leases and operates
manufacturing facilities totaling 386,000 square feet located on approximately
40 acres in Junction City, Oregon. The Company believes that present facilities
are well maintained and in good condition. The plants are currently operating at
approximately 60% capacity.
Item 3. Legal Proceedings
There are no material legal proceedings to which the Company is a
party.
Item 4. Submission of Matters to a Vote of Security Holders
None.
13
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock, par value $.01 per share (the "Common
Stock"), has been quoted on the Nasdaq Stock Market's National Market (the
"Nasdaq National Market") under the symbol NRVH since September 30, 1993. Prior
to that time, there was no public market for the Common Stock. In April 1996,
the Company declared a 3-for-2 stock split paid on May 16, 1996. The following
table sets forth, for the calendar quarters indicated, the high and low sale
prices for the Common Stock as furnished by the Nasdaq National Market after
giving retroactive effect to such 3-for-2 stock dividend.
1997 High Low
First Quarter $ 15 $ 12 1/2
Second Quarter 16 1/8 11 1/2
Third Quarter 21 7/8 15 1/8
Fourth Quarter 34 1/8 19
1996 High Low
First Quarter $ 10 9/16 $ 6 11/16
Second Quarter 14 13/16 10 5/16
Third Quarter 15 8 5/8
Fourth Quarter 17 1/8 13 1/4
On March 18, 1998, the last reported sales price for the Common Stock
quoted on the Nasdaq National Market was $29.00 per share. As of March 18, 1998,
there were 79 record holders of Common Stock. Such number does not include
persons whose shares are held of record by a bank, brokerage house or clearing
agency, but does include such banks, brokerage houses and clearing agencies.
Dividends
The Company has not paid any cash dividends or distributions on its
Common Stock and has no intention to do so in the foreseeable future. The
Company presently intends to retain earnings for general corporate purposes,
including business expansion, capital expenditures and possible acquisitions.
The declaration and payment of future dividends will be at the sole discretion
of the Board of Directors and will depend on the Company's profitability,
financial condition, capital needs, future prospects and other factors deemed
relevant by the Board of Directors. The ability of the Company to declare and
pay dividends is restricted by the Revolving Credit Agreement, dated as of July
28, 1997, between the Company and Union Bank of California, N.A., which
prohibits the payment of dividends in cash or property unless the Company
satisfies certain financial tests set forth therein. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources."
14
<PAGE>
Item 6. Selected Financial Data
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share and unit amounts)
<TABLE>
<CAPTION>
Seven Months
Years Ended Ended
December 31, December 31, Fiscal Years Ended May 31,
1997 1996 1995 1995 1995 1994 1993
Operations Data: (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 285,95$ 137,101$ 89,397 $ 53,062 $ 81,379 $ 71,749 $ 45,772
Cost of sales 245,763 118,643 78,089 46,864 70,459 62,115 40,514
------- ------- ------ ------ ------ ------ ------
Gross profit 40,188 18,458 11,308 6,198 10,920 9,634 5,258
Selling expenses 9,518 4,209 2,643 1,586 2,399 2,019 1,543
General and administrative expenses 5,649 2,899 2,455 1,233 2,243 1,706 1,504
Amortization of intangibles (1) 413 80 - - - 278 278
------- ------- ------ ------ ------ ------ ------
Operating income (loss) 24,608 11,270 6,210 3,379 6,278 5,631 1,933
Interest expense, net 222 111 3 (15) (8) 281 545
Other financing related costs 113 149 178 136 132 233 267
Gain on early extinguishment of debt - - - - - (226) -
(Gain) loss on sale of land and equipment - - - - (23) (1) 1
------- ------- ------ ------ ------ ------ ------
Income (loss) before income taxes and extraordinary item 24,273 11,010 6,029 3,258 6,177 5,344 1,120
Provision (benefit) for income taxes 9,767 4,405 2,387 1,324 2,443 2,212 207
------- ------- ------ ------ ------ ------ ------
Net income (loss) before extraordinary items 14,506 6,605 3,642 1,934 3,734 3,132 913
Loss on investment in marketable equity securities - - (958) - (958) - -
Gain on early extinguishment of debt - - 342 342 - - -
------- ------- ------ ------ ------ ------ ------
Net income (loss) $ 14,506$ 6,605$ 3,026 $ 2,276 $ 2,776 $ 3,132 $ 913
Basic earnings per common share:
Income before extraordinary items $ 2.32 $ 1.38 $ 0.77 $ 0.42 $ 0.77 $ 0.78 $ 0.41
Extraordinary items - - (0.13) 0.07 (0.20) - -
------- ------- ------ ------ ------ ------ ------
Net income $ 2.32 $ 1.38 $ 0.64 $ 0.49 $ 0.57 $ 0.78 $ 0.41
Diluted earnings per common share:
Income before extraordinary items $ 2.09 $ 1.26 $ 0.75 $ 0.40 $ 0.74 $ 0.77 $ 0.36
Extraordinary items - - (0.13) 0.07 (0.19) - -
------- ------- ------ ------ ------ ------ ------
Net income $ 2.09 $ 1.26 $ 0.62 $ 0.47 $ 0.55 $ 0.77 $ 0.36
Weighted average number of common shares outstanding:
Basic 6,243 4,793 4,713 4,610 4,860 4,004 2,252
Diluted 6,926 5,258 4,845 4,812 5,029 4,052 2,502
Other Data:
Class A units sold 3,039 2,042 1,504 905 1,476 1,413 851
Class C units sold (2) - - - - - 143 335
Fifth-Wheel Travel Trailers sold 258 210 299 132 217 - -
Balance Sheet Data:
Total assets (3) $ 87,204$ 68,050$ 34,308 $ 34,308 $ 41,592 $ 45,972 $ 37,416
Working capital 39,271 29,553 15,080 15,080 15,482 17,695 8,368
Long-term debt (4) 6,703 7,272 7,034 7,034 16,282 16,629 24,367
Stockholders' equity 60,958 45,532 18,625 18,625 18,389 19,585 2,338
</TABLE>
15
<PAGE>
(1) Reflects the amortization of the costs relating to the acquisition of
NRV by the Company, on May 26, 1989 (the "Acquisition") and goodwill
related to the acquisition of CCI on November 6, 1996, over five and
twenty years, respectively, from May 26, 1989. The Acquisition was
accounted for as a purchase transaction.
(2) The Company ceased manufacturing Class C motorhomes in January 1994
(3) Includes a $13.8 million restricted cash account funded by the Company
at the time of the Acquisition, which was reduced to $13.5 million at
the time of a restructuring effected in 1991, to secure $13.5 million
of notes (the "Secured Sellers' Notes") issued by the Company to the
sellers of NRV. The restricted cash was used to pay the notes in full
on September 1, 1995.
(4) Includes the Secured Sellers' Notes.
16
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This analysis of the Company's financial condition and operating
results should be viewed in conjunction with the accompanying financial
statements including the notes thereto.
General
On November 6, 1996, the Company acquired all shares of capital stock
of CCI through the issuance of 543,806 shares of Common Stock valued at $9.0
million. Net assets acquired included the assumption of $10.1 million of debt.
The purchase price exceeded the fair value of net assets acquired by $8,191,000,
recorded as goodwill and is being amortized over 20 years.
In December 1996, the Company completed a private placement of
900,000 shares of Common Stock resulting in $10.9 million of net proceeds to
the Company.
In 1995, the Company changed its fiscal year end from May 31 to
December 31.
17
<PAGE>
Results of Operations
The following table sets forth for the periods indicated the percentage
of net sales represented by certain items reflected in the Company's
Consolidated Statement of Income:
<TABLE>
<CAPTION>
Percentage of Net Sales
Seven Months Fiscal Year
Years Ended Ended Ended
December 31, December 31, May 31,
1997 1996 1995 1995 1995
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales 100.0 100.0 100.0 100.0 100.0
Cost of sales 86.0 86.5 87.4 88.3 86.6
----- ----- ----- ----- -----
Gross profit 14.0 13.5 12.6 11.7 13.4
Selling 3.3 3.1 3.0 3.0 2.9
General and administrative 2.0 2.1 2.7 2.3 2.8
Amortization of intangibles 0.1 0.1 - - -
----- ----- ----- ----- -----
Operating income 8.6 8.2 6.9 6.4 7.7
Interest expense, net 0.1 0.1 - - -
Other financing related costs 0.0 0.1 0.2 0.3 0.1
Gain on early extinguishment of debt - - - - -
----- ----- ----- ----- -----
Income before income taxes and extraordinary item 8.5 8.0 6.7 6.1 7.6
Provision for income taxes 3.4 3.2 2.7 2.5 3.0
----- ----- ----- ----- -----
Income before extraordinary item 5.1 4.8 4.0 3.6 4.6
Extraordinary loss on sale of marketable equity securities - - (1.1) - (1.2)
Extraordinary gain on early extinguishment of debt - - 0.4 0.7 -
----- ----- ----- ----- -----
Net income 5.1 4.8 3.3 4.3 3.4
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales in 1997 increased by $148.9 million, or 108.6%, from 1996.
This increase resulted primarily from a 431 unit sales increase at CCI, acquired
in November 1996, from 69 units in 1996 to 500 units in 1997. NRV's sales of
Class A motorhomes increased 565 units in 1997 to 2,539 units compared to 1,974
units in 1996, and the average sales price increased 17.7% reflecting strong
demand for higher-priced motorhomes with slide-out rooms. Sales of fifth-wheel
travel trailers increased 48 units in 1997 to 258 units compared to 210 units in
1996.
Cost of goods sold in 1997 increased by $127.1 million or 107.1% from
1996 resulting primarily from increased net sales. Gross profit margin was 14.0%
in 1997 compared to 13.5% in 1996. The increase resulted primarily from
manufacturing efficiencies realized from operating at a higher production level.
Selling expenses in 1997 increased by $5.3 million or 126.1% from 1996
primarily due to including a full year of expense at CCI compared to only two
18
<PAGE>
months in 1996. Increases at NRV were due to commissions resulting from the
increase in net sales and increased promotional costs. As a percentage of net
sales, selling expenses increased to 3.3% in 1997 from 3.1% in 1996. CCI incurs
higher selling costs which is typical in the highline motorhome market.
General and administrative expenses in 1997 increased by $2.8 million
or 94.9% due to including a full year of expense at CCI compared to only two
months in 1996. As a percentage of net sales, general and administrative
expenses decreased to 2.0% in 1997 from 2.1% in 1996.
Amortization of intangibles increased $0.3 million in 1997 to $0.4
million from $0.1 million in 1996, with a full year of amortization expense from
the CCI acquisition compared to only two months in 1996.
As a result of the foregoing, operating income in 1997 increased by
$13.3 million, or 118.4%, to $24.6 million. As a percentage of net sales,
operating income increased to 8.6% in 1997 from 8.2% in 1996.
Other expenses, which includes net interest expense and other financing
related costs, increased by $75,000, or 28.8%, to $335,000 in 1997 from $260,000
in 1996.
As a result of the foregoing, income before income taxes in 1997
increased $13.3 million, or 120.5% from 1996 to $24.3 million. As a percentage
of net sales, income before income taxes increased to 8.5% from 8.0% in 1996.
Provision for income taxes in 1997 and 1996 was $9.8 million and $4.4
million, respectively, representing a $5.4 million increase. The effective tax
rate in 1997 was 40.2% compared to 40.0% in 1996.
As a result of the foregoing, net income increased $7.9 million, or
119.6%, to $14.5 million from $6.6 million in 1996. As a percentage of net
sales, net income increased to 5.1% from 4.8% in 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995(Unaudited)
Net sales in 1996 increased by $47.7 million, or 53.4% from 1995. This
increase resulted primarily from a 538 unit increase in the sales of the
Company's Class A motorhomes, offset somewhat by an 89 unit decrease in
Fifth-Wheel Travel Trailers. In addition, the net sales increase was due
partially to new model year unit price increases implemented in 1996. The
remaining increase resulted from a change in the product mix of its Class A
motorhomes, with the Company selling 587 more of its more expensive units with
the slide-out feature in 1996 than in 1995.
19
<PAGE>
Cost of goods sold in 1996 increased by $40.6 million or 51.9% from
1995 resulting primarily from increased net sales. Gross profit margin was 13.5%
in 1996 compared to 12.6% in 1995. The increase resulted primarily from
manufacturing efficiencies realized from operating at a higher production level.
Selling expenses in 1996 increased by $1.6 million or 59.3% from 1995
primarily due to commissions resulting from the increase in net sales and
increases in promotional costs. As a percentage of net sales, selling expenses
increased to 3.1% in 1996 from 3.0% in 1995.
General and administrative expenses in 1996 increased by $0.4 million
or 18.1% from 1995. As a percentage of net sales, general and administrative
expenses decreased to 2.1% in 1996 from 2.7% in 1995.
Amortization of intangibles increased $80,000 in 1996 due to the CCI
acquisition.
As a result of the foregoing, operating income in 1996 increased by
$5.1 million, or 81.5%, to $11.3 million. As a percentage of net sales,
operating income increased to 8.2% in 1996 from 6.9% in 1995.
Other expenses, which includes net interest expense and other financing
related costs, increased by $79,000, or 43.6%, to $260,000 from $181,000 in
1995.
As a result of the foregoing, income before income taxes and
extraordinary items in 1996 increased $5.0 million, or 82.6% from 1995 to $11.0
million. As a percentage of net sales, income before income taxes and
extraordinary items increased to 8.0% from 6.7% in 1995.
Provision for income taxes in 1995 and 1996 was $2.4 million and $4.4
million, respectively, representing a $2.0 million increase. The effective tax
rate in 1996 was 40.0% compared to 39.6% in 1995.
As a result, income before extraordinary items increased $3.0 million,
or 81.4%, to $6.6 million from $3.6 million in 1995. As a percentage of net
sales, income before extraordinary items increased to 4.8% from 4.0% in 1995.
The Company incurred a $958,000 extraordinary loss on its investment in
marketable equity securities in 1995. In September 1995, the Company redeemed
$13,500,000 of outstanding promissory notes due January 15, 1998, resulting in
an after-tax gain of $342,000.
20
<PAGE>
As a result, net income increased $3.6 million, or 118.3% to $6.6
million from $3.0 million in 1995. As a percentage of net sales, net income
increased to 4.8% from 3.3% in 1995.
Seven Months Ended December 31, 1995 Compared to Seven Months Ended December 31,
1994 (Unaudited)
On December 26, 1995, the Company changed its year end from May 31 to
December 31. Results of operations for the seven month periods ended December
31, 1995 and 1994 are not necessarily indicative of operating results expected
for a full (12 month) year.
Net sales for the seven months ended December 31, 1995 increased by
$8.0 million or 17.8% from the seven months ended December 31, 1994. This
increase resulted primarily from a 28 and 82 unit increase in the sales of the
Company's Class A motorhomes and fifth-wheel travel trailers, respectively. In
addition, the net sales increase was due partially to August 1995 unit price
increases on the Company's Class A motorhomes. The remaining increase resulted
from a change in the product mix of its Class A motorhomes, with the Company
selling a substantially higher proportion of its more expensive Dolphin
motorhome for the seven months ended December 31, 1995 than for the same period
last year.
Cost of goods sold for the seven months ended December 31, 1995
increased by $7.5 million or 19.1% from the seven months ended December 31, 1994
resulting primarily from increased net sales. Gross profit margin for the seven
months ended December 31, 1995 was 11.7% compared to 12.7% for the same period
last year. The decrease was due mainly to fiberglass rework that resulted from
overuse of molds when increasing the rate of production to handle the strong
demand for 1996 models. New molds have been made to handle the increased
production rate.
Selling expenses for the seven months ended December 31, 1995 increased
by $243,000 or 18.1% from the seven months ended December 31, 1994 primarily due
to commissions resulting from the increase in net sales and increases in
promotional costs. As a percentage of net sales, selling expenses were 3.0%
unchanged from the comparable period last year.
General and administrative expenses for the seven months ended December
31, 1995 increased by $313,000 or 34.0% from the seven months ended December 31,
1994 primarily due to the annual management bonuses falling in the month of
December, the end of the short period, rather than the normal month of May, the
last month in the fiscal year. As a percentage of net sales, general and
administrative expenses increased to 2.3% from 2.0% during the comparable period
last year.
21
<PAGE>
As a result of the foregoing, operating income for the seven months
ended December 31, 1995 decreased by $67,000 or 1.9% from the seven months ended
December 31, 1994. As a percentage of net sales, operating income decreased to
6.4% from 7.7% during the comparable period last year.
Other expenses, which includes net interest expense and other financing
related costs, increased by $81,000, to $121,000 from $40,000 last year. The
increase was due mainly to lower earnings on invested funds as the $13.5 million
of restricted funds was used to retire the related obligations to previous
owners.
As a result of the foregoing, income before income taxes and
extraordinary item for the seven months ended December 31, 1995 decreased by
$148,000 or 4.3% from the seven months ended December 31, 1994. As a percentage
of net sales, income before income taxes and extraordinary item decreased to
6.1% from 7.6% during the comparable period last year.
Provision for income taxes for the seven months ended December 31, 1995
and 1994 was $1.3 million and $1.4 million, respectively. The effective tax rate
for the seven months ended December 31, 1995 and 1994 was 40.7% and 40.5%,
respectively.
As a result, income before extraordinary item decreased $92,000, or
4.5%, to $1.9 million for the seven months ended December 31, 1995 from $2.0
million for the comparable period last year. As a percentage of net sales,
income before extraordinary item decreased to 3.6% from 4.5% during the
comparable period last year.
On September 1, 1995, the Company redeemed $13,500,000 of outstanding
promissory notes due January 15, 1998, resulting in an after-tax gain of
$342,000. The promissory notes were issued to the previous owners of the
Company's wholly-owned operating subsidiary in connection with its acquisition
in 1989, and were collateralized by a $13,500,000 restricted cash account of the
Company. Funds from such restricted cash account were used for the redemption.
As a result, net income increased $250,000, or 12.3%, to $2.3 million
for the seven months ended December 31, 1995 from $2.0 million for the
comparable period last year. As a percentage of net sales, net income decreased
to 4.3% from 4.5% during the comparable period last year.
Liquidity and Capital Resources
During 1997, the Company financed its operations primarily through its
existing cash, income from operations and its credit facility. At December 31,
1997, the Company had working capital of $39.3 million compared to $29.6 million
at December 31, 1996. This increase of $9.7 million was primarily due to a $2.7
million increase in cash, $5.9 million increase in accounts receivable, and a
22
<PAGE>
$3.5 million increase in inventory, partially offset by a $1.3 million increase
in accounts payable and $3.9 million increase in accrued expenses. The increase
in accrued expenses was due primarily to a $2.2 million increase in warranty
reserve resulting from increased unit sales, a revision in the computation of
the estimate for NRV, and additional reserve for the chassis produced at CCI.
Net cash provided by operating activities was $11.0 million for the year ended
December 31, 1997.
During the year ended December 31, 1997, net cash used in investing
activities was $8.5 million and includes $5.6 million of capital expenditures,
related primarily to the new building construction at NRV and building
refurbishing at CCI, and $2.7 million of expenditures related to the acquisition
of a limited partnership interest in Dune Jet Services, L.P., a Delaware limited
partnership formed for the purposes of acquiring and operating an airplane for
the partners' business uses and for third-party charter flights. The general
partner of the Partnership is Dune Jet Services, Inc., a Delaware corporation,
the sole stockholder of which is the Company's Chairman, Mr. Gary N. Siegler.
During the twelve months ended December 31, 1997, net cash provided by
financing activities was $0.2 million.
As of December 31, 1997, the Company had short-term debt of $0.6
million and long-term debt of $6.7 million. Short-term debt consisted of current
maturities of the Company's long-term debt. At December 31, 1997, long-term debt
consisted primarily of the Company's two industrial development revenue bond
issues. The first issue ($2.0 million original principal amount) was for the
1985 construction of the NRV facility. The second issue ($5.0 million original
principal amount) was used for the construction of a new 154,000 square foot
facility at NRV completed in 1997. In February 1998, the Company determined that
it had exceeded a capital expenditure limitation contained in the loan agreement
and certain related agreements governing the Company's 1995 industrial revenue
bond issue (the "Bond Agreements"), of which approximately $4,700,000 was
outstanding at December 31, 1997. As a result, the Bond Agreements require that
the Company prepay such debt in full at an amount equal to 100% of the principal
amount of such debt plus accrued interest. The Company has delivered the
prepayment notice required by the Bond Agreements and is scheduled to prepay
such debt in April 1998.
During 1997, the Company and its subsidiaries entered into two separate
revolving credit facilities aggregating $40 million with Union Bank of
California (the "Bank"). The Company's $20 million credit facility will be
available to finance potential acquisitions. The Company's two subsidiaries, NRV
and CCI, jointly entered into a separate $20 million credit facility which will
be available for general corporate and working capital needs and capital
expenditures. Amounts borrowed under the credit facilities will bear interest at
the Bank's prime rate or at a LIBOR-based rate. Both credit facilities are
secured by substantially all of the assets of the Company and its subsidiaries
23
<PAGE>
and contain, among other provisions, certain financial covenants, including net
worth and debt covenants. At December 31, 1997, no amounts were outstanding
under these revolving credit facilities.
During the year ended December 31, 1997, the Company incurred capital
expenditures of $5.6 million related mainly to the completion of the new
facility at NRV and the refurbishing of a building at CCI, and equipment
required for each of these buildings. The Company anticipates that it will incur
capital expenditures of approximately $3.0 million in 1998.
The Company believes that the combination of internally generated
funds, existing capital and funds available from its existing credit facilities,
will be sufficient to meet the Company's planned capital and operational
requirements for at least the next 24 months.
Effects of Inflation
Management does not believe that inflation has had a significant impact
on the Company's results of operations for the periods presented.
Forward Looking Statements
This Form 10-K contains certain forward-looking statements which may
involve certain risks and uncertainties. The actual results may differ
materially from the results anticipated in these forward-looking statements as a
result of various risks and uncertainties. Potential risks and uncertainties
include but are not limited to such factors as the strength and competitive
pricing of the RV industry, changes in the availability and pricing of credit,
demand for and acceptance of the Company's products, the success of planned
marketing and promotional campaigns, and other risks identified in documents
filed by the Company with the Securities and Exchange Commission.
Item 8. Financial Statements and Supplementary Data
Financial information required by this item is attached to this report
beginning on page F-1 and is incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable
24
<PAGE>
PART III
Item 10. Directors and Officers of the Registrant.
The information required for this Item will be set forth in the
Company's definitive Proxy Statement for its 1998 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1997, which information is incorporated herein by reference.
Item 11. Executive Compensation
The information required for this Item will be set forth in the
Company's definitive Proxy Statement for its 1998 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1997, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required for this Item will be set forth in the
Company's definitive Proxy Statement for its 1998 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1997, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Party Transactions.
The information required for this Item will be set forth in the
Company's definitive Proxy Statement for its 1998 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1997, which information is incorporated herein by reference.
25
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.
(a) List of Documents filed as part of this Report
1. Financial Statements:
Report of Independent Accountants
Consolidated Balance Sheets at December 31, 1997 and 1996
Consolidated Statements of Operations for the twelve
months ended December 31, 1997 and 1996,
seven months ended December 31, 1995, and
the fiscal year ended May 31, 1995
Consolidated Statements of Cash Flows for the twelve
months ended December 31, 1997 and 1996,
seven months ended December 31, 1995, and
the fiscal year ended May 31, 1995
Consolidated Statements of Stockholders' Equity for the
twelve months ended December 31, 1997
and 1996
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedule VIII - Valuation and Qualifying Accounts
Schedule IX - Short-Term Borrowings
3. Exhibits
(b) Reports on Form 8-K:
None
Designation
of Exhibit Description of Exhibit
3.1 The Company's Restated Certificate of Incorporation. (2)
3.2 The Company's By-laws. (2)
26
<PAGE>
4.1 Specimen-Certificate of Common Stock. (1)
10.1 Loan Agreement, dated as of December 1, 1985, between NRV
and The Industrial Development Authority of the County of
Riverside (the "Authority"). (1)
10.2 Security Agreement, dated as of December 1, 1985, by and among
NRV, the Authority and Union Bank. (1)
10.3 Pledge and Security Agreement, dated as of December 1, 1985,
between NRV and Union Bank. (1)
10.4 Employment Agreement, dated as of October 29, 1991, between NRV
and Wayne Mertes. (1)
10.5 Amendment to Employment Agreement, dated as of July 1, 1993,
between NRV and Wayne Mertes. (1)
10.6 Agreement, dated October 4, 1988, between NRV and
Ford Motor Company. (1)
10.7 Pool Company Wholesale Finance Plan Application for Wholesale
Financing and Security Agreement, dated June 26, 1990, between
NRV and Ford Motor Credit Company ("Ford Credit"). (1)
10.8 Continuing Guaranty of the Company for the benefit of Ford Credit. (1)
10.9 Inventory Loan and Security Agreement, dated October 14, 1988,
between NRV and General Motors Acceptance Corporation ("GMAC"). (1)
10.10 Amendment to Inventory Loan and Security Agreement, effective as of
November 19, 1991, between NRV and GMAC. (1)
10.11 Agreement, effective September 27, 1991, between NRV and Chevrolet
Motor Division, General Motors Corporation. (1)
10.12 National R.V. Holdings, Inc. 1993 Stock Option Plan. (1)
10.13 Stock Purchase Agreement, dated as of October 11, 1991, by and
among the Company, Wayne Mertes and Michael Butler. (1)
10.14 National R.V. Holdings, Inc. 1993 Option Plan. (2)
10.15 Second Amendment to Employment Agreement, dated May 23, 1993, between
the Company and Wayne Mertes. (3)
10.16 First Amendment to Loan Agreement between Industrial Development
Authority of the County of Riverside and NRV dated February 1, 1995.(4)
10.17 First Amendment to Letter of Credit and Reimbursement Agreement
between NRV and Union Bank dated as of December 1, 1993. (4)
10.18 Ford Authorized Converter Pool Agreement dated June 12, 1990, between
NRV and Ford Motor Company. (4)
10.19 First Amendment to Ford Authorized Converter Pool Agreement between NRV
and Ford Motor Company effective July 1, 1990. (4)
10.20 Second Amendment to Ford Authorized Converter Pool Agreement between
NRV and Ford Motor Company dated June 30, 1994. (4)
10.21 Motor Home Manufacturers Incentive Agreement dated June 30, 1994,
between NRV and Chevrolet Motor Division, General Motors
Corporation. (4)
27
<PAGE>
10.22 Addendum to Agreement for Wholesale Financing between NRV and ITT
Commercial Finance Corp. dated July 8, 1993. (4)
10.23 Loan Agreement, dated as of December 1, 1995, between NRV and
California Economic Development Financing Authority. (5)
10.24 Reimbursement Agreement, dated as of December 1, 1995, between NRV and
Union Bank. (5)
10.25 Remarketing agreement, dated as of December 1, 1995, between NRV and
Rauscher Pierce Refsnes, Inc. (5)
10.26 Tax Regulator Agreement, dated as of December 1, 1995, between NRV,
the California Economic Development Financing Authority, and First
Trust of California. (5)
10.27 Pledge and Security Agreement, dated as of December 1, 1995, between
NRV and Union Bank. (5)
10.28 Security Agreement, dated as of December 1, 1995, between NRV and Union
Bank. (5)
10.29 Second Construction Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing, dated as of December 1, 1995, between NRV
and Chicago Title Insurance Company. (5)
10.30 Second Amendment to Ford Authorized Converter Pool Agreement, effective
August 14, 1995 between the NRV and Ford Motor Company. (5)
10.31 1995 Stock Option Plan. (5)
10.32 Payment terms with Freightliner Custom Chassis Corporation. (5)
10.33 Third Amendment to Employment Agreement, dated October 31,1996, between
the Company and Wayne M. Mertes. (7)
10.34 Rights Plan Agreement with Continental Stock Transfer & Trust
Company. (6)
10.35 Employment Agreement dated November 6, 1996, between CCI and Robert B.
Lee. (7)
10.36 1996 Stock Option Plan. (7)
10.37 Revolving Credit Agreement, dated as of July 28, 1997, between the
Company and Union Bank of California, N.A. (8)
10.38 Revolving Credit Agreement, dated as of July 28, 1997, among National
R.V., Inc. and Country Coach, Inc. and Union Bank of California,
N.A. (8)
10.39 Letter Agreement, dated January 23, 1998, between the Company and 712
Advisory Services, Inc.
10.40 1997 Stock Option Plan
10.41 Second Amended and Restated Agreement of Limited Partnership
Agreement of Dune Jet Services, L.P. dated as of July 9, 1997 between
Dune Jet Services, Inc. and the Company.
21.1 List of Subsidiaries.
99 Forward Looking Statements - Incorporated by reference from Form 10-Q
for the Quarter ended September 30, 1996.
- ---------------
28
<PAGE>
(1) Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 filed on August 16, 1993 (File No. 33-67414) as amended by
Amendment No. 1 thereto filed on September 22, 1993 and Amendment No. 2
thereto filed on September 29, 1993.
(2) Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 filed on December 15, 1993 (File No. 33-72954).
(3) Previously filed as an exhibit to the Company's Registration
Statement on Form S-1 filed on June 7, 1994 (File No. 33-79900).
(4) Previously filed as an exhibit to the Company's Form 10-K for the
year ended May 31, 1995 filed on August 28, 1995.
(5) Previously filed as an exhibit to the Company's Form 10-K for the
seven months ended December 31, 1995 filed on March 27, 1996.
(6) Incorporated by reference from Form 8-A declared effective on
August 26, 1996.
(7) Incorporated by reference from the Company's Form 10-K for the year
ended December 31, 1996.
(8) Incorporated by reference from the Company's Form 10-Q for the nine
months ended September 30, 1997.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
NATIONAL R.V. HOLDINGS, INC.
Dated: March 27, 1998 By /s/ Wayne M. Mertes
---------------------
Wayne M. Mertes,
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Capacity in Which Signed Date
/s/ Gary N. Siegler Chairman of the Board March 27, 1998
- -----------------------
Gary N. Siegler
/s/ Wayne M. Mertes Chief Executive Officer March 27, 1998
- ----------------------- and Director (Principal
Wayne M. Mertes Executive Officer)
/s/ Robert B. Lee Director March 27, 1998
- -----------------------
Robert B. Lee
/s/ Kenneth W. Ashley Chief Financial Officer (Principal March 27, 1998
- ----------------------- Accounting and Financial Officer)
Kenneth W. Ashley
/s/ Stephen M. Davis Director and Secretary March 27, 1998
- -----------------------
Stephen M. Davis
/s/ Neil H. Koffler Director and Assistant Secretary March 27, 1998
- -----------------------
Neil H. Koffler
/s/ Doy B. Henley Director March 27, 1998
- -----------------------
Doy B. Henley
/s/ Greg McCaffery Director March 27, 1998
- -----------------------
Greg McCaffery
30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
February 13, 1998
To the Board of Directors
and Shareholders of
National R.V. Holdings, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of National
R.V. Holdings, Inc. and its subsidiaries at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years ended
December 31, 1997 and 1996, the seven months ended December 31, 1995 and the
year ended May 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Los Angeles, CA
F-1
1
<PAGE>
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
1997 1996
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 3,542,000 $ 819,000
Receivables, less allowance for doubtful accounts
($180,000 and $177,000, respectively) 11,388,000 5,522,000
Inventories 37,543,000 34,015,000
Deferred income taxes 2,741,000 1,384,000
Prepaid expenses 1,375,000 1,232,000
------------ ------------
Total current assets 56,589,000 42,972,000
Goodwill - net 7,778,000 8,191,000
Restricted funds - 1,210,000
Property, plant and equipment, net 19,817,000 15,542,000
Other 3,020,000 135,000
------------ ------------
$ 87,204,000 $ 68,050,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ - $ 1,400,000
Current portion of long-term debt 554,000 545,000
Accounts payable 9,006,000 7,736,000
Accrued expenses 7,758,000 3,738,000
------------ ------------
Total current liabilities 17,318,000 13,419,000
Deferred income taxes 2,225,000 1,827,000
Long-term debt 6,703,000 7,272,000
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000 shares
authorized 4,000 issued and outstanding - -
Common Stock, $.01 par value, 10,000,000 shares
authorized 63,000 62,000
Additional paid-in capital 35,263,000 34,344,000
Retained earnings 25,632,000 11,126,000
------------ ------------
Total stockholders' equity 60,958,000 45,532,000
------------ ------------
$ 87,204,000 $ 68,050,000
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
F - 2
2
<PAGE>
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Seven Months Year
Year Ended Ended Ended
December 31, December 31, May 31,
1997 1996 1995 1995
<S> <C> <C> <C> <C>
Net sales $285,951,000 $137,101,000 $ 53,062,000 $81,379,000
Cost of goods sold 245,763,000 118,643,000 46,864,000 70,459,000
------------ ------------ ------------ -----------
Gross profit 40,188,000 18,458,000 6,198,000 10,920,000
------------ ------------ ------------ -----------
Selling expenses 9,518,000 4,209,000 1,586,000 2,399,000
General and administrative expenses 5,649,000 2,899,000 1,233,000 2,243,000
Amortization of intangibles 413,000 80,000 - -
------------ ------------ ------------ -----------
Total operating expenses 15,580,000 7,188,000 2,819,000 4,642,000
------------ ------------ ------------ -----------
Operating income 24,608,000 11,270,000 3,379,000 6,278,000
Other expenses (income):
Investment income (113,000) (246,000) (248,000) (669,000)
Interest expense 335,000 357,000 233,000 661,000
Other financing related costs 113,000 149,000 136,000 109,000
------------ ------------ ------------ -----------
Total other expenses 335,000 260,000 121,000 101,000
------------ ------------ ------------ -----------
Income before income taxes and
extraordinary items 24,273,000 11,010,000 3,258,000 6,177,000
Provision for income taxes 9,767,000 4,405,000 1,324,000 2,443,000
------------ ------------ ------------ -----------
Income before extraordinary items 14,506,000 6,605,000 1,934,000 3,734,000
Extraordinary loss on investment in
marketable equity securities, no tax effect - - - (958,000)
Extraordinary gain on early extinguishment
of debt, net of income taxes of $234,000 - - 342,000 -
------------ ------------ ------------ -----------
Net income $ 14,506,000 $ 6,605,000 $ 2,276,000 $ 2,776,000
============ ============ ============ ===========
Earnings per common share - basic
Income before extraordinary items $ 2.32 $ 1.38 $ 0.42 $ 0.77
Extraordinary items - - 0.07 (0.20)
------------ ------------ ------------ -----------
Net income $ 2.32 $ 1.38 $ 0.49 $ 0.57
Earnings per common share - diluted
Income before extraordinary items $ 2.09 $ 1.26 $ 0.40 $ 0.74
Extraordinary items - - 0.07 (0.19)
------------ ------------ ------------ -----------
Net income $ 2.09 $ 1.26 $ 0.47 $ 0.55
Weighted average number of shares:
Basic 6,243,049 4,793,335 4,609,953 4,860,422
============ ============ ============ ===========
Diluted 6,926,426 5,258,069 4,867,236 5,028,707
============ ============ ============ ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-3
3
<PAGE>
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Seven Months Year
Year Ended Ended Ended
December 31, December 31, May 31,
1997 1996 1995 1995
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income $14,506,000 $ 6,605,000 $ 2,276,000 $2,776,000
Adjustments to reconcile net income to
net cash provided by operating activities,
net of effect of acquisition:
Depreciation 1,322,000 516,000 283,000 382,000
Amortization of intangibles 413,000 80,000 - -
Amortization of deferred financial income - - (62,000) (247,000)
Loss on investment in marketable
equity securities - - - 958,000
Gain on early extinguishment of debt - - (576,000) -
(Increase) decrease in receivables (5,866,000) 2,567,000 (2,148,000) (39,000)
(Increase) decrease in inventories (3,528,000) (6,249,000) 688,000 (2,909,000)
(Increase) decrease in prepaid expenses (143,000) (251,000) 128,000 (175,000)
Increase (decrease) in accounts payable 1,270,000 (1,421,000) 631,000 (3,669,000)
Increase (decrease) in accrued expenses 4,020,000 13,000 (116,000) (116,000)
(Decrease) increase in deferred income taxes (959,000) (350,000) 305,000 373,000
----------- ---------- ---------- ----------
Net cash provided (used) by
operating activities 11,035,000 1,510,000 1,409,000 (2,666,000)
Cash flows from investing activities:
Proceeds from (investment in) marketable
equity securities - - 134,000 (382,000)
Payment for CCI acquisition costs - (437,000) - -
Increase in other assets (2,885,000)
Capital expenditures (5,597,000) (5,141,000) (727,000) (1,721,000)
----------- ---------- ---------- ----------
Net cash used by investing activities (8,482,000) (5,578,000) (593,000) (2,103,000)
Cash flows from financing activities:
(Decrease) increase in line of credit (1,400,000) (9,965,000) 900,000 1,000,000
Net proceeds from restricted funds 1,210,000 3,637,000 8,653,000 # -
Proceeds from revenue bonds - - 5,000,000 -
Repayments of obligations to previous owners - - (13,500,000) -
Principal payments on long-term debt (560,000) (160,000) (64,000) (77,000)
Proceeds from issuance of common stock 1,140,000 12,255,000 811,000 15,000
Purchase of treasury stock (220,000) (953,000) (2,851,000) (4,144,000)
Decrease in unsecured subordinated notes - - - (11,000)
----------- ---------- ---------- ----------
Net cash provided (used) by
financing activities 170,000 4,814,000 (1,051,000) (3,217,000)
----------- ---------- ---------- ----------
Net increase (decrease) in cash 2,723,000 746,000 (235,000) (7,986,000)
Cash, beginning of year 819,000 73,000 308,000 8,294,000
----------- ---------- ---------- ----------
Cash, end of year $ 3,542,000 $ 819,000 $ 73,000 $ 308,000
=========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
F-4
4
<PAGE>
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Common Stock Paid-In Retained Treasury Stock
Stock Shares Amount Capital Earnings Shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ - 5,555,163 $56,000 $21,043,000 $ 4,521,000 (1,083,330) $(6,995,000) $18,625,000
Common stock issued
under option plan 20,377 - 83,000 83,000
Common stock issued
upon exercise of warrants 352,933 3,000 1,282,000 1,285,000
Purchase of treasury stock (95,370) (953,000) (953,000)
Acquisition of CCI 5,643,000 543,806 3,357,000 9,000,000
Private placement of stock 265,106 3,000 6,293,000 634,894 4,591,000 10,887,000
Net income 6,605,000 6,605,000
---- --------- ------- ----------- ----------- --------- ---------- -----------
Balance, December 31, 1996 $ - 6,193,579 $62,000 $34,344,000 $11,126,000 - $ - $45,532,000
Common stock issued
under option plan 36,454 - 183,000 183,000
Common stock issued
upon exercise of warrants 81,350 1,000 736,000 12,400 220,000 957,000
Purchase of treasury stock (12,400) (220,000) (220,000)
Net income 14,506,000 14,506,000
---- --------- ------- ----------- ----------- --------- ---------- -----------
Balance, December 31, 1997 $ - 6,311,383 $63,000 $35,263,000 $25,632,000 - $ - $60,958,000
==== ========= ======= =========== =========== ========= ========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-5
5
<PAGE>
NATIONAL R.V. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
National R.V. Holdings, Inc. (the Company) manufactures recreational vehicles
("RVs") through its wholly-owned subsidiaries, National R.V., Inc. (NRV) and
Country Coach, Inc. (CCI). The RVs are marketed primarily in the United States
by NRV under the Dolphin, Sea Breeze, Tropi-Cal ,and Tradewinds brand names and
by CCI under brand names including Concept, Affinity, Magna, Intrigue, and
Allure.
The preparation of financial statements in accordance with generally acceptable
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. Management believes that the
estimates included in the financial statements are reasonable based on the facts
and circumstances known to them at the time of preparation.
CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
National R.V Holdings, Inc., NRV, and CCI. All significant intercompany
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include deposits in banks and short-term investments
with original maturities of three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost generally
determined by the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets ranging from 31 to 39 years for buildings and 5 to 7
years for machinery and equipment.
AMORTIZATION OF INTANGIBLE ASSETS
Goodwill related to the acquisition of CCI is being amortized on the
straight-line basis over a twenty-year period.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses are charged to operations as incurred and are
included in cost of goods sold. Research and development expenses were $2,711000
and $1,077,000 for the years ended December 31, 1997 and 1996, respectively,
$423,000 for the seven months ended December 31, 1995, and $780,000 for the
fiscal year ended May 31, 1995.
INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Under this method deferred tax assets and liabilities are computed using
statutory rates for the expected future tax consequences of events that have
been recognized in the Company's financial statements or tax returns.
F-6
6
<PAGE>
1. (Continued)
INCOME PER SHARE
As of December 31, 1997 the Company adopted and applied retroactively, the new
accounting standard for computing income per share. Under the new requirements,
historically reported "primary" and "fully diluted" earnings per share have been
replaced with "basic" and "diluted" earnings per share.
Basic earnings per share is based upon the weighted average number of common
shares outstanding during a period. Diluted earnings per share is based upon the
weighted average number of common shares plus the incremental dilutive effect of
the securities convertible to Common Stock.
The following is a reconciliation of the shares use to determine basic and
diluted EPS:
Seven Months Year
Year Ended Ended Ended
December 31, December 31, May 31,
1997 1996 1995 1995
Shares used for basic 6,243,049 4,793,335 4,609,953 4,860,422
Dilutive effect of:
Stock options 665,239 429,548 206,823 102,556
Warrants 18,138 35,186 50,460 21,252
Convertible notes 44,477
--------- --------- --------- ---------
Shares used for diluted 6,926,426 5,258,069 4,867,236 5,028,707
========= ========= ========= =========
2. Acquisition
On November 6, 1996, the Company acquired all shares of Capital Stock of CCI
through the issuance of 543,806 shares of Common Stock valued at $9.0 million.
Net assets acquired included the assumption of $10.1 million of debt. The
acquisition of CCI was accounted for as a purchase and the results of operations
of CCI have been included since the acquisition date. The purchase price
resulted in recording goodwill of $8,191,000.
3. Inventories
Inventories consisted of the following:
December 31,
1997 1996
Finished goods $ 10,751,000 $ 8,116,000
Work-in-process 12,769,000 11,000,000
Raw materials 11,747,000 7,987,000
Chassis 2,276,000 6,912,000
------------ ------------
$ 37,543,000 $ 34,015,000
============ ============
F-7
7
<PAGE>
4. Property, Plant and Equipment
Major classes of property, plant and equipment consist of the following:
December 31,
1997 1996
Land $ 3,310,000 $ 2,387,000
Construction in progress - 4,955,000
Buildings 11,825,000 5,853,000
Machinery and equipment 7,501,000 4,852,000
Office equipment 3,082,000 2,074,000
------------ ------------
25,718,000 20,121,000
Less accumulated depreciation (5,901,000) (4,579,000)
------------ ------------
Property, plant and equipment, net $ 19,817,000 $ 15,542,000
============ ============
5. Accrued Expenses
Accrued expenses consists of the following:
December 31,
1997 1996
Workers' compensation self-insurance reserve $ 402,000 $ 347,000
Motorhome warranty reserve 4,036,000 1,840,000
Payroll and other accrued expenses 3,320,000 1,551,000
---------- ----------
$7,758,000 $3,738,000
========== ==========
6. Debt and Credit Agreements
Debt consists of the following:
December 31,
1997 1996
Revolving credit agreements
8.50%, expires 1999 $ - $1,400,000
Industrial revenue bonds
5.10%, due 1998-2003 1,888,000 2,034,000
4.05%, due 1998-2020 4,700,000 5,000,000
Other borrowings 669,000 783,000
----------- ----------
7,257,000 9,217,000
Less payments due within one year 554,000 1,945,000
----------- ----------
$6,703,000 $7,272,000
=========== ==========
On July 28, 1997, the Company and its subsidiaries entered into two separate,
revolving credit facilities aggregating $40 million with Union Bank of
California. The Company's $20 million credit facility will be available to
finance potential acquisitions. The Company's two subsidiaries, NRV and CCI,
jointly have a separate $20 million credit facility which will be available for
general corporate and working capital needs and capital expenditures. Amounts
borrowed under the credit facilities will bear interest at the Bank's prime rate
or at a LIBOR-based rate. Both credit facilities are secured by substantially
all of the assets of the Company and its subsidiaries and contain, among other
provisions, certain financial covenants, including net worth and debt ratios.
NRV's buildings and property are pledged as collateral for the industrial
revenue bonds
Debt maturities over the next five years are $554,000 in 1998, $562,000 in 1999,
$571,000 in 2000, $581,000 in 2001 and $592,000 in 2002.
F-8
8
<PAGE>
7. Income Taxes
The components of the provision for income taxes were as follows:
December 31, May 31,
1997 1996 1995 1995
Currently Payable:
Federal $8,765,000 $3,686,000 $ 886,000 $1,829,000
State 1,954,000 1,048,000 372,000 519,000
---------- --------- --------- ---------
10,719,000 4,734,000 1,258,000 2,348,000
Deferred:
Federal (796,000) (305,000) 63,000 63,000
State (156,000) (24,000) 3,000 32,000
---------- --------- --------- ---------
(952,000) (329,000) 66,000 95,000
---------- --------- --------- ---------
Total provision for income taxes $9,767,000 $4,405,000 $1,324,000 $2,443,000
========== ========== ========= =========
Deferred income taxes are recorded based upon differences between the financial
statement and tax basis of assets and liabilities and available carryforwards.
Temporary differences and carryforwards which give rise to deferred income tax
assets and liabilities at December 31, 1997 and 1996 were as follows:
December 31,
1997 1996
Accrued expenses $2,357,000 $1,138,000
State income taxes 384,000 246,000
---------- ----------
Deferred income tax assets $2,741,000 $1,384,000
========== ==========
Fixed assets $1,697,000 $1,275,000
Other 528,000 552,000
---------- ----------
Deferred income tax liabilities $2,225,000 $1,827,000
========== ==========
A reconciliation of the statutory U.S. federal income tax rate to the Company's
effective income tax rate is as follows:
December 31, May 31,
1997 1996 1995 1995
Statutory rate 34.0% 34.0% 34.0% 34.0%
State taxes, net of federal benefit 4.8 6.1 6.2 5.9
Amortiztion of intangibles not
deductible for income tax purposes 1.7 0.6
Other (0.3) 0.7) 0.5 (0.4)
---- ---- ---- ----
40.2% 40.0% 40.7% 39.5%
Cash paid for income taxes was $9,439,000 and $4,971,000 for the years ended
December 31, 1997 and 1996, respectively, and $1,285,000 for the seven months
ended December 31, 1995, and $2,031,000 for the fiscal year ended May 31, 1995.
F-9
9
<PAGE>
8. Recourse on Dealer Financing
As is customary in the industry, the Company generally agrees with its dealers'
lenders to repurchase any unsold RVs if the dealers become insolvent within one
year of the purchase of such RVs. Although the total contingent liability under
these agreements approximates $74,500,000 at December 31, 1997, as with accounts
receivable, the risk of loss is spread over numerous dealers and lenders and is
further reduced by the resale value of the coaches which the Company would be
required to repurchase. Losses under these agreements have not been significant
in the past and management believes that any future losses under such agreements
will not have a significant effect on the consolidated financial position or
results of operations of the Company.
9. Commitments and Contingencies
The Company is involved in litigation arising in the ordinary course of
business. In the opinion of management, based in part on the advice of outside
counsel, these matters will not have a material adverse effect on the Company's
financial position or results of operations.
The Company has commitments under certain non-cancelable operating leases as
follows:
1998 $ 1,577,000
1999 1,622,000
2000 1,463,000
2001 86,000
2002 8,000
-----------
$ 4,756,000
===========
10. Stockholders' Equity
On August 20, 1996, the Company's Board of Directors adopted a Shareholder
Rights Plan. Pursuant to the Plan, the Company declared a dividend to be made to
stockholders of record on September 4, 1996 of one Series B Participating
Preferred Share Purchase right for each outstanding share of the Company's
Common Stock. No rights will be distributed until a purchaser acquires, or
announces its intent or attempts to acquire, at least 15 percent of the
Company's Common Stock.
At December 31, 1997, there were 62,501 warrants outstanding to financial
advisors and consultants at prices ranging from $9.33 to $16.09. Expiration
dates range from August 31, 1999 to December 1, 2001.
11. Stock Options
The Company has five fixed option plans which reserve shares of common stock for
issuance to executives, key employees and directors. The Company has also issued
fixed options outside of such plans pursuant to individual stock option
agreements. Options granted to non-employee and employee directors vested
immediately upon grant and generally expire ten years from the date of grant.
Options granted to employees vest in three equal annual installments and expire
five years from the date of grant. The price of the options granted pursuant to
these plans will not be less than 100 percent of the market value of the shares
on the date of grant.
No compensation cost has been recognized for the stock option plans in the
financial statements. Had compensation cost for the Company's stock option plans
and individual option agreements been determined based on the fair value rather
than market value at the grant date for awards under those plans and agreements
during 1996 and 1997, the Company's net income and earnings per share would have
been reduced to the pro forma amounts indicated below:
F-10
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11. (Continued)
Year Ended December 31,
1997 1996
Net income As reported $ 14,506,000 $ 6,605,000
Pro forma $ 11,040,000 $ 4,672,000
Basic earnings per share As reported $ 2.32 $ 1.38
Pro forma $ 1.77 $ 0.97
Diluted earnings per share As reported $ 2.09 $ 1.26
Pro forma $ 1.59 $ 0.89
Shares
Basic 6,243,049 4,793,335
Weighted 6,927,713 5,258,069
The fair value of each option granted is estimated on the date of grant using
the Cox Rubinstein binomial option-pricing model with the following
weighted-average assumptions used for grants: 1997 and 1996 dividend yield of
0.0%; expected volatility of 50.8% in 1997 and 51.1% in 1996; risk-free interest
rate ranging from 6.38% to 6.49% in 1997 and 5.875% to 6.5% in 1996; and
expected lives ranging from 5 to 10 years.
Information regarding these option plans and option agreements for 1997 and 1996
is as follows:
Weighted
Average
1997 Exercise 1996
Shares Price Shares
Outstanding, beginning of year 1,232,228 $ 8.757 805,625
Exercised (36,454) 4.682 (20,397)
Granted 600,000 15.125 447,000
Outstanding, end of year 1,795,774 $ 10.967 1,232,228
Option price range at end of year $4.00 to 15.63 $4.00 to 15.63
Option price range for exercised shares $4.00 to 6.92 $4.00 to 5.00
Options available for grant at end of year 79,349 79,349
Weighted-average fair value of options
granted during year $ 9.266 $ 6.359
The following table summarizes information about fixed-price stock options
outstanding at December 31, 1997:
Average Weighted
Grant Options Options Exercise Remaining
Date Authorized Outstanding Exercisable Price Life (Years)
9/20/93 300,000 211,649 211,649 4.000 5.4
12/3/93 232,500 147,300 147,300 6.920 5.3
12/30/94 129,375 124,075 124,075 5.000 6.1
9/28/95 150,000 136,000 90,000 5.625 6.5
10/2/1996-11/06/96 450,000 422,000 140,667 14.760 5.9
6/4/97 600,000 600,000 - 15.125 7.7
All others 157,750 157,750 132,083 8.398 5.1
F-11
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12. Related Party Transactions
The Company has a financial advisory agreement dated January 23, 1998 (the
"Advisory Agreement") with 712 Advisory Services, Inc., an affiliate (the
"Affiliate") of the Chairman of the Company, Mr. Gary N. Siegler. Mr. Neil H.
Koffler, a director of the Company, is also an employee of the Affiliate.
Pursuant to the Advisory Agreement, the Affiliate has agreed to provide advice
and consultation concerning financial and related matters, including, among
other things, with respect to private financings, public offerings,
acquisitions, commercial banking relations and other business ventures. The
Advisory Agreement has an initial term ending December 31, 1998 and is
automatically renewable for additional periods of one year unless either party
elects to terminate prior to the conclusion of any year. The Advisory Agreement
provides that the Affiliate shall be paid fees at the rate of $230,625 per
annum. In the event of certain "changes of control" events relating to the
Company, the Affiliate is entitled to immediate payment of the remaining unpaid
annual fee through the end of the calendar year in which the change of control
occurs. Fees paid under a prior advisory agreement between the Company and the
Affiliate totaled $220,000 and $150,000 for the fiscal years ended December 31,
1997 and 1996, respectively, $75,000 for the seven months ended December 31,
1995 and $150,000 for the fiscal year ended December 31, 1995. In addition, a
Chairman's salary and bonus of $190,000 in the aggregate were payable to Mr.
Siegler for the year ended December 31, 1997 and $180,000 in the aggregate was
paid for the year ended December 31, 1996. During 1996, an additional $385,000
was paid to the Affiliate for financial advisory services rendered in connection
with the Company's acquisition of CCI.
In September 1997, the Company acquired, for $2.75 million, a limited
partnership interest in Dune Jet Services, L.P. (the "Partnership"), a Delaware
limited partnership formed for the purposes of acquiring and operating an
airplane for the partners' business uses and for third-party charter flights
(the "Aircraft"). The general partner of the Partnership is Dune Jet Services,
Inc. ("DJ Services"), a Delaware corporation, the sole stockholder of which is
the Company's Chairman, Mr. Siegler. DJ Services contributed $1.55 million for
its general partnership interest and an additional $3.25 million for a separate
limited partnership interest. The Aircraft has been partially financed by a
$4.25 million loan from a third party financing source, the repayment of which
loan is personally guaranteed by Mr. Siegler. Pursuant to the Partnership's
limited partnership agreement and operating agreement terms, the Company, as a
limited partner, has the right to use the Aircraft for business purposes for its
pro rata share of 800 hours per year, at a rate modestly above the variable cost
of operating the Aircraft. Hours not used by the partners will be available for
charter flights at market rates. Profits and losses of the Partnership are
generally allocated in accordance with the partners' respective capital
contributions, except that depreciation is allocated to the general partner, and
distributions to the partners will be made in the same ratios as the allocations
of profits and losses. Pursuant to the partnership agreement, DJ Services is
entitled to reimbursement for expenses and indemnification from the Partnership
for acting in its capacity as general partner. Other than the purchase of its
partnership interest, the Company has made no other payments with respect to the
Partnership.
Mr. Robert B. Lee, a director of the Company and the Chairman and Chief
Executive Officer of CCI, is a partner in two joint ventures which are parties
to lease agreements with the Company's CCI subsidiary. Pursuant to these
agreements, CCI leases from the joint ventures two parcels of property
constituting CCI's entire manufacturing facilities. During the year ended
December 31, 1997, the Company paid $1,486,000 under such lease agreements. The
lease agreements call for future payments of $1,543,000 annually, adjusted 3%
annually for inflation, through 2001.
Werbel & Carnelutti, a law firm in which Mr. Stephen M. Davis, the Secretary and
a director of the Company, is a partner, performed legal services for the
Company during the year ended December 31, 1997.
F-12
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<PAGE>
NATIONAL R.V. HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1997, 1996 and 1995
Additions
Balance at charged to Balance at
beginning costs end of
of period and expenses Deductions Period
Twelve months ended December 31, 1997
Allowance for doubtful accounts $ 177,000 $ 12,842 $ 9,842 $ 180,000
Workers' compensation self-insurance 347,000 1,087,921 1,032,921 402,000
Motorhome warranty reserve 1,840,000 8,004,383 5,808,383 4,036,000
---------- ---------- ---------- ----------
$2,364,000 $9,105,146 $6,851,146 $4,618,000
Twelve months ended December 31, 1996
Allowance for doubtful accounts $ 40,000 $ 206,520 $ 69,520 $ 177,000
Workers' compensation self-insurance 317,000 793,300 763,300 347,000
Motorhome warranty reserve 445,000 2,062,084 667,084 1,840,000
---------- ---------- ---------- ----------
$ 802,000 $3,061,904 $1,499,904 $2,364,000
Seven months ended December 31, 1995
Allowance for doubtful accounts $ 40,000 $ - $ - $ 40,000
Workers' compensation self-insurance 314,000 333,448 330,448 317,000
Motorhome warranty reserve 342,000 763,629 660,629 445,000
---------- ---------- ---------- ----------
$ 696,000 $1,097,077 $ 991,077 $ 802,000
F-13
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<PAGE>
NATIONAL R.V. HOLDINGS, INC.
SHORT-TERM BORROWINGS
Maximum Average Weighted
amount amount average
Balance Interest outstanding outstanding interest rate
Category of aggregate at end of rate end during the during the during the
short-term borrowings period of period period period (1) period (2)
Twelve months ended
December 31, 1997
Line of credit with
financial institution - 8.50% $4,330,000 $923,957 8.40%
Twelve months ended
December 31, 1996
Line of credit with
financial institution $1,400,000 8.25% $9,500,000 - 8.30%
Seven months ended
December 31, 1995
Line of credit with
financial institution $1,900,000 8.50% $1,900,000 $485,714 8.75%
__________
(1) The average amount outstanding during the period was computed by dividing
the total of the month-end outstanding principal balances by 12.
(2) Average interest rate calculated using interest rates at the beginning and
end of the period.
F-14
14
<PAGE>
Exhibit 10.39
712 Advisory Services, Inc.
712 Fifth Avenue
Suite 1900
New York, New York 10019
January 23, 1998
National R.V. Holdings, Inc.
3411 N. Perris Boulevard
Perris, California 92370
Gentlemen:
This letter agreement hereby amends, restates and supercedes
any and all prior financial advisory agreements.
You hereby agree to retain us to continue to serve, and we
hereby agree to continue to serve, as financial advisor to National R.V. In such
capacity, we shall be available for advice and consultation, and shall advise
National R.V. with respect to such financial and related matters as National
R.V. shall from time to time request, including matters relating to (i) raising
capital, whether from institutional and other lenders or from the private
placement of securities, (ii) public offerings of debt or equity securities,
(iii) structure of debt or equity financing, (iv) acquisitions and other
business ventures, (v) commercial banking relations, (vi) shareholder relations
and (vii) general corporate matters.
For such services, National R.V. agrees to pay to us a fee at
the rate of $230,625 per year ("Annual Fee"). The Annual Fee shall be paid
quarterly in advance from the date hereof through the term of this agreement. We
shall further be entitled to the normal compensation payable to investment
banking firms (the specific terms of such compensation to be agreed between
National R.V. and us on a case-by-case basis) for completed financings,
acquisitions or other transactions as contemplated under the preceding
paragraph. National R.V. shall also reimburse us for any travel and other
out-of-pocket expenses incurred by us in connection with services provided for
herein.
The initial term of our engagement hereunder shall commence as
of January 1, 1998 (the "Commencement Date") and shall continue until the first
anniversary of such date; provided, however, that the term of our engagement
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<PAGE>
hereunder shall automatically be extended for additional periods of one year
unless and until either party shall give the other party written notice, not
later than 15 days prior to the first anniversary of the Commencement Date or
any subsequent anniversary of the Commencement Date, of the notifying party's
election to terminate our engagement hereunder effective as of the anniversary
of the Commencement Date next succeeding the giving of such notice.
National R.V. agrees to indemnify and hold us and any of our
officers, directors, employees, representatives and agents harmless against any
liability, claim, loss or expenses to which we or they may become subject as a
result of this agreement or the performance of our services hereunder; provided,
however, National R.V. shall not be liable for any liability, claim, loss or
expense which has been judicially determined to have been the result of our
willful misconduct or gross negligence. National R.V. shall satisfy any
indemnification request promptly upon our written request.
In the event of a change of control of National R.V. at any
time while this agreement is in effect, at the time of such change in control,
National R.V. shall pay to us immediately and in cash the remaining unpaid
Annual Fees payable through the end of the calendar year in which the change of
control occurs. "Change of Control", for purposes of this letter agreement,
shall be deemed to have occurred if (i) National R.V. or its subsidiary
corporations sell all or substantially all of its or their assets to another
person or entity or is acquired by another person or entity, whether such
acquisition is in the form of a sale, merger, consolidation or other similar
transaction, (ii) any person or group (as such terms are used in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other
than our affiliates is or becomes the "beneficial owner" (as defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly, of securities
of National R.V. representing 25% or more of the combined voting power of the
National R.V. then outstanding securities or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of National R.V. cease for any reason to constitute at
least a majority thereof unless the election, or the nomination for election by
National R.V.'s stockholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at the
beginning of the period.
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<PAGE>
If you find the above in accordance with our understanding,
will you kindly so indicate by signing and returning the enclosed copy of this
letter.
Very truly yours,
712 ADVISORY SERVICES, INC.
By:________________________
Name:
Title:
AGREED:
NATIONAL R.V. HOLDINGS, INC.
By:________________________
Name:
Title:
3
<PAGE>
Exhibit 10.40
NATIONAL R.V. HOLDINGS, INC.
1997 STOCK OPTION PLAN
<PAGE>
NATIONAL R.V. HOLDINGS, INC.
1997 STOCK OPTION PLAN
1. Purpose. The purpose of this Plan is to strengthen National R.V. Holdings,
Inc. by providing an incentive to its employees, consultants and directors,
encouraging them to devote their abilities to the success of the Company. It is
intended that this purpose be achieved by extending to employees, consultants
and directors of the Company or any subsidiary an added long-term incentive for
high levels of performance and exceptional efforts through the grant of options
to purchase shares of the Company's common stock under this National R.V.
Holdings, Inc. 1997 Stock Option Plan.
2. Definitions. For purposes of the Plan:
2.1. "Agreement" means the written agreement
between the Company and an Optionee evidencing the grant of an Option and
setting forth the terms and conditions thereof.
2.2. "Board" means the Board of Directors of the Company.
2.3. "Cause" means with respect to an Eligible Employee, including an
Eligible Employee who is a director of the Company, (i) the voluntary
termination of employment by such Eligible Employee, (ii) intentional failure to
perform, or habitual neglect of, reasonably assigned duties, (iii) dishonesty or
willful misconduct in the performance of an Optionee's duties, (iv) an
Optionee's engaging in a transaction in connection with the performance of such
Optionee's duties to the Company or any of its Subsidiaries thereof which
transaction is adverse to the interests of the Company or any of its
Subsidiaries and which is engaged in for personal profit to the Optionee, (v)
willful violation of any law, rule or regulation in connection with the
performance of an Optionee's duties, (vi) willful violation of any policy
adopted by the Company relating to the performance or behavior of employees or
(vii) acts of carelessness or misconduct which have in the reasonable judgment
of the Company's Board of Directors, an adverse effect on the Company.
2.4. "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company, by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, spin-off, split-up,
issuance of warrants or rights or debentures, stock dividend, stock split or
1
<PAGE>
reverse stock split, cash dividend, property dividend, combination or exchange
of shares, repurchase of shares, public offering, private placement, change in
corporate structure or otherwise.
2.5. "Code" means the Internal Revenue Code of 1986, as amended.
2.6. "Company" means National R.V. Holdings, Inc.
2.7. "Consultant Option" means an Option granted to a consultant pursuant to
Section 7.
2.8. "Director Option" means an Option granted to a Nonemployee Director
pursuant to Section 5.
2.9. "Disability" means a physical or mental infirmity which impairs the
Optionee's ability to perform substantially his or her duties for a period of
sixty (60) consecutive days.
2.10. "Eligible Employee" means any officer or other employee of the
Company or a Subsidiary who is designated by the Board as eligible to receive
Options subject to the conditions set forth herein.
2.11. "Employee Options" means an Option granted to an Eligible Employee
pursuant to Section 6.
2.12. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.13. "Fair Market Value" on any date means the average of the high and
low sales prices of the Shares on such date on the principal national securities
exchange on which such Shares are listed or admitted to trading, or if such
Shares are not so listed or admitted to trading, the arithmetic mean of the per
Share closing bid price and per Share closing asked price on such date as quoted
on the National Association of Securities Dealers Automated Quotation System or
such other market in which such prices are regularly quoted, or, if there have
been no published bid or asked quotations with respect to Shares on such date,
the Fair Market Value shall be the value established by the Board in good faith
and in accordance with Section 422 of the Code.
2.14. "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Board as an
Incentive Stock Option.
2.15. "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option.
2
<PAGE>
2.16. "Nonemployee Director" means a director of the Company who is not
a full-time employee of the Company or any Subsidiary.
2.17. "Option" means an Employee Option, a Director Option, a Consultant
Option or any or all of them.
2.18. "Optionee" means a person to whom an Option has been granted under the
Plan.
2.19. "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.
2.20. "Plan" means the National R.V. Holdings, Inc. 1997 Stock Option Plan.
2.21. "Shares" means the common stock, par value $.01 per share, of the
Company.
2.22. "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with respect to
the Company.
2.23. "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of the
Code applies.
2.24. "Ten-Percent Stockholder" means an Eligible Employee or other
eligible Plan participant, who, at the time an Incentive Stock Option is to be
granted to him or her, owns (within the meaning of Section 422(b)(6) of the
Code) stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, or of a Parent or a Subsidiary.
3. Administration.
3.1. The Plan shall be administered by the Board which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Board shall keep minutes of its meetings. A quorum shall consist of
not less than a majority of the Board and a majority of a quorum may authorize
any action. Any decision or determination reduced to writing and signed by a
majority of all of the members of the Board shall be as fully effective as if
made by a majority vote at a meeting duly called and held. No member of the
Board shall be liable for any action, failure to act, determination or
interpretation made in good faith with respect to this Plan or any transaction
hereunder, except for liability arising from his or her own willful misfeasance,
fraud or bad faith. The Company hereby agrees to indemnify each member of the
Board for all costs and expenses and, to the extent permitted by applicable law,
3
<PAGE>
any liability incurred in connection with defending against, responding to,
negotiation for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any action or failure
to act in administering this Plan or in authorizing or denying authorization to
any transaction hereunder.
3.2. Subject to the express terms and conditions set forth herein, the
Board shall have the power from time to time to determine those Optionees to
whom Options shall be granted under the Plan and the number of Incentive Stock
Options and/or Nonqualified Stock Options to be granted to such Optionee and to
prescribe the terms and conditions (which need not be identical) of each Option,
including the purchase price per Share subject to each Option, and make any
amendment or modification to any Agreement consistent with the terms of the
Plan.
3.3. Subject to the express terms and conditions set forth herein, the
Board shall have the power from time to time:
(a) to construe and interpret the Plan and the Options granted thereunder and to
establish, amend and revoke rules and regulations for the administration of the
Plan, including, but not limited to, correcting any defect or supplying any
omission, or reconciling any inconsistency in the Plan or in any Agreement, in
the manner and to the extent it shall deem necessary or advisable to make the
Plan fully effective, and all decisions and determinations by the Board in the
exercise of this power shall be final, binding and conclusive upon the Company,
its Subsidiaries, the Optionees and all other persons having any interest
therein;
(b) to determine the duration and purposes for leaves of absence which may be
granted to an Optionee on an individual basis without constituting a termination
of employment or service for purposes of the Plan;
(c) to exercise its discretion with respect to the powers and rights granted to
it as set forth in the Plan;
(d) generally, to exercise such powers and to perform such acts as are deemed
necessary or advisable to promote the best interests of the Company with respect
to the Plan.
3.4 Notwithstanding anything to the contrary contained herein, the Board
may designate a committee which shall have and may exercise all the powers and
authority of the Board in administering this Plan. Any action specified herein
to be taken by the Board, shall, if a committee is formed to administer the
Plan, be satisfied by the action of the committee.
4
<PAGE>
4. Stock Subject to Plan.
4.1. The maximum number of Shares that may be made the subject of Options
granted under the Plan is 600,000 Shares (or the number and kind of shares of
stock or other securities to which such Shares are adjusted upon a Change in
Capitalization pursuant to Section 9) and the Company shall reserve for the
purposes of the Plan, out of its authorized but unissued Shares or out of Shares
held in the Company's treasury, or partly out of each, such number of Shares as
shall be determined by the Board.
4.2. Whenever any outstanding Option or portion thereof expires, is canceled
or is otherwise terminated for any reason, the Shares allocable to the canceled
or otherwise terminated Option or portion thereof may again be the subject of
Options granted hereunder.
5. Option Grants for Nonemployee Directors.
5.1. Authority of Board. Subject to the provisions of the Plan, the Board
shall have full and final authority to select those Nonemployee Directors who
will receive Director Options, the terms and conditions of which shall be set
forth in an Agreement.
5.2. Purchase Price. The purchase price or the manner in which the
purchase price is to be determined for Shares under each Director Option shall
be determined by the Board and set forth in the Agreement evidencing the Option,
provided that the purchase price per Share under each Director Option shall be
not less than the Fair Market Value of a Share on the date the Director Option
is granted.
5.3. Duration. Director Options shall be for a term to be designated by
the Board and set forth in the Agreement evidencing the Option.
5.4. Vesting. Each Director Option shall, commencing not earlier than
the date of its grant, become exercisable in such installments (which need not
be equal or may be one installment) and at such times as may be designated by
the Board and set forth in the Agreement evidencing the Option. To the extent
not exercised, installments shall accumulate and be exercisable, in whole or
part, at any time after becoming exercisable, to not later than the date the
Director Option expires. The Board may accelerate the exercisability of any
Option or portion thereof at any time.
6. Option Grants for Eligible Employees.
6.1. Authority of Board. Subject to the provisions of the Plan, the Board
shall have full and final authority to select those Eligible Employees who will
5
<PAGE>
receive Employee Options, the terms and conditions of which shall be set forth
in an Agreement; provided, however, that no Eligible Employee shall receive an
Incentive Stock Option unless he is an employee of the Company, a Parent or a
Subsidiary at the time the Incentive Stock Option is granted.
6.2. Purchase Price. The purchase price or the manner in which the
purchase price is to be determined for Shares under each Employee Option shall
be determined by the Board and set forth in the Agreement evidencing the Option,
provided that the purchase price per Share under each Employee Option shall be
(i) except as provided in clause (ii) of this Section 6.2, not less than the
Fair Market Value of a Share on the date the Employee Option is granted; and
(ii) with respect to any Incentive Stock Option granted to a Ten Percent
Stockholder, not less than 110% of the Fair Market Value of a Share on the date
the Option is granted.
6.3. Duration. Employee Options granted hereunder shall be for such term
as the Board shall determine, provided that no Employee Option shall be
exercisable after the expiration of ten (10) years from the date it is granted
(five (5) years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder). The Board may, subsequent to the granting of any
Employee Option, extend the term thereof but in no event shall the term as so
extended exceed the maximum term provided for in the preceding sentence.
6.4. Vesting. Each Employee Option shall, commencing not earlier then
the date of its grant, become exercisable in such installments (which need not
be equal or may be in one installment) and at such times as may be designated by
the Board and set forth in the Agreement evidencing the Option. To the extent
not otherwise provided by the Board, Employee Options shall be exercisable in
three (3) equal installments each equal to one-third of the entire Option
granted, the first of which shall become exercisable on the first anniversary of
the date of the grant of the Employee Option, the second installment of which
shall become exercisable on the second anniversary of the date of grant of the
Employee Option, and the final installment of which shall become exercisable on
the third anniversary of the date of grant. To the extent not exercised,
installments shall accumulate and be exercisable, in whole or part, at any time
after becoming exercisable, to not later than the date the Employee Option
expires. The Board may accelerate the exercisability of any Option or portion
thereof at any time.
7. Option Grants for Consultants.
7.1. Authority of Board. Subject to the provisions of the Plan, the Board
shall have full and final authority to select those consultants to the Company
or a Subsidiary who will receive Consultant Options, the terms and conditions of
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<PAGE>
which shall be set forth in an Agreement. An employee or officer of the Company
shall not be deemed a consultant.
7.2. Purchase Price. The purchase price or the manner in which the purchase
price is to be determined for Shares under each Consultant Option shall be
determined by the Board and set forth in the Agreement evidencing the Option,
provided that the purchase price per Share under each Consultant Option shall be
not less than the Fair Market Value of a Share on the date the Consultant Option
is granted.
7.3. Duration. Consultant Options granted hereunder shall be for such
term as the Board shall determine, provided that no Consultant Option shall be
exercisable after the expiration of ten (10) years from the date it is granted.
The Board may, subsequent to the granting of any Consultant Option, extend the
term thereof but in no event shall the term as so extended exceed the maximum
term provided for in the preceding sentence.
7.4. Vesting. Each Consultant Option shall, commencing not earlier then the
date of its grant, become exercisable in such installments (which need not be
equal or may be in one installment) and at such times as may be designated by
the Board and set forth in the Agreement evidencing the Option. To the extent
not otherwise provided by the Board, Consultant Options shall be exercisable in
three (3) equal installments each equal to one-third of the entire Option
granted, the first of which shall become exercisable on the first anniversary of
the date of grant of the Consultant Options, the second installment of which
shall become exercisable on the second anniversary of the date of grant, and the
final installment of which shall become exercisable on the third anniversary of
the date of grant. To the extent not exercised, installments shall accumulate
and be exercisable, in whole or part, at any time after becoming exercisable, to
not later than the date the Consultant Option expires. The Board may accelerate
the exercisability of any Option or portion thereof at any time.
8. Terms and Conditions Applicable to All Options
8.1. Non-transferability. No Option granted hereunder shall be
transferable by the Optionee to whom granted otherwise than by will or the laws
of descent and distribution, and an Option may be exercised during the lifetime
of such Optionee only by the Optionee or his or her guardian or legal
representative. The terms of each Option shall be final, binding and conclusive
upon the beneficiaries, executors, administrators, heirs and successors of the
Optionee.
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<PAGE>
8.2. Method of Exercise. The exercise of an Option shall be made only by a
written notice delivered in person or by mail to the Secretary of the Company at
the Company's principal executive office, specifying the number of Shares to be
purchased and accompanied by payment therefor and otherwise in accordance with
the Agreement pursuant to which the Option was granted. The purchase price for
any Shares purchased pursuant to the exercise of an Option shall be paid in full
upon such exercise, as determined by the Board in its discretion, by any one or
a combination of the following: (i) cash, (ii) transferring Shares to the
Company upon such terms and conditions as determined by the Board; or (iii) as
otherwise determined by the Board. At the Optionee's request and subject to the
consent of the Board, Shares to be acquired upon the exercise of a portion of an
Option will be applied automatically to pay the purchase price in connection
with the exercise of additional portions of the Option then being exercised. The
written notice pursuant to this Section 8.2 may also provide instructions from
the Optionee to the Company that upon receipt of the purchase price in cash from
the Optionee's broker or dealer, designated as such on the written notice, in
payment for any Shares purchased pursuant to the exercise of an Option, the
Company shall issue such Shares directly to the designated broker or dealer. Any
Shares transferred to the Company as payment of the purchase price under an
Option shall be valued at their Fair Market Value on the day preceding the date
of exercise of such Option. If requested by the Board, the Optionee shall
deliver the Agreement evidencing the Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such Agreement to
the Optionee. No fractional shares (or cash in lieu thereof) shall be issued
upon exercise of an Option and the number of Shares that may be purchased upon
exercise shall be rounded to the nearest number of whole Shares.
8.3. Rights of Optionees. No Optionee shall be deemed for any purpose
to be the owner of any Shares subject to any Option unless and until (i) the
Option shall have been exercised pursuant to the terms thereof, (ii) the Company
shall have issued and delivered the Shares to the Optionee and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company. Thereupon, the Optionee shall have full voting, dividend and
other ownership rights with respect to such Shares.
8.4. Termination of Employment or Services. Unless otherwise provided in
the Agreement evidencing the Option, an Option (other than an Option granted to
a consultant or a Nonemployee Director) shall terminate upon an Optionee's
termination of employment (or similar arrangement) with the Company and its
Subsidiaries as follows:
(a) in the event the Optionee's employment terminates as a result of Disability,
the Optionee may at any time within three (3) months after such event exercise
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the Option or portion thereof that was exercisable on the date of such
termination;
(b) if an Optionee's employment terminates for Cause, the Option shall
terminate immediately and no rights thereunder may be exercised;
(c) if an Optionee's employment terminates without Cause, the Optionee may at
any time within one (1) month after such event exercise the Option or portion
thereof that was exercisable on the date of such termination; and
(d) if an Optionee dies while an employee of the Company or any Subsidiary or
within six (6) months after termination as a result of Disability as described
in clause (a) of this Section 8.4, the Option may be exercised at any time
within six (6) months after the Optionee's death by the person or persons to
whom such rights under the Option shall pass by will or by the laws of descent
and distribution; provided, however, that an Option may be exercised to the
extent, and only to the extent, that the Option or portion thereof was
exercisable on the date of death or earlier termination.
Notwithstanding the foregoing, in no event may any Option be exercised by
anyone after the expiration of the term of the Option.
8.5. Termination of Nonemployee Director Options and Consultant Options.
Nonemployee Director Options and Consultant Options granted to Nonemployee
Directors and consultants to the Company or a Subsidiary shall terminate under
such circumstances as are provided in the Agreement evidencing the Option, and
if not expressly specified, as of the close of business on the last day of the
term of the Option, but in no event may such an Option be exercised by anyone
after the expiration of the term of the Option.
8.6. Modification or Substitution. The Board may, in its discretion,
modify outstanding Options or accept the surrender of outstanding Options (to
the extent not exercised) and grant new Options in substitution for them.
Notwithstanding the foregoing, no modification of an Option shall adversely
alter or impair any rights or obligations under the Option without the
Optionee's consent.
9. Adjustment Upon Changes in Capitalization.
9.1. Subject to Section 10, in the event of a Change in Capitalization, the
Board shall conclusively determine the appropriate adjustments, if any, to the
maximum number or class of Shares or other stock or securities with respect to
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which Options may be granted under the Plan, the number and class of Shares or
other stock or securities which are subject to outstanding Options granted under
the Plan, and the purchase price therefor, if applicable.
9.2. Any such adjustment in the Shares or other stock or securities
subject to outstanding Incentive Stock Options (including any adjustments in the
purchase price) shall be made in such manner as not to constitute a modification
as defined by Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
9.3. If, by reason of a Change in Capitalization, an Optionee shall be
entitled to exercise an Option with respect to new, additional or different
shares of stock or securities, such new, additional or different shares shall
thereupon be subject to all of the conditions which were applicable to the
Shares subject to the Option, as the case may be, prior to such Change in
Capitalization.
10.Effect of Certain Transactions.
In the event of (i) the liquidation or dissolution of the Company or (ii) a
merger or consolidation of the Company (a "Transaction"), the Plan and the
Options issued hereunder shall continue in effect in accordance with their
respective terms and each Optionee shall be entitled to receive in respect of
each Share subject to any outstanding Options, as the case may be, upon exercise
of any Option, the same number and kind of stock, securities, cash, property, or
other consideration that each holder of a Share was entitled to receive in the
Transaction in respect of a Share. In the event that, after a Transaction, there
occurs any change of a type described in Section 2.4 hereof with respect to the
shares of the surviving or resulting corporation, then adjustments similar to,
and subject to the same conditions as, those in Section 9 hereof shall be made
by the Board.
11.Termination and Amendment of the Program.
11.1. The Plan shall terminate on the day preceding the tenth anniversary
of the date of its adoption by the Board and no Option may be granted
thereafter. The Board may sooner terminate or amend the Plan at any time and
from time to time; provided, however, that to the extent necessary under Section
16(b) of the Exchange Act and the rules and regulations promulgated thereunder
or other applicable law, no amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law and regulations at
an annual or special meeting held within twelve (12) months after the date of
adoption of such amendment.
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11.2. Except as provided in Sections 9 and 10 hereof, rights and
obligations under any Option granted before any amendment or termination of the
Plan shall not be adversely altered or impaired by such amendment or
termination, except with the consent of the Optionee, nor shall any amendment or
termination deprive any Optionee of any Shares which he may have acquired
through or as a result of the Plan.
12. Non-Exclusivity of the Plan. The adoption of the Plan by the Board shall not
be construed as amending, modifying or rescinding any previously approved
incentive arrangement or as creating any limitations on the power of the Board
to adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the Plan,
and such arrangements may be either applicable generally or only in specific
cases.
13.Limitation of Liability. As illustrative of the limitations of liability
of the Company, but not intended to be exhaustive thereof, nothing in the Plan
shall be construed to:
(i) give any person any right to be granted an Option other than at the
sole discretion of the Board;
(ii) give any person any rights whatsoever with respect to Shares except as
specifically provided in the Plan;
(iii) limit in any way the right of the Company to terminate the employment
of any person at any time; or
(iv) be evidence of any agreement or understanding, expressed or
implied, that the Company will employ any person at any particular rate of
compensation or for any particular period of time.
14.Regulations and Other Approvals; Governing Law.
14.1. This Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of Delaware.
14.2. The obligation of the Company to sell or deliver Shares with respect
to Options granted under the Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Board.
14.3. The Plan is intended to comply with Rule 16b-3 promulgated under the
Exchange Act and the Board shall interpret and administer the provisions of the
Plan or any Agreement in a manner consistent therewith. Any provisions
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inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan.
14.4. The Board may make such changes as may be necessary or appropriate
to comply with the rules and regulations of any government authority, or to
obtain for Eligible Employees granted Incentive Stock Options the tax benefits
under the applicable provisions of the Code and regulations promulgated
thereunder.
14.5. Each Option is subject to the requirement that, if at any time
the Board determines, in its discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Shares, no Options shall be granted or payment made or Shares issued, in whole
or in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions, or as otherwise determined to
be acceptable to the Board.
14.6. Notwithstanding anything contained in the Plan to the contrary, in
the event that the disposition of Shares acquired pursuant to the Plan is not
covered by a then current registration statement under the Securities Act of
1933, as amended, and is not otherwise exempt from such registration, such
Shares shall be restricted against transfer to the extent required by the
Securities Act of 1933, as amended, and Rule 144 or other regulations
thereunder. The Board may require any individual receiving Shares pursuant to
the Plan, as a condition precedent to receipt of such Shares upon exercise of an
Option, to represent and warrant to the Company in writing that the Shares
acquired by such individual are acquired without a view to any distribution
thereof and will not be sold or transferred other than pursuant to an effective
registration thereof under said act or pursuant to a exemption applicable under
the Securities Act of 1933, as amended, or the rules and regulations promulgated
thereunder. The certificates evidencing any of such Shares shall be
appropriately amended to reflect their status as restricted securities as
aforesaid.
15.Miscellaneous.
15.1. Multiple Agreements. The terms of each Option may differ from other
Options granted under the Plan at the same time, or at some other time. The
Board may also grant more than one Option to a given Eligible Employee during
the term of the Plan, either in addition to, or in substitution for, one or more
Options previously granted to that Eligible Employee.
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15.2. Withholding of Taxes. (a) The Company shall have the right to deduct
from any distribution of cash to any Optionee, an amount equal to the federal,
state and local income taxes and other amounts as may be required by law to be
withheld (the "Withholding Taxes") with respect to any Option. If an Optionee is
entitled to receive Shares upon exercise of an Option, the Optionee shall pay
the Withholding Taxes to the Company prior to the issuance of such Shares. In
satisfaction of the Withholding Taxes, the Optionee may make a written election
(the "Tax Election"), which may be accepted or rejected in the discretion of the
Board, to have withheld a portion of the Shares issuable to him or her upon
exercise of the Option having an aggregate Fair Market Value, on the date
preceding the date of exercise, equal to the Withholding Taxes, provided that in
respect of an Optionee who may be subject to liability under Section 16(b) of
the Exchange Act either (i) (A) the Optionee makes the Tax Election at least six
(6) months after the date the Option was granted, (B) the Option is exercised
during the ten day period beginning on the third business day and ending on the
twelfth business day following the release for publication of the Company's
quarterly or annual statements of earnings (a "Window Period") and (C) the Tax
Election is made during the Window Period in which the Option is exercised or
prior to such Window Period and subsequent to the immediately preceding Window
Period or (ii) (A) the Tax Election is made at least six months prior to the
date the Option is exercised and (B) the Tax election is irrevocable with
respect to the exercise of all Options which are exercised prior to the
expiration of six months following an election to revoke the Tax Election.
Notwithstanding the foregoing, the Board may, by the adoption of rules or
otherwise, (i) modify the provisions in the preceding sentence or impose such
other restrictions or limitations on Tax Elections as may be necessary to ensure
that the Tax Elections will be exempt transactions under Section 16(b) of the
Exchange Act, and (ii) permit Tax Elections to be made at such other times and
subject to such other conditions as the Board determines will constitute exempt
transactions under Section 16(b) of the Exchange Act.
(b) If an Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any Share or
Shares issued to such Optionee pursuant to the exercise of an Incentive Stock
Option within the two-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office, and immediately deliver to the Company the amount of Withholding Taxes.
15.3. Designation of Beneficiary. Each Optionee may designate a person
or persons to receive in the event of his or her death, any Option or any amount
payable pursuant thereto, to which he or she would then be entitled. Such
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designation will be made upon forms supplied by and delivered to the Company and
may be revoked in writing. If an Optionee fails effectively to designate a
beneficiary, then his or her estate will be deemed to be the beneficiary.
16. Effective Date. The effective date of the Plan shall be the date of
its adoption by the Board, subject only to the approval by the affirmative votes
of the holders of a majority of the securities of the Company present, or
represented, and entitled to vote at a meeting of stockholders duly held in
accordance with the applicable laws of the State of Delaware within twelve (12)
months of such adoption.
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Exhibit 10.41
SECOND
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
DUNE JET SERVICES, L.P.
Dated as of July 9, 1997
<PAGE>
SECOND
AMENDED AND RESTATED
AGREEMENT OF
LIMITED PARTNERSHIP
OF
DUNE JET SERVICES, L.P.
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of
DUNE JET SERVICES, L.P. (this "Agreement") is entered into on October 31, 1997,
as of July 9, 1997, by and among DUNE JET SERVICES, INC. (the "General Partner")
and the other entities set forth on Schedule A attached hereto and made part of
this Agreement (each a "Limited Partner" and collectively with the General
Partner, the "Partners").
RECITALS:
The parties hereto have formed a limited partnership (the
"Partnership") pursuant to an Agreement of Limited Partnership (the "Original
Agreement") dated as of July 9, 1997 (the "Formation Date") and an amendment and
restatement of the Original Agreement (the "First Amendment") as of the
Formation Date. The parties now desire again to amend and restate the Original
Agreement as of the Formation Date as provided herein (the "Agreement"), among
other things to reflect the withdrawal of one of the Limited Partners upon the
redemption of its interest by the Partnership, and the making of capital
contributions by the General Partner as a Limited Partner, in each case as of
the Formation Date.
In consideration of the foregoing and of the mutual covenants and
agreements hereinafter set forth, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
FORMATION, NAME AND PRINCIPAL OFFICE
Section 1.1 Formation. The parties hereto formed the Partnership
pursuant to the Revised Uniform Limited Partnership Act (the "Act") and other
relevant laws of the State of Delaware, and desire to continue the Partnership
as provided in this Agreement.
Section 1.2 Name and Principal Office. The business of the Partnership
shall be conducted under the name "Dune Jet Services, L.P." or such other name
as selected by the General Partner. The principal office of the Partnership
shall be located at 1013 Center Road, Wilmington, Delaware 19805, or at such
other place as the General Partner may designate.
Section 1.3 Registered Office in the State of Delaware; Agent for
Service. The address of the Partnership's registered office in the State of
Delaware is c/o The Corporation Service Company, Corporation Trust Center, 1013
Center Road, Wilmington, County of New Castle, Delaware 19805. The name of the
Partnership's registered agent for service of process in the State of Delaware
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at such address is The Corporation Service Company or such other agent as may be
designated from time to time by the General Partner.
ARTICLE II
PURPOSES AND POWERS
Section 2.1 Purpose. The purpose for which the Partnership is formed
shall be to engage in any lawful act or activity in which a limited partnership
is entitled to engage under the Act, including, without limitation, the
ownership, directly or through one or more grantor trusts, of one or more
corporate jet aircraft ("Aircraft") and the operation of a corporate jet
aircraft charter business.
Section 2.2 Powers. The Partnership shall be empowered to do any and
all acts and things necessary, appropriate, incidental to or convenient for the
furtherance and accomplishment of the purposes set forth in Section 2.1 hereof,
including, without limitation, directly in the name of the Partnership or
through any one or more grantor trusts:
(a) to utilize its capital and assets to purchase, hold and
dispose of property used in connection with, or incidental to its business;
(b) to acquire, obtain rights with respect to, construct,
operate, maintain, finance, improve, own, sell, convey, assign, mortgage or
lease any Aircraft and any other personal property necessary, convenient or
incidental to the accomplishment of the purposes of the Partnership;
(c) to borrow money from, and issue evidences of indebtedness
in furtherance of the Partnership business and to secure the same by mortgages,
pledges or other liens on any assets of the Partnership or prepay, refinance,
increase, modify or extend any thereof; provided, that such evidences of
indebtedness and documents securing the same;
(d) to enter into, perform and carry out contracts of any
kind, including, without limitation, contracts with affiliates of the General
Partner necessary or incidental to the accomplishment of the purposes of the
Partnership;
(e) to bring and defend actions at law or in equity or
compromise or submit to arbitration any and all claims in favor of or against
the Partnership;
(f) to enter into management and other agreements as may be
required to operate the business of the Partnership;
(g) subject to the express provisions of this Agreement, to
make or revoke any election which the Partnership may make under the Code or any
State or local income tax law;
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(h) to maintain at the expense of the Partnership such
insurance coverage as shall be necessary or appropriate to the business of the
Partnership, including, without limitation, general partner indemnification
insurance, in such amounts and of such types as shall be determined in the sole
discretion of the General Partner;
(i) to make prudent interim investments in government
obligations, insured obligations, bank time deposits, commercial paper, tax
exempt investments, money market funds, certificates of deposit and bankers
acceptances;
(j) to deposit the funds of the Partnership in the Partnership
name in any bank or trust company and to entrust to such bank or trust company
any of the securities, monies, documents and papers belonging or relating to the
Partnership; and
(k) to engage in any kind of lawful activity, and enter into,
perform and carry out contracts of any kind and execute such agreements and
documents as shall be necessary or advisable, in the discretion of the General
Partner, in connection with the accomplishment of the purposes of the
Partnership.
ARTICLE III
TERM
The term of the Partnership shall commence on the Effective Date, and
shall continue until July 8, 2017, unless the Partnership is terminated sooner
pursuant to Article XI hereof.
ARTICLE IV
CAPITAL CONTRIBUTIONS
Section 4.1 Initial Capital Contributions. As of the Formation Date,
each Partner made the initial capital contribution, if any, set forth opposite
its name on Schedule A as its "Initial Contribution" and Medical Resources, Inc
(the "Withdrawing Partner") made an initial capital contribution of $1,000. Upon
execution and delivery of the First Amendment, National RV Holdings, Inc. (the
"Continuing Original Limited Partner") made the additional capital contribution
set forth opposite its name as its "Additional Contribution" and the Withdrawing
Partner made an additional capital contribution of $3,249,000. On the date
hereof, the Partnership redeemed all capital contributions of the Withdrawing
Partner and the General Partner shall make the additional capital contribution
as a Limited Partner set forth opposite its name as a Limited Partner as its
"Additional Contribution".
Section 4.2 Additional Capital Contributions.
(a) The General Partner shall determine whether any Partner,
now existing and/or newly admitted, shall be permitted to make additional
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capital contributions to the Partnership. In the event that there is a deficit
in the operating cash flow of the Partnership, each Partner shall make
additional capital contributions to the Partnership from time to time, as
required to fund the operating expenses of the Partnership as determined in the
reasonable discretion of the General Partner ("Additional Capital
Contributions"); such Additional Capital Contributions shall be made in amounts
pro rata among the Partners in accordance with the percentages (of each
additional capital contribution so determined by the General Partner) for the
Partners respectively set forth in Schedule A opposite the names of such
Partners as their "Contribution Percentages". Additional Capital Contributions
under this Section 4.2(a) shall be made by each Partner within ten (10) days
after delivery of a written notice executed by the General Partner, which notice
shall include the total amount of Additional Capital Contributions required by
the Partnership.
(b) Capital contributions to the Partnership shall be made in
cash or, with the consent of the General Partner in its reasonable discretion,
in property of any kind or character. If contributions to the capital of the
Partnership are made in property other than cash, they shall be valued at their
fair market value on the date of contribution. The initial capital contribution
of the General Partner was the Cessna Aircraft, Serial No. 650-0025,
Registration Number NI6FE, which the parties agree shall be valued at the amount
set forth on Schedule A as the "Initial Contribution" of the General Partner.
(c) If a Partner fails to contribute its full share of any
Additional Capital Contribution called for pursuant to Section 4.2(a) by the due
date specified in Section 4.2(a) (such non-contributing Partner being herein
called a "Non-Contributing Partner" and the amount of cash which the
Non-Contributing Partner failed timely to contribute being herein referred to as
its "Deficit Amount"), the General Partner shall give a notice of such failure
to each of the other Partners who has timely contributed its own full share of
such cash (the Partners who have timely contributed their full share of such
cash being collectively referred to herein as the "Contributing Partners"). For
a period of fifteen (15) days following the giving of such notice by the General
Partner, each Contributing Partner shall have the right (but not the obligation)
to contribute directly to the Partnership all or any portion of the Deficit
Amount of the Non-Contributing Partner, provided, however, that if more than one
of the Contributing Partners contributes all or any portion of the Deficit
Amount of a Non-Contributing Partner and the aggregate amount contributed by the
Contributing Partners exceeds such Deficit Amount, unless otherwise agreed in
writing by all of such contributing Partners, the maximum portion of such
Deficit Amount which each such contributing Partner shall have the right to
contribute shall be that portion of such Deficit Amount which bears the same
ratio to the total of such Deficit Amount as the respective Contribution
Percentage of each such contributing Partner bears to the aggregate Contribution
Percentages of all such Contributing Partners, and the General Partners shall
return any such excess.
(d) If a Contributing Partner contributes all or any portion
of the Non-Contributing Partner's Deficit Amount, then all of the following
shall occur effective as of the date of such contribution by the Contributing
Partner:
(i) The amount of such contribution shall be deemed
to be an Additional Capital Contribution contributed by the
Contributing Partner who made such contribution and such amount shall
be credited to the Capital Account of the Contributing Partner;
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(ii) The Capital Account of the Non-Contributing
Partner (as the same may have previously been adjusted pursuant to this
Section 4.2(d)(ii)) shall be permanently decreased , but not below
zero, subject to possible future adjustment pursuant to this Section
4.2(d)(ii), and the Capital Account of the Contributing Partner who
made such contribution (as the same may have previously been adjusted
pursuant to this Section 4.2(d)(ii)) shall be permanently increased,
subject to possible future adjustment pursuant to this Section
4.2(d)(ii), by an amount equal to the product of (x) the amount of such
contribution made by the Contributing Partner multiplied by (y) 2; and
(iii) The Profit and Loss Percentage of the
Non-Contributing Partner (as the same may have previously been adjusted
pursuant to this Section 4.2(d)(iii)) shall be permanently decreased
(but not below zero) subject to possible future adjustment pursuant to
this Section 4.2 (d)(iii), and the Profit and Loss Percentage of the
Contributing Partner who made such contribution (as the same may have
previously been adjusted pursuant to Section 4.2(d)(ii)) shall be
permanently increased subject to possible future adjustment pursuant to
this Section 4.2(d)(ii), by the number of percentage points equal to
the lesser of (A) the percentage (rounded to ten decimal places)
obtained by dividing (x) the sum of such Partner's Initial
Contributions, Additional Contributions and Additional Capital
Contributions, taking into account those deemed made pursuant to
Section 4.2(d)(ii), by (y) the aggregate of Initial Contributions,
Additional Contributions and Additional Capital Contributions of all
the Partners; or (B) the Profit and Loss Percentage of the
Non-Contributing Partner immediately prior to the adjustment pursuant
to this Section 4.2(d).
4.3 Reasonably promptly following a request by any Partner, the
Partners shall execute an amendment to this Agreement evidencing any adjustments
in the Partners' Capital Accounts and Profit and Loss Percentages pursuant to
Section 4.2(d), but such adjustments shall be effective whether or not such an
amendment is executed.
4.4 Each Limited Partner hereby consents to admission of additional
Partners and any amendment of this Agreement to reflect the admission of
additional Partners or withdrawal of Partners and additional capital
contributions and withdrawals from the Capital Account of any Partner, provided,
however, that no amendment to this Agreement shall be necessary to reflect the
admission or withdrawal of Limited Partners or additions or reductions to the
Capital Account of any Partner.
ARTICLE V
CAPITAL ACCOUNTS
Section 5.1 Capital Accounts. A separate capital account ("Capital
Account") shall be maintained for each Partner. The Capital Account of each
Partner shall be (a) credited with (i) the amount of cash and the fair market
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<PAGE>
value of any property (such value to be determined by the General Partner)
contributed by such Partner to the capital of the Partnership pursuant to
Sections 4.1 and 4.2 hereof and (ii) the share of profits of the Partnership
allocated to such Partner pursuant to Sections 6.1 and 6.2 hereof, (b) debited
with (i) the amount of cash and the fair market value of any property
distributed to such Partner pursuant to Section 7.1 hereof, and (ii) the share
of losses of the Partnership allocated to such Partner as determined pursuant to
Sections 6.1 and 6.3 hereof, (c) adjusted as provided in Section 4.2, and (d)
otherwise maintained in accordance with Section 704(b) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the Treasury Regulations issued
thereunder.
Any references in this Agreement to the Capital Account of a Partner
shall be deemed to refer to such Capital Account as the same may be credited or
debited from time to time as set forth in this Section 5.1.
Section 5.2 Negative Capital Accounts. Except as required by law, no
Partner shall be required to pay to the Partnership or to any other Partner any
deficit or negative balance which may exist from time to time in such Partner's
Capital Account.
Section 5.3 Return of Capital; No Interest on Capital. Except as
expressly set forth in this Agreement, no Partner shall have the right to demand
or receive the return of all or part of its Capital Account or any contributions
to the capital of the Partnership. No Partner shall be entitled to receive any
interest on any contributions to the capital of the Partnership or on its
Capital Account. Notwithstanding the foregoing, the parties acknowledge that the
Withdrawing Partner has received the amount of $17,536.46, representing interest
on the amount of its capital contributions from the dates made through the date
of its withdrawal.
ARTICLE VI
ALLOCATIONS OF PROFITS AND LOSSES
Section 6.1 Allocations of Profits and Losses. Partnership net profits
and losses, other than gains from Substantial Capital Transactions, as defined
in Section 6.2 of this Agreement, and losses from Depreciation of Aircraft, as
defined in Section 6.3 of this Agreement, shall be allocated for each taxable
year pro rata among the Partners in accordance with their respective Profit and
Loss Percentages. Each Partner's Profit and Loss Percentage shall initially be
the Contribution Percentage set forth on Schedule A hereto and shall be adjusted
pursuant to Section 4.2(d).
Section 6.2 Allocations of Gain from Substantial Capital Transactions.
Net gain derived in connection with the sale, transfer, assignment or other
disposition of all or substantially all the business assets of the Partnership,
or any other event which results in the dissolution and termination of the
Partnership (any such sale, transfer, assignment, disposition or event, a
"Substantial Capital Transaction") shall be allocated (after all net income or
net loss from operations and distributions made or to be made for the current
period have been taken into account) as follows and in the following order of
priority:
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(i) first, to the General Partner to the extent such
gain (whether or not characterized as ordinary income for federal income tax
purposes) is derived from recapture of Depreciation of Aircraft previously
allocated pursuant to Section 6.3 hereof;
(ii) second, to the Partners with deficit Capital
Account balances, in proportion to such deficits,
until such deficits are reduced to zero; and
(iii) the balance, pro rata among the Partners in
accordance with their respective Profit and Loss
Percentages.
Section 6.3 Losses of the Partnership from deductions for depreciation
and amortization for federal income tax purposes with respect to the
Partnership's Aircraft ("Depreciation of Aircraft") shall be allocated to the
General Partner.
Section 6.4 Except as provided in Section 6.5 below, the net profits
and net losses of the Partnership, as determined for federal income tax
purposes, shall be allocated in the same manner as profits and losses are
allocated under Section 6.1, 6.2 and 6.3.
Section 6.5 Partnership income, gain, loss and deduction shall be
allocated among the Partners in accordance with the principles of Code Section
704(c), the Treasury Regulations thereunder and Treasury Regulations Section
1.704-1(b)(4)(i) to account for any variation between adjusted tax basis and
book value of Partnership property.
ARTICLE VII
DISTRIBUTIONS
Section 7.1 Distributions. Until the dissolution of the Partnership,
all distributions shall be made to the Partners, pro rata, in accordance with
the respective Profit and Loss Percentages. From and after the dissolution of
the Partnership, distributions shall be made to the Partners:
(i) first, pro rata in accordance with the ratios of
their respective positive capital account balance
until such balances shall be reduced to zero; and
(ii) thereafter, in accordance with their respective
Profit and Loss Percentages.
All other matters regarding distributions, whether prior to or after
dissolution, including, without limitation, when distributions shall be made,
whether they shall be made in cash and/or property, and the fair market value of
any property distributed in kind shall be determined by the General Partner.
Section 7.2 Withholding. The Partnership may withhold
from any distribution the amount required by applicable Federal, State or local
7
<PAGE>
income tax law with respect to such distribution (or deemed distribution related
thereto), the amount so withheld being treated as a distribution for all
purposes of this Agreement. The General Partner may make any elections permitted
under applicable law as to withholding of tax and may require appropriate
documentation where a Limited Partner claims that withholding is not required
with respect to distributions to which he is entitled. Notwithstanding the
foregoing, the Partnership or the General Partner shall be entitled to
reimbursement, whether from the distributee or from distributions to which he is
otherwise entitled, for any taxes the Partnership or the General Partner is
required to pay with respect to a Limited Partner and not covered by amounts
withheld with respect to such Partner.
ARTICLE VIII
FISCAL MATTERS
Section 8.1 Fiscal Year. The taxable and fiscal year of the Partnership
for financial and federal, state and local income tax purposes shall be the
period beginning January 1 and ending December 31 of each year or portion
thereof during which the Partnership is in existence, except as otherwise
provided in the discretion of the General Partner.
Section 8.2 Books and Records. The Partnership shall keep complete and
accurate books of accounts reflecting all of the Partnership's activities and
transactions. All accounting decisions, including the selection of accountants
for the Partnership, and tax elections shall be determined by the General
Partner The General Partner is hereby designated the Tax Matters Partner for
Federal income tax purposes pursuant to Section 6231 of the Code and is
authorized to take all necessary action to qualify as such. Each Partner may
have access during reasonable business hours to the Partnership's books of
account.
Section 8.3 Bank Accounts. All funds of the Partnership shall be
deposited in one or more bank accounts established by the General Partner in the
name of the Partnership or in the name of a trust set up by the Partnership. All
withdrawals therefrom shall be made upon checks signed by the General Partner
and/or such additional person or persons as shall be designated by the General
Partner.
ARTICLE IX
RIGHTS, DUTIES AND RESTRICTIONS OF THE GENERAL PARTNER
Section 9.1 Business Management and Control. The General Partner shall
have the absolute and exclusive right, power and discretion to manage the
business of the Partnership and, acting in accordance with the terms of this
Agreement, to make all decisions and take any action he deems necessary or
advisable in connection with the business, management and operation of the
Partnership.
8
<PAGE>
Section 9.2 Liability. Except as otherwise provided by law, neither the
General Partner, nor its successors, assigns, and former, present and future
partners, officers, directors, stockholders and employees or affiliates shall be
personally liable for the return of any portion of the Capital Contributions of
the Limited Partners or shall be required to pay to the Partnership or any
Limited Partner any deficit in any Partner's Capital Account. No former, present
or future partner, officer, director, stockholder, employee or affiliate of the
General Partner shall be liable, responsible or accountable to the Partnership
or any Partner for (a) any act or omission performed or omitted by any of them,
including without limitation, those acts performed or omitted on advice of legal
counsel, accountants, brokers or consultants of the Partnership, or for any
costs, damages or liabilities arising therefrom, or by law, unless that act or
omission was performed or omitted fraudulently, in bad faith or as a result of
gross negligence; or (b) except as provided in clause (a) of this Section 9.2
with respect to the person who performed or omitted such acts, any loss due to
negligence, dishonesty or bad faith of any employee, officer, broker, consultant
or other agent of the Partnership, selected, engaged and retained in good faith
by such General Partner.
Section 9.3 Indemnification.
(a) Rights to Indemnification. The Partnership shall:
(i) indemnify and hold harmless the General Partner,
the former, present and future partners, officers, directors,
stockholders, employees and affiliates of the General Partner
and the respective personal representatives, heirs, successors
in interest and assignees of any thereof (each, an
"Indemnified Party"), from and against any and all damages
incurred or suffered by any Indemnified Party arising out of
or in connection with the Partnership's business or affairs;
provided, however, that the Partnership shall not indemnify or
hold harmless any Indemnified Party with respect to any act or
omission which was performed or omitted fraudulently, in bad
faith or as a result of gross negligence; and
(ii) advance to any Indemnified Party expenses for
which the Partnership is required to indemnify the Indemnified
Party pursuant to this Section 9.3 subject to the undertaking
of the Indemnified Party to repay such advances if it is
ultimately determined that such Indemnified Party is not
entitled to be indemnified.
(b) Survival. The exculpation provided in Section 9.2 and the
indemnification provided in this Section 9.3 shall survive any termination of
this Agreement. Any person entitled to exculpation pursuant to Section 9.2
and/or indemnification pursuant to this Section 9.3 shall remain entitled to
such exculpation and/or indemnification to the same extent as prior to any of
the following events with respect to any matter arising prior to such event and
shall have no liability with respect to any matter arising after such event: (i)
such person ceases to be a partner, officer, director, stockholder, employee or
affiliate of the General Partner; or (ii) the General Partner ceases to be the
general partner of the Partnership, except, in the case of clause (ii), if such
person is a partner, officer, director, stockholder, employee or affiliate of a
successor to the General Partner.
9
<PAGE>
(c) Repayment. If it shall ultimately be determined that the
Indemnified Party is not entitled to the indemnification provided by this
Section 9.3, the Indemnified Party shall promptly repay to the Partnership the
amount of any expenses advanced to such Indemnified Party and the amount of all
costs of the Partnership in providing indemnification pursuant to this
Agreement.
Section 9.4 Fees and Expenses. All out-of-pocket expenses incurred by
the General Partner in connection with the Partnership's business shall be paid
by the Partnership or reimbursed to the General Partner by the Partnership.
Section 9.5 Transactions with Partners or Affiliates. Subject to
availability, taking into account the obligations of the Partnership with
respect to commercial charter of its Aircraft, each Partner shall be entitled to
a pro rata share of the hours of utilization of the Partnership's Aircraft
designated by the General Partner, in its sole discretion, by the Partners for
the respective executive officers and their guests. Each Partner shall reimburse
the Partnership for such utilization at the rate to be mutually agreed upon by
all Partners. The Partnership is expressly permitted in the normal course of its
business to enter into other transactions with any Partner or any affiliate of
any Partner.
ARTICLE X
ADMISSION OF PARTNERS;
RIGHT OF FIRST REFUSAL;
ASSIGNMENT OF PARTNERSHIP INTERESTS
Section 10.1 Citizenship Requirement.
(a) Each Limited Partner represents, warrants and covenants
(i) that it is, and during the term of the Partnership will remain, a citizen of
the United States, as such term is defined in the Federal Aviation Act of 1958,
as amended (such act or any successor legislation hereinafter referred to as the
"FAA Act"), and (ii) that it is not, and during the term of the Partnership will
not become, nor is it acquiring, its interest in the Partnership as nominee for
an air carrier, an officer or director of an air carrier or a person who
controls an air carrier, as such terms as defined in the FAA Act.
(b) If, at any time during the term of the Partnership, a
Limited Partner breaches any of the representations, warranties or covenants
contained in Section 10.1(a) or fails to comply with any rule or regulation of
the Federal Aviation Administration (or any successor agency), or otherwise
imposed under the FAA Act, which rule or regulation is applicable to such
Limited Partner, such Limited Partner shall immediately give notice to the
General Partner of such non-compliance, and the General Partner may give notice
to such Limited Partner requiring it to comply with such rule or regulation,
obtain a waiver thereof satisfactory to the General Partner or transfer its
interest in the Partnership to a person approved by the General Partner. If such
Limited Partner fails to take any such action within 30 days of such notice by
10
<PAGE>
the General Partner, anything contained herein to the contrary notwithstanding,
the interest in the Partnership of such Limited Partner shall automatically
revert to the Partnership and shall be allocated to the other Partners in
proportion to their respective percentages, and the rights, powers and
privileges of the Limited Partner with respect to such interest in the
Partnership shall be forfeited without compensation to such Limited Partner.
(c) Each Limited Partner hereby indemnifies the Partnership
and each Partner against any and all loss, liability, damage or expense
(including, without limitation, tax liabilities or loss of tax benefits)
arising, directly or indirectly, as a result of any breach by such partner of
the representations, warranties or covenants contained in, or any non-compliance
with the provisions of, this Section 10.1.
Section 10.2 No person may be admitted as a Limited Partner without the
written consent of the General Partner, which consent may be withheld in its
sole and absolute discretion. No Limited Partner may transfer all or a portion
of its interest in the Partnership (including any beneficial interest therein),
except to a wholly-owned subsidiary or to a person owning 100% of the
outstanding capital stock of such Limited Partner, without the consent of the
General Partner, which consent may be withheld in its sole and absolute
discretion.
Section 10.3 No transferee of a Limited Partner's interest in the
Partnership shall become a Limited Partner without the written consent of the
General Partner, which consent may be withheld in the sole and absolute
discretion the General Partner, and the transferee shall have accepted, adopted
and approved in writing all of the terms and provisions of this Agreement, as
the same may have been amended, and shall have become a party hereto.
Section 10.4 Change of Control. Upon the occurrence of a Change in
Control (as hereinafter defined) of any Limited Partner (or the death or
incapacity of any Limited Partner who is an individual), the General Partner or
its designee shall have the right to purchase the interest of such Limited
Partner at a price equal to the fair market value of such interest at such time.
For purposes hereof, a "Change of Control" shall mean the occurrence of any of
the following events: (A) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended [the
"Exchange Act"]), other than Permitted Holders (as hereinafter defined), is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have beneficial ownership
of all shares that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the voting stock of all classes of voting stock
of such Limited Partner; (B) such Limited Partner and any other person
consolidate or merge, in a transaction as a result of which Permitted Holders
are not "beneficial owners," directly or indirectly, of more than 50% of the
voting stock of all classes of voting stock of such Limited Partner; or (iii)
such Limited Partner is liquidated or dissolved or adopts a plan of liquidation
or dissolution. For purposes hereof, a "Permitted Holder" shall mean: (i) a
Partner or a wholly-owned subsidiary, or person beneficially owning 100% of the
capital stock, of such Partner; (ii) any executive officer or other member of
executive management employed as of the date of this Agreement by any person
referred to in clause (i) of this sentence; (iii) immediate family members of
persons described in clause (ii) of this sentence; (iv) trusts for the benefit
11
<PAGE>
of the persons described in clauses (ii) and (iii) of this sentence; and (v) in
the event of the death or incapacity of any of the persons described in clauses
(ii), (iii) and (iv) of this sentence, such person's estate, executor,
administrator, committee or other personal representatives or beneficiaries.
ARTICLE XI
DISSOLUTION AND TERMINATION OF THE PARTNERSHIP
Section 11.1 Events of Dissolution . The Partnership shall be dissolved
and its affairs wound-up upon the occurrence of the earliest of the following
events:
(a) the election to dissolve the Partnership made in writing
by the General Partner;
(b) the expiration of its term as provided in this Agreement;
(c) the entry of a decree of judicial dissolution; or
(d) except as otherwise provided herein, any act or event
specified in Section 17-801 of the Act or any successor
provision thereto.
Section 11.2 Liquidation. Upon the liquidation of the Partnership,
unless an election to continue the business of the Partnership is made pursuant
to Section 11.4 hereof, the Partners shall proceed without unnecessary delay to
sell or otherwise liquidate the property of the Partnership and, after payment
or adequate provision for the payment of all debts and obligations of the
Partnership, to distribute the net proceeds and any other assets of the
Partnership to the Partners pro rata in accordance with the positive balances of
their respective Capital Accounts.
Section 11.3 Termination. Dissolution of the Partnership shall be
effective on the day on which the event giving rise to the dissolution occurs,
but the Partnership shall not terminate until the assets of the Partnership
shall have been distributed as provided for herein. Notwithstanding the
dissolution of the Partnership, prior to the termination of the Partnership, the
Partnership business and the affairs of the Partnership shall continue to be
governed by this Agreement.
Section 11.4 Right to Continue Business. In the event of the death,
incompetency, bankruptcy or insolvency of a Partner, the remaining Partners
shall have the right to continue the business of the Partnership under its
present name, and such remaining Partners shall have the option to purchase the
Partnership interest of the bankrupt or insolvent Partner by paying to the legal
representative of the bankrupt or insolvent Partner, within one hundred twenty
(120) days after receipt of an appraisal from an appraiser mutually agreeable to
the parties, the fair market value of such Partner's Capital Account as
determined by, such appraisal, with the cost of such appraisal being borne by
the bankrupt or insolvent Partner.
12
<PAGE>
ARTICLE XII
AMENDMENT OF THE PARTNERSHIP AGREEMENT
Amendments to this Agreement may be made by the General Partner without
the consent of any Limited Partner through the use of the power of attorney
described in Section 13.1 if those amendments are (i) of a non-material nature,
as reasonably determined by the General Partner, (ii) for the purpose of
admitting additional Limited Partners or reflecting the withdrawal of Limited
Partners, (iii) necessary to maintain the Partnership's status as a partnership
according to Section 7701(a)(2) of the Code, (iv) necessary to preserve the
validity of any and all allocations of Partnership income, gain, loss or
deduction pursuant to Section 704(b) of the Code or (v) contemplated by this
Agreement. The General Partner and the officers, directors, employees and other
agents of the General Partner shall devote so much of their time to the affairs
of the Partnership as in their judgment the conduct of its business shall
reasonably require.
ARTICLE XIII
ARBITRATION
Any controversy, claim or other dispute between or among any
Partner(s), on the one hand, any other Partner(s) and/or the Partnership, on the
other hand, arising out of or relating to this Agreement, shall be submitted for
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"). Unless otherwise agreed to by all parties to
such dispute, arbitration before the AAA shall be held in the city, county and
state of New York.
13
<PAGE>
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Power of Attorney. Each Limited Partner hereby constitutes
and appoints the General Partner as its true and lawful representative and
attorney-in-fact, in its name, place and stead and with full power of
substitution to make, execute, publish, acknowledge, deliver, record and file
and swear to the execution, delivery, acknowledgment, filing and/or recording
of: (a) all amendments to this Agreement permitted by the provisions of Article
XII to be made without the consent of any Limited Partner and all instruments
that the attorney-in-fact deems appropriate to reflect any change or
modification of this Agreement in accordance with this Agreement; (b) except as
otherwise provided in this Agreement, a Certificate of Limited Partnership of
the Partnership, any amendment thereof required because of an amendment to this
Agreement or in order to effectuate any change in the membership of the
Partnership; and (c) all such other agreements, applications, instruments,
documents, certifications, certificates and reports which may from time to time
be required by the laws of the United States of America, the State of Delaware
or any other jurisdiction, or any political subdivision or agency thereof, or
any Regulatory Rule, all of the foregoing to effectuate, implement and continue
the valid and subsisting existence of the Partnership and to permit it to
conduct its business. The power of attorney granted hereby is coupled with an
interest and is irrevocable and shall (i) continue in full force and effect
notwithstanding the subsequent death, incapacity, dissolution, termination or
bankruptcy of the Limited Partner granting the same or the transfer of all or
any portion of such Limited Partner's interest, and (ii) extend to that Limited
Partner's successors, assigns and legal representatives. Each Limited Partner
agrees to be bound by any representation made by the attorney-in-fact acting in
good faith pursuant to, and in accordance with, this power of attorney, and
hereby waives any and all defenses which may be available to contest, negate or
disaffirm the action of the attorney-in-fact taken in good faith pursuant to,
and in accordance with, this power of attorney.
Section 14.2 Additional Actions and Documents. Each Partner hereby
agrees to take or cause to be taken such further actions, to execute, deliver
and file or cause to be executed, delivered and filed such further documents and
instruments, as may be necessary or as may be reasonably requested in order to
fully effectuate the purposes, terms and conditions of this Agreement.
Section 14.3 Notices. All notices and demands required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) upon receipt if delivered personally (unless subject to clause (b) of
this Section 14.3) or if mailed by registered or certified mail, (b) on the date
after dispatch if sent by overnight courier or (c) upon dispatch if transmitted
by telecopy or other means of facsimile which provides immediate delivery to
compatible equipment in the possession of the recipient, if receipt has been
confirmed, in any case, at the address of the Partnership at which such Partner
primarily performs its duties to the Partnership. Any Partner may specify a
different address or telecopy number by notifying all other Partners thereof.
14
<PAGE>
Section 14.4 Severability. If any part of any provision of this
Agreement shall be invalid or unenforceable in any respect, such part shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Agreement.
Section 14.5 Survival. It is the express intention and agreement of the
Partners that all covenants, agreements, statements, representations, warranties
and indemnities made this Agreement shall survive the execution and delivery of
this Agreement.
Section 14.6 Waivers. No delay or failure on the part of any Partner in
exercising any right, power or privilege hereunder shall impair any such right,
power or privilege or be construed as a waiver of any default or any
acquiescence therein. No single or partial exercise of any such right, power or
privilege shall preclude the further exercise of any other right, power or
privilege. No waiver shall be valid against any Partner unless made in writing
and signed by the Partner against whom enforcement of such waiver is sought.
Section 14.7 Binding Effect. Subject to the provisions of this
Agreement restricting assignment, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
Section 14.8 Entire Agreement. This Agreement constitutes the entire
agreement among the Partners with respect to the subject matter hereof, and it
supersedes all prior oral or written agreements, commitments or understandings
with respect to the matters provided for herein.
Section 14.9 Headings. Article and Section headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
Section 14.10 Governing Law. THIS AGREEMENT, THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HERETO, AND ANY CLAIMS OR DISPUTES RELATING THERETO, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
EXCLUDING THE CHOICE OF LAW RULES THEREOF.
Section 14.11 Counterparts. This Agreement may be executed in as many
counterparts as may be required. All counterparts shall collectively constitute
a single agreement.
15
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
DUNE JET SERVICES, INC.
By: /S/ Gary N. Siegler
-------------------
Name: Gary N. Siegler
Title:President
LIMITED PARTNERS:
NATIONAL RV HOLDINGS, INC.
By: /S/ Kenneth W. Ashley
---------------------
Name: Kenneth W. Ashley
Title:Chief Financial Officer
DUNE JET SERVICES, INC.
By: /S/ Gary N. Siegler
-------------------
Name: Gary N. Siegler
Title:President
16
<PAGE>
SCHEDULE A
============================== -------------- ------------ =================
Initial Additional Contribution
Partners Contribution Contribution Percentage
============================== -------------- ------------ =================
General Partner
============================== -------------- ------------ =================
Dune Jet Services, Inc. $1,550,000 -0- 20.5298013245%
============================== -------------- ------------ ==================
Limited Partners
============================== -------------- ------------ ==================
Dune Jet Services, Inc. -0- $3,250,000 43.0463576159%
============================== ============== ============ ==================
National R.V. Holdings, Inc. $1,000 $2,749,000 36.4238410596%
============================== ============== ============ ==================
17
<PAGE>
Exhibit 21.1
List of Subsidiaries
National R.V., Inc. incorporated in the state of California.
Country Coach, Inc. incorporated in the state of Oregon.
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,542
<SECURITIES> 0
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<ALLOWANCES> 180
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<PP&E> 25,718
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<CURRENT-LIABILITIES> 17,318
<BONDS> 6,703
0
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<COMMON> 63
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<TOTAL-LIABILITY-AND-EQUITY> 87,204
<SALES> 285,951
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<CGS> 245,763
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