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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, 1999
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
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(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:
Common Stock, par value $.01 per share New York Stock Exchange
-------------------------------------- -----------------------------------
(Title of class) (Name of each Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
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 27, 2000 was
approximately $139,184,176
The number of shares outstanding of the Registrant's common stock, as of March
27, 2000, was 9,657,086.
Documents Incorporated by Reference: Part III incorporates by reference portions
of the National R.V. Holdings, Inc. Proxy Statement for the 2000 Annual Meeting
of Stockholders.
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. From its Perris, California facility, the
Company designs, manufactures and markets National R.V., Inc. ("NRV") Class "A"
motorhomes and fifth-wheel travel trailers under brand names including Islander,
Tradewinds, Caribbean, Tropi-Cal, Dolphin, Sea Breeze, Sea View, Surf Side, and
Palisades. From its Junction City facility, the Company designs, manufactures
and markets Country Coach, Inc. ("CCI") high-end (Highline) Class "A" motorhomes
and bus conversions under brand names including Concept, Affinity, Allure,
Intrigue and Magna. 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 234 dealer locations in
38 states and Canada.
The Company was incorporated in Delaware in 1988. NRV was incorporated in
California in 1970 and its predecessor was organized in 1964. 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 be lived in without being attached to utilities.
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,
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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 that 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 1999 increased 9.7% to 321,200 from 292,700 in 1998. The
aggregate wholesale value of these 1999 shipments was $8.3 billion, with Class A
motorhomes comprising $4.4 billion or 53% of the total and fifth-wheel travel
trailers comprising $1.2 billion or 14.5% of the total. Unit shipments of Class
A motorhomes in 1999 increased 15.2% to 49,400 from 42,900 in 1998. The average
wholesale price of Class A motorhomes increased 17.4% in 1999 to $88,962 from
$75,754 in 1998. Unit shipments of fifth-wheel travel trailers increased 7.1% in
1999 to 60,500 from 56,500 in 1998. The average wholesale price of fifth-wheel
travel trailers increased in 1999 0.8% to $20,284 from $20,119 in 1998.
While overall unit shipments have increased over the past five years,
the RV industry's manufacturing base has undergone a consolidation. Between 1992
and 1999, the number of Class A motorhome manufacturers declined from 45 to 25.
In addition, during this period, the aggregate retail market share of the ten
largest Class A motorhome manufacturers increased from 82.5% to 90.9%.
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 8.6 million households (or 9.8% of all households) in the United
States owned RVs in 1997, up from 8.2 million in 1993, 7.7 million in 1988 and
5.8 million in 1980. In addition, the study indicated that 67% of all current RV
owners and 25% of all former RV owners plan to purchase another RV in the
future. This study further indicated that 65% of RVs purchased are used (RVIA
and market share statistics reflect new product sales only) with more than 34%
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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 16.4% of households in this category owning RVs. The number of
households in this group, which constitutes the Company's primary target market,
is projected to grow by 8.0 million households, or 63% from 1997 to 2010 as
compared to total growth of 14.9 million households, or 14.9%. 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
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 fourteen 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 $42,000 to
$1,200,000. Each model is intended to attract customers seeking an RV within
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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. 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, 1999, the Company was the third largest manufacturer of Highline
motorhomes, with approximately 15.6% of this market, up from 14.8% in 1998. 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
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 1996 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. National RV currently manufactures Class A motorhomes
under Islander, Tradewinds, Caribbean, Tropi-Cal, Dolphin, Sea Breeze, Sea View
and Surf Side brand names and a line of fifth-wheel travel trailers under the
Sea Breeze and Palisades brand names. Country Coach 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.
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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. Built on the 40' and 45' XL II or the
VIP chassis, the Country Coach Prevost Conversion combines creative floor plans
with fully custom interiors and stunning one-of-a-kind exteriors. Among its many
features of note are computerized touch pad switching, computerized air
leveling, a voice synthesized monitoring system, and an Infotronics multiplex
control console which networks together "stand alone" systems, so the user may
program multiple systems at one time. Slide-out floor plans provide expanded
living space. Suggested retail prices start at $715,000. The Country Coach
Prevost Conversion was introduced in 1979.
Concept. Completely custom, the 40' and 45' wide body, bus-style
Concept is built from the ground up on the DynoMax chassis and is powered by a
500 horsepower Detroit Diesel Series 60 engine. The Concept's Pentium
computer-driven digital dash features a Global Positioning System. Fully custom
interior schemes, and Euro-styled Vitricor or laminate cabinetry complement
beautiful one-of-a-kind interiors. Suggested retail prices start at $538,000.
The Concept was introduced in 1988.
Affinity. Built on the DynoMax chassis, the 38', 40' and 42' models
feature the CAT 455 horsepower C-12 engine. The Affinity offers 14 exterior
color combinations (or custom colors) with seven custom graphic schemes in
addition to the standard scheme. Galley slide floor plans are available. Six
designer coordinated interior schemes (or customization) are offered with 19
floor plan combinations. A 42' Affinity with a liftable tag axle and dual slide
floor plan, the Bed & Breakfast, debuted in the 1999 model year.
Suggested retail prices start at $365,000. The Affinity was introduced in 1991.
Magna. In 36', 38' and 40' lengths, the wide-body Magna is built on the
DynoMax diesel-powered chassis featuring the Cummins 350 horsepower engine or
CAT C-10 385 horsepower engine. The Magna offers 15 floor plan combinations and
six designer coordinated interior packages (along with modified or complete
customization) to complement the 14 exterior color combinations (or custom
exterior graphics). Full size living room slides and new galley slides maximize
interior living. Suggested retail prices start at $287,000. The Magna was
introduced in 1991.
Intrigue. The wide-body, bus-style Intrigue, in 32', 36' and 40'
lengths, is built on the DynoMax chassis and powered by the Cummins 8.3 ISC 330
or 350 horsepower engine. It features custom crafted cabinetry with three color
coordinated interior packages and 22 floor plan arrangements. Full size Great
Room and galley slides are available. Suggested retail prices start at $201,000.
The Intrigue was introduced in 1994.
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Islander. The Islander is a luxury, bus-style diesel pusher built on a
semi-monocoque chassis manufactured by CCI. Available in one floorplan just
under 40' in length, the Islander features a large slide room that adds
approximately 45 square feet of additional living space. It carries a suggested
retail price of $201,000 and was introduced in 1999.
Allure. This Highline motorcoach is available in 32', 36' and 40'
lengths. Built on the DynoMax chassis, the Allure is powered by the Cummins 8.3
ISC 275 or 330 HP C-Series horsepower engine. It features painted graphics,
clear coat and bus-style aerodynamics. Offering three designer coordinated
interior packages and 16 floor plan combinations, the Allure is available with
full size living room slides and galley slides. Suggested retail prices start at
$172,000. The Allure was introduced in 1995.
Tradewinds. The Tradewinds is available in five floorplans on a diesel
powered chassis. These models are full-basement wide-body, bus-style motorhomes.
All models have automatic slide-out features that expand the interior of the
motorhome and add approximately 36 square feet of additional living space.
Models are produced in 35-38 foot lengths and are available with a choice of oak
or walnut interiors. Suggested retail prices range from $147,000 to $152,000.
The Tradewinds was introduced in 1997.
Caribbean. The Caribbean is a compact, luxury, bus-style, diesel pusher
that represents a newer market segment that has emerged. Featuring one floorplan
of 34 feet in length with a slide-out room, the Caribbean is designed to appeal
to consumers looking for a luxury product that is easier to drive and handle
than conventional luxury bus-style products. The Caribbean carries a suggested
retail price of $138,000, and was introduced in 1999.
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 seven floorplans on a gas-powered
chassis and produced in 33 to 37 foot lengths. All 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 $93,000 to $104,000. The Tropi-Cal was introduced in
1993.
Dolphin. The Dolphin is available in eight floorplans on a gas-powered
chassis. These models are full-basement wide-body, bus-style motorhomes. All
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 37 foot lengths and have suggested retail
prices that range from $90,000 to $100,000. The Class A Dolphin motorhome was
introduced in 1985.
Sea View. The Sea View is available in five floorplans on a gas-powered
chassis. These models are full-basement wide-body, bus-style motorhomes. All
models have automatic slide-out features that expand the interior of the
motorhome and add approximately 36 square feet of additional living space. The
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Sea View models are produced in 31 to 34 foot lengths and have suggested retail
prices that range from $82,000 to $90,000. This product was introduced in 1997.
Sea Breeze. The Sea Breeze is a moderately priced, bus-style motorhome,
built on a gas-powered chassis. The Sea Breeze is a low profile motorhome,
offering partial basement storage. The Sea Breeze features Corian countertops,
power heated side-view mirrors, deluxe trim and heated water and waste holding
tanks. The Sea Breeze features four floorplans between 30 and 34 feet in length.
Suggested retail prices range from approximately $72,000 to $90,000. The Class A
Sea Breeze product was introduced in 1992.
Surf Side. The Surf Side is available in two floorplans on a gas-
powered chassis. This full-basement wide-body, bus-style motorhome is
offered in 30 and 31 foot lengths and has a suggested retail price of $68,000.
The Surf Side was introduced in 1999.
Palisades Fifth-Wheel Travel Trailer. The Palisades fifth-wheel
travel trailer comes in four, triple-slide floorplans ranging from 32 to 37
feet in length. All floorplans feature standard dark walnut interiors, and
many other amenities. Suggested retail prices range from $50,000 to $65,000.
The Palisades was introduced in 1999.
Sea Breeze Fifth-Wheel Travel Trailer. The Sea Breeze fifth-wheel
travel trailer comes in eight floorplans equipped similar to a Sea Breeze
motorhome. All floorplans feature standard living room and bedroom slide-out
sections and are produced in 29 to 37 foot lengths. Suggested retail prices
range from $42,000 to $51,000. The Sea Breeze fifth-wheel trailer was introduced
in 1995.
Planned Product Introductions
During 2000, the Company plans to add additional floorplans to the
three products introduced in the fourth quarter of 1999, the Islander,
Caribbean, and Palisades. New product introductions include a Tradewinds LTC,
which is a Tradewinds on a raised-rail chassis, and two new products, the
Castaic and the Marlin, targeting new price points in the diesel pusher market.
Additionally, with the anticipated completion of the new towables plant at the
Perris, California facility late in 2000, the Company plans to introduce a Sea
Breeze travel trailer. Double-slide models incorporating a slide-out room in the
bedroom area will be introduced on many of the existing product lines.
Distribution and Marketing
The Company markets NRV products through a network of 207 dealer
locations in 38 states and Canada. These dealers generally carry all or a
portion of NRV's product lines along with competitors' products. The Company
markets CCI products through 27 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.
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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, 1999, the Company's contingent liability under these agreements was
approximately $104.5 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.
Manufacturing Facilities and Production
The Company owns and operates manufacturing facilities in Perris,
California, and Junction City, Oregon. NRV products are designed and
manufactured in facilities encompassing 400,000 square feet located on
approximately 49 acres in Perris. Two additional buildings are scheduled for
construction in 2000 at the Perris facility. These include a 45,000 square foot,
30-bay service center, and a 164,000 square foot travel trailer manufacturing
building. CCI products are designed and manufactured in facilities encompassing
386,000 square feet located on approximately 56 acres in Junction City.
Construction of an additional 150,000 square foot manufacturing building at the
Junction City facility is in the planning stages, with construction scheduled to
begin in late 2000. The Company also owns 12 acres in Florida, where a 15-bay
service center is planned for construction in the second half of 2000.
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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.
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 76
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
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 $4,087,000, $3,050,000 and $2,711,000 for the years ended December
31, 1999, 1998 and 1997, respectively.
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Arrangements with Chassis Suppliers
The Company's NRV subsidiary purchases gasoline-powered chassis' that
are manufactured by Ford Motor Company and Workhorse Custom Chassis, and rear
engine diesel-powered chassis' from Freightliner Custom Chassis Corporation,
Spartan Motor Corporation, and from CCI. The Company's CCI subsidiary
manufactures its own chassis, the DynoMax, which is used as the base upon which
all CCI motorhomes are built, except for the Prevost Conversions, which utilize
a Prevost bus shell. The Company takes advantage of cash discounts, for payment
upon delivery, that are generally provided for in the purchase agreements with
these manufacturers. Such 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.
Backlog
The Company's backlog of orders was $64.0 million as of February 29, 2000
and $79.6 million as of February 28, 1999. All backlog orders are subject to
cancellation. To the extent not canceled, the Company expects that its backlog
as of February 29, 2000 will be filled within 60-90 days.
Competition
The motorhome market is intensely competitive, with a number of other
manufacturers selling products that compete with those of the Company. According
to Statistical Surveys, Inc., the two leading manufacturers accounted for
approximately 39.8% and 42.1% of total retail units sold in the Class A
motorhome market during 1999 and 1998, 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, 7.8% in 1997, 8.2% in 1998, and 8.2% in 1999.
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 that have been promulgated thereunder by the Department of
Transportation. The regulations that have been promulgated under the Motor
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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 that 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.
In March, 2000, CCI received a notice from NHTSA which indicated that
NHTSA is conducting a review of a safety recall by CCI in 1999 concerning
certain motorhomes equipped with a slide galley option and requested certain
information about motorhomes with slide out sections manufactured by CCI. CCI
intends to respond fully to NHTSA's request. At this time, it is not possible to
ascertain what action NHTSA may take with respect to such a review, or what
impact, if any, that the review may have on the Company's financial condition or
results of operations. Future recalls of the Company's vehicles, voluntary or
involuntary, could have a material adverse effect on the Company's financial
condition and results of operation.
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 production
that the 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.
Representatives of OSHA and the RVIA periodically inspect the Company's plant.
Product Warranty
The Company provides retail purchasers of its motorhomes with a limited
warranty against defects in materials and workmanship. Excluded from the
Company's warranties are chassis manufactured by third parties and certain other
specified components that are warranted by the Company's suppliers of these
items. 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 $7.8 million at December 31, 1999, which the
Company believes is sufficient to cover warranty claims.
Trademarks
NRV's Dolphin, Tropi-Cal, Sea Breeze, Tradewinds, Sea View and
DuraFrame trademarks, and CCI's Affinity, Magna, Intrigue, Allure, and Great
12
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 29, 2000, the Company employed a total of 2,170 people,
of which 1,960 were involved in manufacturing, 63 in administration, 76 in
research and development and 71 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.
Item 2. Properties
The Company owns and operates manufacturing facilities in Perris,
California, and Junction City, Oregon. NRV products are designed and
manufactured in facilities encompassing 400,000 square feet located on
approximately 49 acres in Perris. Two additional buildings are scheduled for
construction in 2000 at the Perris facility. These include a 45,000 square foot,
30-bay service center, and a 164,000 square foot travel trailer manufacturing
building. CCI products are designed and manufactured in facilities encompassing
386,000 square feet located on approximately 56 acres in Junction City. A
portion of CCI's facilities representing 276,000 square feet is being leased
under an agreement expiring in October 2000 (renewable in two separate five-year
increments at fair market values). Construction plans on an additional 150,000
square foot manufacturing building at the Junction City facility are under way,
with actual construction scheduled to begin in late 2000. The Company also owns
12 acres in Florida, where a 15-bay service center is planned for construction
in late 2000.
The Company believes that present facilities are well maintained and in
good condition. The plants are currently operating at approximately 80%
capacity.
13
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.
14
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 trading on the New York Stock Exchange under the symbol NVH
since December 14, 1998. From September 30, 1993 to December 13, 1998, the stock
traded on the Nasdaq National Market under the symbol NRVH. Prior to that time,
there was no public market for the Common Stock.
1999 High Low
---- ---- ---
First Quarter $ 26.88 $ 20.56
Second Quarter 29.50 21.88
Third Quarter 27.31 19.13
Fourth Quarter 21.25 16.25
1998 High Low
---- ---- ---
First Quarter $ 29.69 $ 16.94
Second Quarter 30.81 21.38
Third Quarter 33.67 17.56
Fourth Quarter 28.00 13.13
On March 27, 2000, the last reported sales price for the Common Stock
quoted on the New York Stock Exchange was $26.375 per share. As of March 27,
2000, there were 86 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 March
11, 1999, between the Company and Bank of America NT&SA, 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."
15
Item 6. Selected Financial Data
The following selected consolidated financial data are qualified by
reference to, and should be read in conjunction with, the Company's Consolidated
Financial Statements and the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained elsewhere
herein. The selected income statement data for the years ended December 31,
1997, 1998 and 1999 and the selected balance sheet data as of December 31, 1998
and 1999 are derived from the Company's audited consolidated financial
statements that are included elsewhere herein. The selected income statement
data for the year ended December 31, 1996 along with the balance sheet data as
of December 31, 1996 and 1997 are derived from the audited consolidated
financial statements of the Company which are not included herein. The selected
income statement data for the year ended December 31, 1995 along with the
balance sheet data as of December 31, 1995 are derived from the accounting
records of the Company and have not been audited.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share and unit amounts)
Years Ended December 31,
-------------------------------------------------------
1999 1998 1997 1996 (1) 1995
----------- --------- --------- --------- ------------
Operations Data: (Unaudited)
Net sales $ 419,421 $ 360,326 $ 285,951 $ 137,101 $ 89,397
Cost of sales 348,592 302,098 245,763 118,643 78,089
----------- --------- ---------------------------------
Gross profit 70,829 58,228 40,188 18,458 11,308
Selling expenses 11,437 11,154 9,518 4,209 2,643
General and administrative expenses 7,214 6,586 5,649 2,899 2,455
Amortization of intangibles 413 413 413 80 -
----------- --------- ---------------------------------
Operating income 51,765 40,075 24,608 11,270 6,210
Interest (income) expense, net (1,379) (280) 222 111 3
Other financing related costs - 213 113 149 178
Other (432) - - - -
----------- --------- ---------------------------------
Income before income taxes and
extraordinary item 53,576 40,142 24,273 11,010 6,029
Provision for income taxes 20,625 16,033 9,767 4,405 2,387
----------- --------- ---------------------------------
Net income before extraordinary items 32,951 24,109 14,506 6,605 3,642
Loss on investment in marketable equity
securities - - - - (958)
Gain on early extinguishment of debt - - - - 342
----------- --------- ---------------------------------
Net income $ 32,951 $ 24,109 $ 14,506 $ 6,605 $ 3,026
Basic earnings per common share:
Income before extraordinary items $ 3.16 $ 2.35 $ 1.55 $ 0.92 $ 0.51
Extraordinary items - - - - (0.09)
----------- --------- ---------------------------------
Net income $ 3.16 $ 2.35 $ 1.55 $ 0.92 $ 0.42
Diluted earnings per common share:
Income before extraordinary items $ 2.95 $ 2.11 $ 1.40 $ 0.84 $ 0.50
Extraordinary items - - - - (0.09)
----------- --------- ---------------------------------
Net income $ 2.95 $ 2.11 $ 1.40 $ 0.84 $ 0.41
Weighted average number of common shares
outstanding:
Basic 10,430 10,263 9,365 7,190 7,070
Diluted 11,178 11,423 10,390 7,887 7,268
Other Data:
Class A units sold 3,951 3,652 3,039 2,042 1,504
Fifth-Wheel Travel Trailers sold 431 410 258 210 299
Balance Sheet Data:
Total assets $ 159,214 $ 117,739 $ 87,204 $ 68,050 $ 34,308
Working capital 91,916 63,480 39,271 29,553 15,080
Long-term debt 84 1,700 6,703 7,272 7,034
Stockholders' equity 130,566 94,489 60,958 45,532 18,625
(1) Operating results in 1996, 1997, 1998 and 1999 reflect the effects of
the acquisition of Country Coach, Inc. in November 1996.
16
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 read in conjunction with the accompanying consolidated
financial statements including the notes thereto.
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:
Percentage of Net Sales
Years Ended
December 31,
-----------------------------
1999 1998 1997
-------- -------- -------
Net sales 100.0 % 100.0 % 100.0 %
Cost of sales 83.1 83.8 86.0
-------- -------- -------
Gross profit 16.9 16.2 14.0
Selling 2.8 3.1 3.3
General and administrative 1.7 1.9 2.0
Amortization of intangibles 0.1 0.1 0.1
-------- -------- -------
Operating income 12.3 11.1 8.6
Interest (income) expense, net (0.3) (0.1) 0.1
Other financing related costs (0.2) 0.1 0.0
-------- -------- -------
Income before income taxes 12.8 11.1 8.5
Provision for income taxes 4.9 4.4 3.4
-------- -------- -------
Net income 7.9 6.7 5.1
======== ======== =======
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net sales in 1999 increased by $59.1 million to $419.4 million, or
16.4%, from $360.3 million in 1998. NRV's sales of Class A motorhomes increased
236 units, or 7.6%, in 1999 to 3,333 units compared to 3,097 units in 1998, and
the average sales price increased 5.5% reflecting strong demand for
higher-priced motorhomes with slide-out rooms and more diesel-pusher motorhome
sales. Sales of fifth-wheel travel trailers increased 21 units, or 5.1%, in 1999
to 431 units compared to 410 units in 1998. CCI's unit sales increased 63 units,
or 11.4%, in 1999 to 618 units compared to 555 units in 1998.
Cost of goods sold in 1999 increased by $46.5 million to $348.6 million, or
15.4%, from $302.1 million in 1998 resulting primarily from increased net sales.
Gross profit margin was 16.9% in 1999 compared to 16.2% in 1998.
Selling expenses in 1999 increased by $0.3 million to $11.4 million, or
2.5%, from $11.1 million in 1998 primarily due to the increase in net sales. As
a percentage of net sales, selling expenses decreased to 2.8% in 1999 from 3.1%
in 1998.
17
General and administrative expenses in 1999 increased by $0.6 million
to $7.2 million, or 9.5%, from $6.6 million in 1998. As a percentage of net
sales, general and administrative expenses decreased to 1.7% in 1999 from 1.9%
in 1998.
Amortization of intangibles was $0.4 million in 1999 and 1998.
As a result of the foregoing, operating income in 1999 increased by
$11.7 million, or 29.2%, to $51.8 million from $40.1 million in 1998. As a
percentage of net sales, operating income increased to 12.3% in 1999 from 11.1%
in 1998.
Other income, which includes net interest income and other financing
related costs, increased by $1.7 million to $1.8 million in 1999 from $0.1
million in 1998. The change was primarily due to a $1.0 million increase in
interest income resulting from increased cash balances.
Provision for income taxes in 1999 and 1998 was $20.6 million and $16.0
million, respectively, representing a $4.6 million increase. The effective tax
rate in 1999 was 38.5% compared to 39.9% in 1998. The decrease was due to a
reduction in state income taxes resulting from state tax planning.
Net income increased $8.8 million, or 36.7%, to $33.0 million from $24.1
million in 1998. As a percentage of net sales, net income increased to 7.9% from
6.7% in 1998.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net sales in 1998 increased by $74.4 million to $360.3 million, or
26.0%, from 1997. NRV's sales of Class A motorhomes increased 558 units, or
22.0% in 1998 to 3,097 units compared to 2,539 units in 1997, and the average
sales price increased 5.3% reflecting strong demand for higher-priced motorhomes
with slide-out rooms. Sales of fifth-wheel travel trailers increased 152 units,
or 58.9% in 1998 to 410 units compared to 258 units in 1997. CCI's sales of
Class A motorhomes and bus conversions increased 55 units, or 11.0% in 1998 to
555 units compared to 500 units in 1997.
Cost of goods sold in 1998 increased by $56.3 million to $302.1
million, or 22.9% from 1997 resulting primarily from increased net sales. Gross
profit margin was 16.2% in 1998 compared to 14.0% in 1997. The increase resulted
primarily from manufacturing efficiencies realized from operating at a higher
production level.
Selling expenses in 1998 increased by $1.6 million to $11.2 million, or
17.2% from 1997 primarily due to the increase in net sales. As a percentage of
net sales, selling expenses decreased to 3.1% in 1998 from 3.3% in 1997.
General and administrative expenses in 1998 increased by $0.9 million
to $6.6 million, or 16.6%. As a percentage of net sales, general and
administrative expenses decreased to 1.9% in 1998 from 2.0% in 1997.
18
Amortization of intangibles was $0.4 million in 1998 and 1997.
As a result of the foregoing, operating income in 1998 increased by
$15.5 million, or 62.9%, to $40.0 million. As a percentage of net sales,
operating income increased to 11.1% in 1998 from 8.6% in 1997.
Other expense (income), which includes net interest expense and other
financing related costs, decreased by $402,000 to $67,000 of income in 1998 from
$335,000 of expense in 1997. The change was primarily due to a $321,000 increase
in interest income resulting from increased cash balances.
Provision for income taxes in 1998 and 1997 was $16.0 million and $9.8
million, respectively, representing a $6.2 million increase. The effective tax
rate in 1998 was 39.9% compared to 40.2% in 1997.
As a result of the foregoing, net income increased $9.6 million, or 66.2%,
to $24.1 million from $14.5 million in 1997. As a percentage of net sales, net
income increased to 6.7% from 5.1% in 1997.
Liquidity and Capital Resources
During 1999, the Company financed its operations primarily through its
existing cash and income from operations. At December 31, 1999, the Company had
working capital of $91.9 million compared to $63.5 million at December 31, 1998.
This increase of $28.4 million was primarily due to a $9.9 million increase in
cash, $1.8 million increase in accounts receivable, and a $21.4 million increase
in inventory, partially offset by a $2.4 million increase in accounts payable
and a $4.6 million increase in accrued expenses. The increase in accrued
expenses was due primarily to a $1.9 million increase in warranty reserve and a
$0.9 million increase in workers' compensation reserve. Net cash provided by
operating activities was $18.3 million for the year ended December 31, 1999.
During the year ended December 31, 1999, net cash used in investing
activities was $8.6 million and includes $11.3 million of capital expenditures,
related primarily to $3.0 million in land acquisitions for planned expansion,
and $4.5 million of equipment purchases. The capital expenditures were partially
offset by $3.0 million received in respect of its limited partnership interest
in Dune Jet Services as a result of the liquidation of the partnership.
During the twelve months ended December 31, 1999, net cash provided by
financing activities was $0.1 million due mainly to $1.9 million in proceeds
from the exercise of Company stock options and warrants partially offset by a
$1.8 million reduction in long-term debt.
As of December 31, 1999, the Company had short-term debt of $20,000 and
long-term debt of $84,000.
The Company has a revolving credit facility of $40 million with Bank of
America National Trust and Savings Association. The revolving credit facility is
available for general corporate and working capital needs and capital
19
expenditures. A separate term facility of $20 million exists for acquisitions.
Amounts borrowed under the term facility reduce the amount available under the
revolving credit facility. Amounts borrowed under the credit facilities bear
interest at the bank's reference rate or at a LIBOR-based rate plus an
applicable amount. The facilities contain, among other provisions, certain
financial covenants, including net worth and debt ratios. At December 31, 1999,
no amounts were outstanding under these revolving credit facilities.
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.
In January 2000, the Company's board of directors approved and
implemented a plan to repurchase up to one million shares of the Company's
common stock, to be acquired from time to time at current market or privately
negotiated prices.
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.
Year 2000 Date Conversion
The Company has completed its year 2000 compliance assessment and
implemented corrective solutions for its critical systems. Total costs incurred
by the Company with respect to this project were immaterial. The Company
experienced no measurable impact from the Y2K changeover.
Forward Looking Statements
Statements contained in this Form 10-K that are not historical facts
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that forward-looking
statements are inherently uncertain. Actual performance and results may differ
materially from that projected or suggested herein due to certain risks and
uncertainties including, without limitation, the cyclical nature of the
recreational vehicle industry; seasonality and potential fluctuations in the
Company's operating results; the Company's dependence on chassis suppliers; the
integration by the Company of acquired businesses and the management of growth;
potential liabilities under repurchase agreements; competition; government
regulation; product liability; dependence on key personnel and dependence on
certain dealers and concentration of dealers in certain regions. Certain risks
and uncertainties that could cause actual results to differ materially from that
projected or suggested are set forth below. Additional information concerning
risks and uncertainties may be identified from time to time in the Company's
filings with the Securities and Exchange Commission (SEC) and the Company's
public announcements, copies of which are available from the SEC or from the
Company upon request.
20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company has no significant financial instruments. The Company has
not entered into any derivative financial instruments. The Company does not have
any significant foreign currency exposure because it does not transact business
in foreign currencies.
Item 8. Financial Statements and Supplementary Data
The information required by this item is contained in the financial
statements listed in Item 14(a) under the caption "Consolidated Financial
Statements" and commencing on page F-1 of this Report.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable
21
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 2000 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1999, 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 2000 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1999, 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 2000 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1999, 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 2000 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission not later than 120 days
after December 31, 1999, which information is incorporated herein by reference.
22
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, 1999 and 1998
Consolidated Statements of Income for the years ended December
31, 1999, 1998, and 1997
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998, and 1997
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1999, 1998, and 1997
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedule VIII - Valuation and Qualifying Accounts
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)
4.1 Specimen-Certificate of Common Stock. (1)
10.1 National R.V. Holdings, Inc. 1993 Stock Option Plan. (1)
10.2 National R.V. Holdings, Inc. 1993 Option Plan. (2)
10.3 1995 Stock Option Plan. (3)
10.4 Rights Plan Agreement with Continental Stock Transfer & Trust Company.
(4)
10.5 1996 Stock Option Plan. (5)
10.6 1997 Stock Option Plan (6)
10.7 1999 Stock Option Plan
10.8 Employment Agreement dated as of August 6, 1999 between the Company and
Bradley C. Albrechtsen.
23
10.9 Employment Agreement dated as of January 31, 2000 between the Company
and Wayne M. Mertes.
10.10 Employment Agreement dated as of January 31, 2000 between the Company
and Robert B. Lee.
21.1 List of Subsidiaries. (6)
23.1 Consent of PricewaterhouseCoopers LLP
99.1 Risk Factors
- ---------------------------------
(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 Form 10-K for the
seven months ended December 31, 1995 filed on March 27, 1996.
(4) Incorporated by reference from Form 8-A declared effective on August
26, 1996.
(5) Incorporated by reference from the Company's Form 10-K for the year
ended December 31, 1996. (6) Incorporated by reference from the
Company's Form 10-K for the year ended December 31, 1997.
24
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, 2000 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, 2000
- --------------------------
Gary N. Siegler
/s/ Wayne M. Mertes Chief Executive Officer March 27, 2000
- -------------------------- and Director (Principal
Wayne M. Mertes Executive Officer)
/s/ Robert B. Lee Director March 27, 2000
- --------------------------
Robert B. Lee
/s/ Bradley C. Albrechtsen Chief Financial Officer March 27, 2000
- -------------------------- (PrincipalAccounting and
Bradley C. Albrechtsen Financial Officer)
/s/ Stephen M. Davis Director and Secretary March 27, 2000
- -------------------------
Stephen M. Davis
/s/ Neil H. Koffler Director March 27, 2000
- --------------------------
Neil H. Koffler
/s/ Doy B. Henley Director March 27, 2000
- --------------------------
Doy B. Henley
/s/ Greg McCaffery Director March 27, 2000
- --------------------------
Greg McCaffery
25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
National R.V. Holdings, Inc.
In our opinion, the accompanying consolidated financial statements listed in the
index appearing under Item 14(a)(1) on page 23 present fairly, in all material
respects, the financial position of National R.V. Holdings, Inc. and its
subsidiaries at December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States. In addition, in our opinion, the financial statement schedule
listed in the index appearing under Item 14(a)(2) on page 23 presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, 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/ PricewaterhouseCoopers
- ---------------------------
Los Angeles, CA
February 11, 2000
F-1
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
December 31,
-------------------------------
1999 1998
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 20,301,000 $ 10,446,000
Receivables, less allowance for doubtful
accounts ($199,000 and $188,000,
respectively) 22,473,000 20,719,000
Inventories 68,187,000 46,832,000
Deferred income taxes 5,610,000 3,883,000
Prepaid expenses 1,439,000 809,000
-------------- -------------
Total current assets 118,010,000 82,689,000
Goodwill - net 6,952,000 7,365,000
Property, plant and equipment, net 33,167,000 24,341,000
Other 1,085,000 3,344,000
-------------- -------------
$159,214,000 $117,739,000
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 20,000 $ 166,000
Accounts payable 11,166,000 8,771,000
Accrued expenses 14,908,000 10,272,000
-------------- -------------
Total current liabilities 26,094,000 19,209,000
Deferred income taxes 2,470,000 2,341,000
Long-term debt 84,000 1,700,000
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000
shares authorized, 4,000 issued and
outstanding - -
Common Stock, $.01 par value, 25,000,000
shares authorized, 10,588,886 and
10,322,837 issued and outstanding,
respectively 106,000 103,000
Additional paid-in capital 47,768,000 44,645,000
Retained earnings 82,692,000 49,741,000
-------------- -------------
Total stockholders' equity 130,566,000 94,489,000
-------------- -------------
$159,214,000 $117,739,000
============== =============
See Notes to Consolidated Financial Statements
F-2
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31,
------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
Net sales $419,421,000 $360,326,000 $285,951,000
Cost of goods sold 348,592,000 302,098,000 245,763,000
-------------- -------------- --------------
Gross profit 70,829,000 58,228,000 40,188,000
-------------- -------------- --------------
Selling expenses 11,437,000 11,154,000 9,518,000
General and administrative
expenses 7,214,000 6,586,000 5,649,000
Amortization of intangibles 413,000 413,000 413,000
-------------- -------------- --------------
Total operating expenses 19,064,000 18,153,000 15,580,000
-------------- -------------- --------------
Operating income 51,765,000 40,075,000 24,608,000
Other expenses (income):
Interest income (1,408,000) (434,000) (113,000)
Interest expense 29,000 154,000 335,000
Other (432,000) 213,000 113,000
-------------- -------------- --------------
Total other expenses
(income) (1,811,000) (67,000) 335,000
-------------- -------------- --------------
Income before income taxes 53,576,000 40,142,000 24,273,000
Provision for income taxes 20,625,000 16,033,000 9,767,000
-------------- -------------- --------------
Net income $32,951,000 $24,109,000 $14,506,000
============== ============== ==============
Earnings per common share:
Basic $ 3.16 $ 2.35 $ 1.55
Diluted $ 2.95 $ 2.11 $ 1.40
Weighted average number of shares:
Basic 10,429,658 10,263,157 9,364,574
Diluted 11,178,330 11,423,471 10,389,640
See Notes to Consolidated Financial Statements
F-3
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
-----------------------------------------
1999 1998 1997
------------ ------------ ------------
Cash flows from operating activities:
Net income $32,951,000 $24,109,000 $14,506,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 2,463,000 1,880,000 1,322,000
Amortization of intangibles 413,000 413,000 413,000
Gain on asset disposals (463,000)
Tax benefit related to exercise of stock
options 1,263,000 6,021,000 -
Changes in assets and liabilities:
Increase in receivables (1,754,000) (9,331,000) (5,866,000)
Increase in inventories (21,355,000) (9,289,000) (3,528,000)
(Increase) decrease in prepaid expenses (630,000) 566,000 (143,000)
Increase (decrease) in accounts payable 2,395,000 (235,000) 1,270,000
Increase in accrued expenses 4,636,000 2,514,000 4,020,000
Decrease in deferred income taxes (1,598,000) (1,026,000) (959,000)
------------ ------------ ------------
Net cash provided by operating activities 18,321,000 15,622,000 11,035,000
Cash flows from investing activities:
Return of investment in Dune Jet Services, LLP 2,985,000 - -
Increase in other assets (292,000) (324,000) (2,885,000)
Capital expenditures (11,260,000) (6,404,000) (5,597,000)
------------ ------------ ------------
Net cash used in investing activities (8,567,000) (6,728,000) (8,482,000)
Cash flows from financing activities:
Decrease in line of credit - - (1,400,000)
Net proceeds from restricted funds - - 1,210,000
Principal payments on long-term debt (1,762,000) (5,391,000) (560,000)
Proceeds from issuance of common stock 1,863,000 3,401,000 1,140,000
Purchase of treasury stock - - (220,000)
------------ ------------ ------------
Net cash provided by (used in) financing
activities 101,000 (1,990,000) 170,000
------------ ------------ ------------
Net increase in cash 9,855,000 6,904,000 2,723,000
Cash, beginning of year 10,446,000 3,542,000 819,000
------------ ------------ ------------
Cash, end of year $20,301,000 $10,446,000 $ 3,542,000
============ ============ ============
See Notes to Consolidated Financial Statements
F-4
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Treasury Stock
Preferred ------------------------- Paid-In Retained ---------------------
Stock Shares Amount Capital Earnings Shares Amount Total
-------- ------------ ----------- -------------- -------------- --------- ----------- ----------------
$ - 9,290,328 $62,000 $34,344,000 $11,126,000 - $ - $ 45,532,000
Common stock issued
under option plan 54,681 - 183,000 183,000
Common stock issued
upon exercise of
warrants 122,025 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
-------- ------------ ----------- -------------- -------------- --------- ---------- ----------------
$ - 9,467,034 $63,000 $35,263,000 $25,632,000 - $ - $ 60,958,000
Stock split - 3-for-2 31,000 (31,000) -
Common stock issued
under option plan 797,517 8,000 3,158,000 3,166,000
Common stock issued
upon exercise of
warrants 58,286 1,000 234,000 235,000
Tax benefit related to
exercise of stock
options 6,021,000 6,021,000
Net income 24,109,000 24,109,000
-------- ------------ ----------- -------------- -------------- ---------- --------- ----------------
$ - 10,322,837 $103,000 $44,645,000 $49,741,000 - $ - $ 94,489,000
Common stock issued
under option plan 265,754 3,000 1,857,000 1,860,000
Common stock issued
upon exercise of
warrants 295 - 3,000 3,000
Tax benefit related to
exercise of stock
options 1,263,000 1,263,000
Net income 32,951,000 32,951,000
--------- ------------ ----------- -------------- -------------- ---------- --------- ----------------
$ - 10,588,886 $106,000 $47,768,000 $82,692,000 - $ - $130,566,000
========= ============ =========== ============== ============== ========== ========= ================
See Notes to Consolidated Financial Statements
F-5
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 Caribbean, Dolphin, Islander, Palisades, Sea
Breeze, Sea View, Surf Side, Tradewinds and Tropi-Cal brand names and by CCI
under brand names including Affinity, Allure, Intrigue and Magna.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States 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 are 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.
F-6
REVENUE RECOGNITION
Sales are recorded by the Company when products are shipped to the dealer.
AMORTIZATION OF INTANGIBLE ASSETS
Goodwill related to the acquisition of CCI during 1996 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
$4,087,000, $3,050,000 and $2,711,000 for the years ended December 31, 1999,
1998 and 1997, respectively.
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.
SEGMENTS
The Company operates in one reportable segment: the manufacturing,
wholesale distribution, and service of recreational vehicles. The Company does
not have operations outside the United States.
INCOME 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 difference in the shares used to determine basic and diluted EPS is as
follows:
Year Ended December 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
Shares used for basic .............. 10,429,658 10,263,157 9,364,574
Dilutive effect of:
Stock options .................... 743,602 1,151,889 997,859
Warrants ......................... 5,070 8,425 27,207
---------- ---------- ----------
Shares used for diluted ............ 11,178,330 11,423,471 10,389,640
========== ========== ==========
F-7
2. Inventories
Inventories consist of the following:
December 31,
1999 1998
------------ ------------
Finished goods ....................... $ 12,315,000 $ 11,112,000
Work-in-process ...................... 18,274,000 13,815,000
Raw materials ........................ 14,027,000 12,477,000
Chassis .............................. 23,571,000 9,428,000
------------ ------------
$ 68,187,000 $ 46,832,000
============ ============
3. Property, Plant and Equipment
Major classes of property, plant and equipment consist of the following:
December 31,
1999 1998
------------ ------------
Land ................................. $ 6,360,000 $ 3,442,000
Buildings ............................ 17,441,000 15,289,000
Machinery and equipment .............. 13,558,000 9,073,000
Office equipment ..................... 4,889,000 4,241,000
------------ ------------
42,248,000 32,045,000
Less accumulated depreciation ........ (9,081,000) (7,704,000)
------------ ------------
Property, plant and equipment, net . $ 33,167,000 $ 24,341,000
============ ============
4. Accrued Expenses
Accrued expenses consist of the following:
December 31,
1999 1998
------------ ------------
Workers' compensation self-insurance
reserve ........................... $ 2,428,000 $ 1,494,000
Motorhome warranty reserve ........... 7,754,000 5,824,000
Payroll and other accrued expenses ... 3,837,000 2,954,000
Income taxes ......................... 889,000 -
------------ ------------
$ 14,908,000 $ 10,272,000
============ ============
F-8
5. Debt and Credit Agreements
Debt consists of the following:
December 31,
1999 1998
------------ ------------
Industrial revenue bonds, 4.6%,
paid in full in 1999 ................ $ - $ 1,742,000
Note Payable - City of Junction City,
3%, paid monthly through October 2004 104,000 124,000
----------- ------------
104,000 1,866,000
Less payments due within one year ..... 20,000 166,000
---------- ------------
$ 84,000 $ 1,700,000
========== ============
The Company has a revolving credit facility of $40 million with Bank of
America National Trust and Savings Association. The revolving credit facility is
available for general corporate and working capital needs and capital
expenditures. A separate term facility of $20 million exists for acquisitions.
Amounts borrowed under the term facility reduce the amount available under the
revolving credit facility. Amounts borrowed under the revolving credit facility
and the term facility bear interest, at the Company's election, at the bank's
reference rate or at a LIBOR-based rate plus an applicable amount. The credit
facilities contain, among other provisions, certain financial covenants,
including net worth and debt ratios. At December 31, 1999, no amounts were
outstanding under these facilities. Unless otherwise extended, the Company's
credit facilities with Bank of America expire on April 1, 2001.
Debt maturities over the next five years are $20,000 in 2000, $21,000 in
2001, $22,000 in 2002, $22,000 in 2003 and $19,000 in 2004 and thereafter.
6. Income Taxes
The components of the provision for income taxes were as follows:
December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
Currently Payable:
Federal .............. $ 18,942,000 $ 13,837,000 $ 8,765,000
State ................ 3,281,000 3,173,000 1,954,000
------------ ------------ ------------
22,223,000 17,010,000 10,719,000
Deferred:
Federal .............. (1,456,000) (750,000) (796,000)
State ................ (142,000) (227,000) (156,000)
------------ ------------ ------------
(1,598,000) (977,000) (952,000)
------------ ------------ ------------
Total provision for income
taxes .................. $ 20,625,000 $ 16,033,000 $ 9,767,000
============ ============ ============
F-9
Deferred income taxes are recorded based upon differences between the
financial statement and tax basis of assets and liabilities. Temporary
differences which give rise to deferred income tax assets and liabilities at
December 31, 1999 and 1998 were as follows:
December 31,
1999 1998
------------ ------------
Accrued expenses ................... $ 4,390,000 $ 3,293,000
State income taxes ................. 1,220,000 590,000
------------ ------------
Deferred income tax assets .... $ 5,610,000 $ 3,883,000
============ ============
Fixed assets ....................... $ 1,922,000 $ 1,767,000
Other .............................. 548,000 574,000
------------ ------------
Deferred income tax liabilities $ 2,470,000 $ 2,341,000
============ ============
A reconciliation of the statutory U.S. federal income tax rate to the
Company's effective income tax rate is as follows:
December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
Statutory rate .............. 35.0 % 35.0 % 34.0 %
State taxes, net of federal
benefit ................ 3.8 4.7 4.8
Amortiztion of intangibles
not deductible for
income tax purposes .... 0.7 1.0 1.7
Other ....................... (1.0) (0.8) (0.3)
------------ ------------ ------------
38.5 % 39.9 % 40.2 %
============ ============= ============
Cash paid for income taxes was $20,116,000, $16,114,000 and $9,439,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.
7. 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 $104,500,000 at December 31, 1999,
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 been
negligible 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.
F-10
8. 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:
2000 ................................. $ 1,020,000
2001 ................................. 12,000
2002 ................................. 7,000
2003 ................................. 7,000
-----------
$ 1,046,000
===========
9. Stock Options and Warrants
The Company has six 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 generally
vested immediately upon grant and 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. The exercise of certain of these stock options represents
a tax benefit for the Company which has been reflected as a reduction of income
taxes payable and an increase to additional paid-in-capital amounting to
$1,263,000 and $6,021,000 in 1999 and 1998, respectively.
No compensation cost has been recognized for these fixed options 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 1997, 1998 and 1999, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
Year Ended December 31,
1999 1998 1997
------------ ------------ ------------
Net income
As reported ............. $ 32,951,000 $ 24,109,000 $ 14,506,000
Pro forma ............... 32,309,000 23,439,000 11,719,000
Basic earnings per share
As reported ............. 3.16 2.35 1.55
Pro forma ............... 3.10 2.28 1.25
Diluted earnings per share
As reported ............ 2.95 2.11 1.40
Pro forma .............. 2.89 2.04 1.13
F-11
The fair value of options granted during 1997 and 1999 were estimated on
the date of grant using Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants:
Year Ended December 31,
1999 1997
- --------------------------------------------------------------------------------
Dividend yield ........................... 0 % 0 %
Expected volatility ...................... 44.3 % 51.1 %
Risk-free interest rate .................. 5.6 % 6.4 %
Expected lives ........................... 5 years 5-10 years
Information regarding these option plans and option agreements for 1999,
1998 and 1997 is as follows:
Options Exercise
Outstanding Price
----------- --------
Outstanding at December 31, 1996 ............... 1,848,343 $ 5.84
Granted ..................................... 900,000 10.08
Expired or canceled ......................... - -
Exercised ................................... (54,681) 3.12
--------- -------
Outstanding at December 31, 1997 ............... 2,693,662 7.31
Granted ..................................... - -
Expired or canceled ......................... - -
Exercised ................................... (856,205) 5.55
--------- -------
Outstanding at December 31, 1998 ............... 1,837,457 8.16
Granted ..................................... 442,050 24.75
Expired or canceled ......................... (1,496) 9.33
Exercised ................................... (291,249) 8.61
--------- -------
Outstanding at December 31, 1999 ............... 1,986,762 $ 11.85
========= =======
Average Weighted
Options Options Exercise Remaining
Options Plans/Non-Plan Grants Authorized Outstanding Exercisable Price Life (Years)
--------------------------------------------------------------------------------------
1993 Stock Option Plan ...... 450,000 200,800 158,750 $ 7.33 3.8
1993 Option Plan ............ 348,750 101,250 101,250 4.61 3.9
1994 Non-Plan Grants ........ 199,688 91,044 91,044 3.33 5.0
1995 Stock Option Plan ...... 225,000 100,383 100,383 3.75 5.4
1996 Stock Option Plan ...... 675,000 433,501 433,501 9.87 5.4
1997 Stock Option Plan ...... 900,000 644,450 555,450 10.08 6.1
1999 Stock Option Plan ...... 400,000 400,000 - 24.93 4.5
All other non-plan grants ... 93,000 15,334 15,334 10.72 1.9
--------- --------- --------- ------ ---
3,291,438 1,986,762 1,455,712 $11.84 5.2
========= ========= ========= ====== ===
F-12
The weighted average fair value of options granted during 1999 and 1997 was
$10.04 and $6.01, respectively.
At December 31, 1999, there were 15,336 warrants outstanding to a financial
advisor at a price of $10.73. The warrants are due to expire on December 2,
2001.
10. Related Party Transactions
Through December 31, 1998, the Company was a party to 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, was also an
employee of the Affiliate. The Advisory Agreement terminated effective December
31, 1998. Pursuant to the Advisory Agreement, the Affiliate 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. Fees
incurred under the Advisory Agreement in 1998 and under a prior advisory
agreement in 1997 between the Company and the Affiliate totaled $231,000 and
$220,000, respectively. In addition, a Chairman's salary and bonus of $235,000
for 1999, $190,000 for 1998, and $205,000 for 1997 in the aggregate were paid to
Mr. Siegler.
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 was 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. During 1999 the Aircraft was sold and the
Partnership was liquidated. The Company received $2,985,000 in the aggregate
from the Partnership representing a return of its capital plus its share of the
gain on the sale of the Aircraft, after expenses of the Partnership were
allocated.
Mr. Robert B. Lee, a director of the Company and the Chairman and Chief
Executive Officer of CCI, is a partner in a joint venture that is a party to a
lease agreement with the Company. Pursuant to the agreement, The Company leases
from the joint venture a parcel of property constituting a majority of CCI's
manufacturing facilities. During the years ended December 31, 1999, 1998, and
1997, the Company paid $1.16 million, $1.14 million, and $1.11 million,
respectively, under the lease agreement. The lease agreement calls for future
payments totaling $990,000 through October 31, 2000. In addition, Mr. Lee is a
partner in another joint venture, which in 1998 leased to CCI a separate parcel
containing manufacturing facilities used by CCI (the "Acquired Property"). On
October 8, 1998, the Company purchased the Acquired Property from Mr. Lee's
joint venture for $2,100,000 pursuant to the exercise of a purchase option
contained in the lease agreement for such property.
F-13
Heller Ehrman White & McAuliffe, 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. Fees paid the law firm were $127,000, $124,000, and
$123,000 during the years ended December 31, 1999, 1998, and 1997, respectively.
11. Repurchases of Common Stock
In January 2000, the Company's board of directors approved and implemented
a plan to repurchase up to one million shares of the Company's common stock, to
be acquired from time to time at current market or privately negotiated prices.
F-14
NATIONAL R.V. HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1999, 1998 and 1997
Additions
Balance at charged to Balance at
beginning costs and end of
of period expenses Deductions Period
----------- ----------- ---------- -----------
Twelve months ended December 31, 1999
Allowance for doubtful accounts .................... $ 188,000 $ 24,689 $ 13,689 $ 199,000
Workers' compensation self-insurance reserve ....... 1,494,000 3,394,969 2,460,969 2,428,000
Motorhome warranty reserve ......................... 5,824,000 13,325,525 11,395,525 7,754,000
----------- ----------- ----------- -----------
$ 7,506,000 $16,745,183 $13,870,183 $10,381,000
Twelve months ended December 31, 1998
Allowance for doubtful accounts .................... $ 180,000 $ 19,664 $ 11,664 $ 188,000
Workers' compensation self-insurance reserve ....... 402,000 3,608,907 2,516,907 1,494,000
Motorhome warranty reserve ......................... 4,036,000 10,018,529 8,230,529 5,824,000
----------- ----------- ----------- -----------
$ 4,618,000 $13,647,100 $10,759,100 $ 7,506,000
Twelve months ended December 31, 1997
Allowance for doubtful accounts .................... $ 177,000 $ 12,842 $ 9,842 $ 180,000
Workers' compensation self-insurance reserve ....... 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
F-15
Exhibit 10.7
NATIONAL R.V. HOLDINGS, INC.
1999 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. 1999 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
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. "Committee" shall mean a committee of the Board of Directors
consisting of no fewer than two (2) persons who are (i) "nonemployee directors"
within the meaning of Rule 16b-3 under the Exchange Act, or any successor rule
or regulation and (ii) "outside directors" within the meaning of Section 162(m)
of the Code; provided however, that clause (ii) shall apply only with respect to
grants of Options intended by the committee to qualify as "performance-bases
compensation" under Section 162(m) of the Code.
2.7. "Company" means National R.V. Holdings, Inc.
2.8. "Consultant Option" means an Option granted to a consultant
pursuant to Section 7.
2.9. "Director Option" means an Option granted to a Nonemployee
Director pursuant to Section 5.
2.10. "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.
2.11. "Eligible Employee" means any officer or other employee of the
Company or a Subsidiary who is designated by the Committee as eligible to
receive Options subject to the conditions set forth herein.
2.12. "Employee Options" means an Option granted to an Eligible
Employee pursuant to Section 6.
2.13. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.14. "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.
2.15. "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee as an
Incentive Stock Option.
2.16. "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
2.17. "Nonemployee Director" means a director of the Company who is
not a full-time employee of the Company or any Subsidiary.
2.18. "Option" means an Employee Option, a Director Option, a
Consultant Option or any or all of them.
2.19. "Optionee" means a person to whom an Option has been granted
under the Plan.
2.20. "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.
2.21. "Plan" means the National R.V. Holdings, Inc. 1999 Stock
Option Plan.
2.22. "Shares" means the common stock, par value $.01 per share, of
the Company.
2.23. "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with respect to
the Company.
2.24. "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.
2.25. "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 Committee which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A quorum shall consist
of not less than a majority of the Committee 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 Committee shall be as fully
effective as if made by a majority vote at a meeting duly called and held. No
member of the Committee 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 Committee for all costs and expenses and, to the extent
permitted by applicable law, 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
Committee 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
Committee 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 Committee 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.
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 400,000 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 Committee. During any calendar year no
person may be granted Options with respect to more than 100,000 Shares.
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 Committee. Subject to the provisions of the Plan, the
Committee 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 Committee 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 Committee 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 Committee 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 Committee may accelerate the exercisability of any
Option or portion thereof at any time.
6. Option Grants for Eligible Employees.
6.1. Authority of Committee. Subject to the provisions of the Plan, the
Committee shall have full and final authority to select those Eligible Employees
who will 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 Committee 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 Committee 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 Committee 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 Committee and set forth in the Agreement evidencing the Option. To the
extent not otherwise provided by the Committee, 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 Committee may accelerate the exercisability of any
Option or portion thereof at any time.
6.5. $100,000 Per Year Limitation for Incentive Stock Options. To the
extent that the aggregate Fair Market Value (determined as of the date of grant)
of Shares for which Incentive Stock Options are exercisable for the first time
by any Optionee during any calendar year (under all plans of the Company and its
Subsidiaries) exceeds $100,000, such excess Incentive Stock Options shall be
treated as Nonqualified Stock Options.
7. Option Grants for Consultants.
7.1. Authority of Committee. Subject to the provisions of the Plan, the
Committee 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 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 Committee 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 Committee shall determine, provided that no Consultant Option shall
be exercisable after the expiration of ten (10) years from the date it is
granted. The Committee 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 Committee and set forth in the Agreement evidencing the Option. To the
extent not otherwise provided by the Committee, 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 Committee 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.
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 Chief Financial
Officer 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
Committee 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 Committee; or (iii) as otherwise determined by the Committee.
At the Optionee's request and subject to the consent of the Committee, 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 Committee, the Optionee shall deliver the Agreement
evidencing the Option to the Chief Financial Officer 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:
(e) 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 the Option or portion thereof that was exercisable on the
date of such termination;
(f) if an Optionee's employment terminates for Cause, the
Option shall terminate immediately and no rights thereunder may be exercised;
(g) 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
(h) 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 Committee 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 Committee shall conclusively determine the appropriate adjustments, if any,
to the maximum number or class of Shares or other stock or securities with
respect to 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 Committee.
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.
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 Committee;
(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 Committee.
14.3. The Plan is intended to comply with Rule 16b-3 promulgated under
the Exchange Act and the Committee shall interpret and administer the provisions
of the Plan or any Agreement in a manner consistent therewith. Any provisions
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 Committee 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 Committee.
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 Committee 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 Committee 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.
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
Committee, 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 Committee 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 Committee 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
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.
Exhibit 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into effective as the 6th
day of August, 1999, by and between National R.V. Holdings, Inc., a Delaware
corporation (the "Company"), and Bradley C. Albrechtsen, an individual
("Executive").
RECITALS
A. The Company desires to be assured of the association and services
of Executive.
B. Executive is willing and desires to be employed by the Company, and
the Company is willing to employ Executive, upon the terms, covenants and
conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs Executive as Chief
Financial Officer of the Company.
2. Term. The term of this Agreement shall be for the period commencing
on the effective date hereof and ending on December 31, 2001, unless terminated
earlier pursuant to Section 6 herein; provided, however, that Executive's
obligations in Sections 5, 7 and 8 herein shall continue in effect after any
such termination as specified therein. The term of this Agreement may be
extended by the mutual written agreement of the Company and the Executive. The
initial term, together with any extension thereof, is herein referred to as the
"Term."
3. Compensation; Reimbursement.
3.1 Base Salary. For all services rendered by Executive under this Agreement,
effective as of the date hereof, the Company shall pay Executive a base salary
of One Hundred and Four Thousand Dollars ($104,000) per annum, payable weekly in
equal installments (the "Base Salary"). Beginning January 1, 2000, the Base
Salary shall be One Hundred Thirty Thousand Dollars ($130,000) per annum,
payable weekly in equal installments. 3.2 Bonus Compensation. For each of the
1999, 2000 and 2001 calendar years, the Company shall also pay to Executive an
annual bonus (the "Bonus") based upon the attainment of certain financial
targets for the Company as set forth on Exhibit A attached hereto up to a
maximum of 30%, 45% and 45%, respectively, of the Executive's aggregate salary
received from the Company for such year. The Executive shall be entitled to a
pro rata Bonus based upon the number of days employed in such calendar year in
the event of termination of employment due to death, disability (as defined
herein) or without cause. As soon as practicable following the completion of the
audit for each of such calendar years, the Company shall calculate whether any
Bonus is payable to the Executive, and, if payable, shall make such payment
promptly thereafter.
3.3 Additional Benefits. In addition to the Base Salary,
Executive shall be entitled to all other benefits of employment which are
generally provided to senior management of the Company. Additionally, during the
Term, Executive shall be granted exclusive use of a vehicle with a fair market
value of no more than $45,000, which vehicle shall be purchased or leased by the
Company at its discretion. All applicable taxes and license and registration
fees for such vehicle shall be paid by the Company.
3.4 Reimbursement. Executive shall be reimbursed for all
reasonable "out-of-pocket" business expenses incurred in connection with the
performance of his duties under this Agreement. The reimbursement of Executive's
business expenses shall be upon presentation to, and approval by, the Company of
valid receipts and other appropriate documentation for such expenses.
4. Scope of Duties.
4.1 Assignment of Duties. Executive shall have such duties as
are commensurate with his experience and responsibilities and as are consistent
with past practice. Such duties shall be exercised subject to the control,
supervision and direction of the Board of Directors of the Company.
4.2 Executive's Devotion of Time. Executive hereby agrees to
devote his full time, abilities and energy to the faithful performance of the
duties assigned to him and to the promotion and forwarding of the business
affairs of the Company. Executive shall have no other employment during the Term
of this Agreement.
5. Confidentiality of Trade Secrets and Other Materials.
5.1 Trade Secrets. Other than in the performance of his duties
hereunder, Executive agrees not to disclose, either during the term of his
employment by the Company or at any time thereafter, to any person, firm or
corporation, any trade secrets or confidential information of the Company
including, but not limited to, trade secrets, lists of past or present clients
or customers, client or consultant contracts, product or service development
plans, floor plans and designs, marketing plans, pricing policies, business
acquisition plans or any portion or phase of any technical information,
technique, method, process, procedure, technology, or know-how (whether or not
in written or tangible form) used by the Company or any portion or phase of any
technical information, ideas, discoveries, designs, computer programs (including
source or object codes), processes, procedures, formulae or improvements of the
Company that is valuable (whether or not in written or tangible form) and
including all memoranda, notes, plans, reports, records, documents and other
evidence thereof and any other information of whatever nature which gives the
Company an opportunity to obtain an advantage over its competitors who do not
have access or know how to use such information shall be considered a "trade
secret" for the purposes of this Agreement.
5.2 Ownership of Trade Secrets; Assignment of Rights.
Executive hereby agrees that all know-how, documents, reports, plans, proposals,
marketing and sales plans, client lists, client files and materials made by him
or by the Company are the property of the Company and shall not be used by him
in any way adverse to the Company's interests. Executive shall not deliver,
reproduce or in any way allow such documents or things to be delivered or used
by any third party without specific direction or consent of the Board of
Directors of the Company. Executive hereby assigns to the Company any rights
which he may have in any such trade secret or proprietary information.
6. Termination.
6.1 Bases for Termination.
1. Executive's employment hereunder may be terminated
at any time by mutual agreement of the parties.
2. This Agreement shall automatically terminate upon
the Executive's death or incapacity.
"Incapacity," as used herein, shall mean mental or physical incapacity, or both,
reasonably determined by the Company's Board of Directors based upon a
certification of such incapacity by, in the discretion of the Company's Board of
Directors, either Executive's regularly attending physician or a duly licensed
physician selected by the Company's Board of Directors, rendering Executive
unable to perform substantially all of his duties hereunder and which appears
reasonably certain to continue for at least 60 consecutive days without
substantial improvement. Executive shall be deemed to have "become
incapacitated" on the date the Company's Board of Directors has determined that
Executive is incapacitated and so notifies Executive.
3. Executive's employment may be terminated
by the Company "with cause," effective upon delivery of
written notice to Executive given at any time (without any necessity for prior
notice) upon the occurrence of (i) a felony criminal conviction or any other
criminal conviction involving Executive's lack of honesty or Executive's moral
turpitude; (ii) drug or alcohol abuse; (iii) acts of dishonesty, gross
carelessness or negligence or gross misconduct which have, in the reasonable
judgment of the Company's Board of Directors, a material adverse effect on the
Company; or (iv) material breach of any provision of this Agreement.
4. Executive's employment may be terminated
by the Company "without cause" (for any reason or no
reason at all) at any time by giving Executive three days prior written notice
of termination, which termination shall be effective on the fourth day following
such notice.
6.2 Payment Upon Termination.
(a) If Executive's employment under this
Agreement is terminated under Paragraph 6.1(4) herein, the
Company shall pay to Executive, in the manner set forth below, an amount equal
to the sum of (a) Executive's Base Salary through the remaining portion of the
Term, less any compensation actually earned or accrued by Executive for services
rendered elsewhere to himself or any other person or entity; plus (b) any unpaid
out-of-pocket expenses incurred by the Executive prior to the date of
termination which are reimbursable pursuant to Section 3.4 herein. After the
Company's termination of Executive under this provision, the Company shall not
be obligated to provide the benefits to Executive described in Section 3.3
(except as may be required by law). Payments made above shall be made in equal
installments over such period of time on regularly scheduled Company paydays.
(b) Upon termination under Paragraphs
6.1(1), (2) or (3), the Company shall not be obligated to
compensate Executive, his estate or representatives, except for any unpaid Base
Salary accrued through the date of termination and any unpaid out-of-pocket
expenses incurred by the Executive prior to the date of termination which are
reimbursable pursuant to Section 3.4 herein, nor provide the benefits to
Executive described in Section 3.3 (except as provided by law).
6.3 Dismissal from Premises. At the Company's
option, Executive shall immediately leave the Company's premises on the date
notice of termination is given by the Company.
7. Non-Competition/Non-Interference.
7.1 Non-Competition.
(a) Executive covenants and agrees that until the
end of the Term of this Agreement, neither the
Executive nor any entity of which 5% or more of the beneficial ownership is held
or owned directly or indirectly by the Executive or controlled directly or
indirectly by the Executive ("Executive Entity") will, anywhere in the Market,
directly or indirectly own, manage, operate, advise (whether or not for
compensation), control, invest or acquire an interest in, or otherwise engage or
participate in, whether as a proprietor, partner, stockholder, director,
officer, "Key Employee" (defined herein to include any person who is employed in
a management, executive, supervisory, marketing or sales capacity for another
person), joint venturer, lender, investor or other participant, in any business
which competes, directly or indirectly, with the Business ("Competitive
Business") without regard to (X) whether the Competitive Business has its
office, manufacturing or other business facilities within or without the Market,
(Y) whether any of the activities of the Executive referred to above occur or
are performed within or without the Market or (Z) whether the Executive resides,
or reports to an office, within or without the Market.
(b) For purposes of this Agreement, (A) the
"Business" refers to any business conducted by the
Company prior to the date of this Agreement or by the Company during the Term,
and (B) the "Market" refers to any and every state in the United States of
America or in any similar jurisdiction of any foreign country in which the
Business is so conducted.
7.2 Non-Interference.
(a) In consideration of all of the payments due to
him hereunder, Executive covenants and agrees
that during the period ending one year following the end of the Term (the
"Restricted Period"), neither the Executive nor any Executive Entity will
directly or indirectly solicit, induce or influence any customer, supplier,
lender, lessor or any other person which has a business relationship with the
Company or which had on the date of the end of the Term a business relationship
with the Company to discontinue or reduce the extent of such relationship with
the Company or its subsidiaries, if any.
(b) In consideration of all of the payments due to
him hereunder, Executive covenants and agrees
that during the Restricted Period, neither the Executive nor any Executive
Entity will (A) directly or indirectly recruit, solicit or otherwise induce or
influence any employee or sales agent of the Company to discontinue such
employment or agency relationship with the Company, or (B) employ or seek to
employ, or cause or permit any Competitive Business to employ or seek to employ
for any Competitive Business, any person who is then (or was at any time within
six months prior to the date the Executive or the Competitive Business employs
or seeks to employ such person) employed by the Company. Nothing herein shall
prevent the Executive from providing a letter of recommendation to an employee
with respect to a future employment opportunity.
8. Injunctive Relief; Independence and Severability of Covenants.
8.1 Injunctive Relief. Executive acknowledges and agrees that
the Company is entering into this Agreement in reliance upon Executive's
agreement contained herein and that, in the event of any breach or likely breach
of any of the covenants of Sections 5 and 7 herein, the Company and any relevant
affiliate(s) would incur damages in an amount difficult to ascertain and/or be
irreparably harmed and could not be made whole solely by monetary damages. It is
accordingly agreed that such persons, in addition to any other remedy to which
they may be entitled at law or in equity, shall be entitled to injunctive relief
in respect of such breach or likely breach as may be ordered by any court of
competent jurisdiction including, but not limited to, an injunction restraining
any violation of Sections 5 and 7 herein and without the proof of actual
damages. It is intended to grant full third party rights under this provision.
8.2 Independence and Severability of Covenants. Executive
acknowledges and agrees that the covenants and other provisions set forth in
Sections 5 and 7 herein and in this Section 8 are reasonable, including with
respect to duration and subject matter, and that he is receiving valuable and
adequate consideration for such covenants under this Agreement. The parties
acknowledge that it is their intention that all such covenants and provisions be
enforceable to the fullest extent possible under applicable law. If any of the
provisions set forth in Sections 5 or 7 and or in this Section 8 is found to be
unenforceable in any instance, such finding shall not preclude any other
enforcement of such provisions and reference is made to Section 9.2. If any of
the provisions set forth in Sections 5 or 7 or in this Section 8 is found to be
invalid, such finding or invalidity shall not affect the validity of the
remaining provisions and the provisions of Section 9.2 will apply.
9. Miscellaneous.
9.1 Transfer and Assignment. This Agreement is personal as to
Executive and shall not be assigned or transferred by Executive without the
prior written consent of the Company. This Agreement shall be binding upon, and
inure to, the benefit of all of the parties hereto and their respective
permitted heirs, personal representatives, successors and assigns.
9.2 Severability. Nothing contained herein shall be construed
to require the commission of any act contrary to law. Should there be any
conflict between any provisions hereof and any present or future statute, law,
ordinance, regulation, or other pronouncement having the force of law, the
latter shall prevail, but the provision of this Agreement affected thereby shall
be curtailed and limited only to the extent necessary to bring it within the
requirements of the law, and the remaining provisions of this Agreement shall
remain in full force and effect.
9.3 Governing Law. This Agreement is made under and
shall be construed pursuant to the laws of the State of California.
9.4 Counterparts. This Agreement may be executed in several
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
did not sign the original or the same counterparts.
9.5 Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes all prior oral or written agreements, arrangements and
understandings with respect thereto. No representation, promise, inducement,
statement or intention has been made by any party hereto that is not embodied
herein, and no party shall be bound by or liable for any alleged representation,
promise, inducement or statement not so set forth herein.
9.6 Modification. This Agreement may be modified, amended,
superseded or cancelled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by the party or parties to be bound by any such modification,
amendment, supersession, cancellation or waiver.
9.7 Waiver. The waiver by either of the parties, express or
implied, of any right under this Agreement or any failure to perform under this
Agreement by the other party, shall not constitute or be deemed as a waiver of
any other right under this Agreement or of any other failure to perform under
this Agreement by the other party, whether of a similar or dissimilar nature.
9.8 Cumulative Remedies. Each and all of the several rights
and remedies provided in this Agreement, or by law or in equity, shall be
cumulative, and no one of them shall be exclusive of any other right or remedy,
and the exercise of any one or such rights or remedies shall not be deemed a
waiver of, or an election to exercise, any other such right or remedy.
9.9 Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement.
9.10 Notices. Any notice under this Agreement must be in
writing, may be telecopied, sent by express 24-hour guaranteed courier, or
hand-delivered, or may be served by depositing the same in the United States
mail, addressed to the party to be notified, postage-prepaid and registered or
certified with a return receipt requested. The addresses of the parties for the
receipt of notice shall be as follows:
If to the Company:
National R.V. Holdings, Inc.
27401 Los Altos, Suite 180
Mission Viejo, CA 92691
Attn: Wayne M. Mertes
If to Executive:
Bradley C. Albrechtsen
3411 N. Perris Blvd.
Perris, CA 92504
Each notice given by registered or certified mail shall be deemed delivered and
effective on the date of delivery as shown on the return receipt, and each
notice delivered in any other manner shall be deemed to be effective as of the
time of actual delivery thereof. Each party may change its address for notice by
giving notice thereof in the manner provided above.
9.11 Survival. Any provision of this Agreement which imposes
an obligation after termination or expiration of this Agreement shall survive
the termination or expiration of this Agreement and be binding on Executive and
the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed as of the date first set forth above.
NATIONAL R.V. HOLDINGS, INC.
By: ______________________________
Name: Wayne M. Mertes
Title: President and Chief Executive Officer
______________________________
Executive: Bradley C. Albrechtsen
Exhibit 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of this 31st day
of January, 2000, by and between National R.V. Holdings, Inc., a Delaware
Corporation (the "Company" or "NRVH"), and Wayne Mertes, an individual
("Executive").
RECITALS
A. Executive and National R.V., Inc., a California corporation and a
wholly-owned subsidiary of the Company ("NRV"), have previously entered into an
Employment Agreement, dated as of October 29, 1991, as amended by the Amendment
to Employment Agreement, dated as of July 2, 1993, the Second Amendment to
Employment Agreement, dated as of May 23, 1994, the Third Amendment to
Employment Agreement, dated as of October 31, 1996, and the Fourth Amendment to
Employment Agreement, dated as of October 31, 1998 (collectively, "the Previous
Employment Agreement"), whereby the Company has employed Executive as President
and Chief Executive Officer of the Company.
B. The Executive and the Company wish to enter into a new employment
agreement which will extend the term of the employment relationship until
December 31, 2001.
C. NRVH desires to be assured of the services of Executive for the
Company.
D. Executive is willing and desires to be employed by the Company and
the Company is willing to employ Executive, upon the terms, covenants and
conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs Executive as
President and Chief Executive Officer of the Company.
2. Term. The term of this Agreement shall be from date of its
execution through December 31, 2001, unless terminated earlier pursuant to
Section 6 herein; provided, however, that Executive's obligations in Sections 5,
7 (subject to the last sentence of Section 6.1(5)) and 8 herein shall continue
in effect after any such termination as though no termination occurred. The term
of this Agreement may be extended by the mutual written agreement of the Company
and the Executive. The initial period (i.e., through December 31, 2001),
together with any extension thereof, is herein referred to as the "Term."
3. Compensation; Reimbursement.
3.1. Base Salary. For all services rendered by
Executive under this Agreement, the Company shall pay Executive a base
salary of $283,400 per annum, payable biweekly in equal installments (the
"Base Salary").
3.2. Bonus Compensation. The Company shall also
pay to Executive an annual bonus, to be determined at
the discretion of the Compensation Committee, which has engaged a compensation
consultant, William M. Mercer, Inc., to advise it with regard to Executive's
compensation. Executive's annual bonus, however, shall in no event be less than
the Bonus Compensation provided for in the Previous Employment Agreement.
3.3. Additional Benefits. (a) In addition to the
Base Salary, Executive shall be entitled to all other
benefits of employment which are generally provided to senior management of
NRVH, including three weeks of paid vacation each year, use of the apartment
located in the Company's offices, and use of an automobile. (b) In addition, the
Company shall provide Executive with a split dollar life insurance policy in the
face amount of $2,950,000 and an annual premium not greater than $150,000 per
year, as set forth in the Previous Employment Agreement. The Company and the
Executive agree that the Company shall own the cash value of the policy and that
the Company will be entitled to withdraw from the policy $92,601 per annum until
the aggregate premiums paid by the Company to the insurance carrier are repaid.
To insure the repayment to the Company of the aggregate premiums paid by the
Company, the parties agree that upon the death of the Executive, the Company
shall be entitled to receive from the policy's death benefits the greater of the
aggregate premiums not thereto fore repaid to the Company and the then cash
value of the insurance policy. The parties agree to enter into any necessary
agreements with the insurance carrier to reflect the foregoing.
3.4. Reimbursement. Executive shall be
reimbursed for all reasonable "out-of-pocket" business expenses
incurred in connection with the performance of his duties under this Agreement.
The reimbursement of Executive's business expenses shall be upon presentation
to, and approval by, the Company of valid receipts and other appropriate
documentation for such expenses.
4. Scope of Duties.
4.1. Assignment of Duties. Executive shall have
such duties as are commensurate with his experience
and responsibilities and as are consistent with past practice. Such duties shall
be exercised subject to the control, supervision and direction of the Board of
Directors of NRVH.
4.2. Executive's Devotion of Time. Executive
hereby agrees to devote his full time, abilities and
energy to the faithful performance of the duties assigned to him and to the
promotion and forwarding of the business affairs of the Company. Executive shall
have no other employment during the Term of this Agreement.
5. Confidentiality of Trade Secrets and Other Materials.
5.1. Trade Secrets. Other than in the
performance of his duties hereunder, Executive agrees not to
disclose, either during the term of his employment by the Company or at any time
thereafter, to any person, firm or corporation, any trade secrets or
confidential information of the Company including but not limited to, trade
secrets, lists of past or present clients or customers, client or consultant
contracts, product or service development plans, floor plans and designs,
marketing plans, pricing pollicies, business acquisition plans or any portion or
phase of any technical information, technique, method, process, procedure,
technology, or know-how (whether or not in written or tangible form) used by the
Company or any portion of phase of any technical information, ideas,
discoveries, designs, computer programs (including source or object codes),
processes, procedures, formulae or improvements of the Company that is valuable
(whether or not in written or tangible form) and including all memoranda, notes,
plans, reports, records, documents and other evidence thereof and any other
information of whatever nature which gives the Company an opportunity to obtain
an advantage over its competitors who do not have access or know how to use such
information shall be considered a "trade secret" for the purposes of this
Agreement.
5.2. Ownership of Trade Secrets; Assignments
of Rights. Executive hereby agrees that all know-how,
documents, reports, plans, proposals, marketing and sales plans, client lists,
client files and materials made by him or by the Company are the property of the
Company and shall not be used by him in any way adverse to the Company's
interests. Executive shall not deliver, reproduce or in any way allow such
documents or things to be delivered or used by any third party without specific
direction or consent by the Board of Directors of the Company. Executive hereby
assigns to the Company any rights which he may have in any such trade secret or
proprietary information.
6. Termination.
6.1. Bases for Termination.
(1) Executive's employment hereunder may
be terminated at any time by mutual agreement of the
parties.
(2) This Agreement shall automatically
terminate upon the Executive's death or incapacity.
"Incapacity," as used herein, shall mean mental or physical incapacity, or both,
reasonably determined by the Company's Board of Directors based upon a
certification of such incapacity by, in the discretion of the Company's Board of
Directors, either Executive's regularly attending physician or a duly licensed
physician selected by the Company's Board of Directors, rendering Executive
unable to perform substantially all of his duties hereunder and which appears
reasonably certain to continue for at least 60 consecutive days without
substantial improvement. Executive shall be deemed to have "become
incapacitated" on the date the Company's Board of Directors has determined that
Executive is incapacitated and so notifies Executive.
(3) Executive's employment may be terminated
by the Company "with cause," effective upon delivery
of written notice to Executive given at any time (without any necessity for
prior notice) upon the occurrence of (i) a felony criminal conviction or any
other criminal conviction involving Executive's lack of honesty or Executive's
moral turpitude; (ii) drug or alcohol abuse; (iii) acts of dishonesty, gross
carelessness or negligence or gross misconduct which have, in the reasonable
judgment of the Company's Board of Directors, a material adverse effect on the
Company; or (iv) material breach of any provision of this Agreement.
(4) Executive's employment may be
terminated by the Company "without cause" (for any reason or no
reason at all) at any time by giving Executive three days prior written notice
of termination, which termination shall be effective on the fourth day following
such notice.
(5) Executive may terminate this Agreement
immediately upon a "Change in Control." "Change in
Control," as used herein, shall mean any of the following: (1) the sale by NRVH
of substantially all of the stock, business operations, or assets of NRVH, (2)
the merger of NRVH with or into another corporation or consolidation into
another corporation in a transaction in which the shareholders of NRVH are not
majority shareholders or voting equity holders in the combined or successor
entity, or (3) the acquisition by any person of more than fifty percent of the
stock of NRVH. If Executive terminates his employment pursuant to this
paragraph, Executive is no longer bound by the terms of Section 7.1
(Non-Competition) or Section 7.2 (Non-Interference) below.
6.2. Payment Upon Termination.
(1) If Executive's employment under this
Agreement is terminated under Paragraph 6.1(4) herein,
the Company shall pay to Executive, in the manner set forth below, an amount
equal to the sum of (a) Executive's Base Salary through the remaining portion of
the Term, less any compensation actually earned or accrued by Executive for
services rendered elsewhere to himself or any other person or entity; plus (b)
any unpaid out-of-pocket expenses incurred by the Executive prior to the date of
termination which are reimbursable pursuant to Section 3.4 herein. After the
Company's termination of Executive under this provision, the Company shall not
be obligated to provide the benefits to Executive described in Section 3.3
(except as may be required by law). Payments made above shall be made in equal
installments over such period of time on regularly scheduled Company paydays.
(2) Upon termination under Paragraphs
6.1(1), (2) or (3), the Company shall not be obligated to
compensate Executive, his estate or representatives, except for unpaid
out-of-pocket expenses incurred by the Executive prior to the date of
termination which are reimbursable pursuant to Section 3.4 herein, nor provide
the benefits to Executive described in Section 3.3 (except as provided by law).
(3) Upon termination under Paragraph 6.1(5),
the Company shall pay Executive only his Base Salary
through the date of termination, any benefits under any Plan of the Company in
which the Executive is a participant to the full extent of Executive's rights
under such plans, any accrued vacation, and any unpaid out-of-pocket expenses
incurred by the Executive prior to the date of termination which are
reimbursable pursuant to Section 3.4 herein.
6.3. Dismissal from Premises. At the Company's
option, Executive shall immediately leave the Company's premises on the date
notice of termination is given by the Company.
7. Non-Competition/Non-Interference.
7.1. Non-Competition.
(1) Executive covenants and agrees that
during the term of this Agreement, neither the Executive
nor any entity of which 5% or more of the beneficial ownership is held or owned
directly or indirectly by the Executive or controlled directly or indirectly by
the Executive ("Executive Entity") will, anywhere in the Market, directly or
indirectly own, manage, operate, advise (whether or not for compensation),
control, invest or acquire an interest in, or otherwise engage or participate
in, whether as a proprietor, partner, stockholder, director, officer, "Key
Employee" (defined herein to include any person who is employed in a management,
executive, supervisory, marketing or sales capacity for another person), joint
venturer, lender, investor or other participant, in any business which competes,
directly or indirectly, with the Business ("Competitive Business") without
regard to (X) whether the Competitive Business has its office, manufacturing or
other business facilities within or without the Market, (Y) whether any of the
activities of the Executive referred to above occur or are performed within or
without the Market or (Z) whether the Executive resides, or reports to an
office, within or without the Market.
(2) For purposes of this Agreement, (A) the
"Business" refers to any business conducted by the
Company prior to the date of this Agreement or by the Company during the Term,
and (B) the "Market" refers to any and every state in the United States of
America or in any similar jurisdiction of any foreign country in which the
Business is so conducted.
7.2. Non-Interference.
(1) In consideration of all of the payments
due to him hereunder, Executive covenants and agrees
that during the term of this Agreement neither the Executive nor any Executive
Entity will directly or indirectly solicit, induce or influence any customer,
supplier, lender, lessor or any other person which has a business relationship
with the Company or which had on the date of the end of the Term a business
relationship with the Company to discontinue or reduce the extent of such
relationship with the Company or its subsidiaries, if any.
(2) In consideration of all of the payments
due to him hereunder, Executive covenants and agrees
that during the Term of this Agreement, neither the Executive nor any Executive
Entity will (A) directly or indirectly recruit, solicit or otherwise induce or
influence any employee or sales agent of the Company to discontinue such
employment or agency relationship with the Company, or (B) employ or seek to
employ, or cause or permit any Competitive Business to employ or seek to employ
for any Competitive Business, any person who is then (or was at any time within
six months prior to the date the Executive or the Competitive Business employs
or seeks to employ such person) employed by the Company. Nothing herein shall
prevent the Executive from providing a letter of recommendation to an employee
with respect to a future employment opportunity.
8. Injunctive Relief; Independence and Severability of
Covenants.
8.1. Injunctive Relief. Executive acknowledges
and agrees that, in the event of any breach or likely
breach of any of the covenants of Sections 5 and 7 herein, the Company and any
relevant affiliate(s) would incur damages in an amount difficult to ascertain
and/or be irreparably harmed and could not be made whole solely by monetary
damages. It is accordingly agreed that such persons, in addition to any other
remedy to which they may be entitled at law or in equity, shall be entitled to
injunctive relief in respect of such breach or likely breach as may be ordered
by any court of competent jurisdiction including, but not limited to, an
injunction restraining any violation of Sections 5 and 7 herein and without the
proof of actual damages. It is intended to grant full third party rights under
this provision.
8.2. Independence and Severability of Covenants.
Executive acknowledges and agrees that the covenants
and other provisions set forth in Sections 5 and 7 herein and in this Section 8
are reasonable, including with respect to duration and subject matter, and that
he is receiving valuable and adequate consideration for such covenants under
this Agreement. The parties acknowledge that it is their intention that all such
covenants and provisions be enforceable to the fullest extent possible under
applicable law. If any of the provisions set forth in Sections 5 or 7 and or in
this Section 8 is found to be in unenforceable in any instance, such finding
shall not preclude any other enforcement of such provisions and reference is
made to Section 9.2. If any of the provisions set forth in Sections 5 or 7 or in
this Section 8 is found to be invalid, such finding or invalidity shall not
affect the validity of the remaining provisions and the provisions of Section
9.2 will apply.
9. Miscellaneous.
9.1. Transfer and Assignment. This Agreement
is personal as to Executive and shall not be assigned or
transferred by Executive without the prior written consent of the Company. This
Agreement shall be binding upon, and inure to, the benefit of all of the parties
hereto and their respective permitted heirs, personal representatives,
successors and assigns.
9.2. Severability. Nothing contained herein
shall be construed to require the commission of any act
contrary to law. Should there be any conflict between any provisions hereof and
any present or future statute, law, ordinance, regulation, or other
pronouncement having the force of law, the latter shall prevail, but the
provision of this Agreement affected thereby shall be curtailed and limited only
to the extent necessary to bring it within the requirements of the law, and the
remaining provisions of this Agreement shall remain in full force and effect.
9.3. Governing Law. This Agreement is made
under and shall be construed pursuant to the laws of the State of California.
9.4. Counterparts. This Agreement may be
executed in several counterparts and all documents so executed shall
constitute one agreement, binding on all of the parties hereto, notwithstanding
that all of the parties did not sign the original or the same counterparts,
9.5. Entire Agreement. This Agreement
constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes all prior oral
or written agreements, arrangements and understandings with respect thereto. No
representation, promises, inducement, statement or intention has been made by
any party hereto that is not embodied herein, and no party shall be bound by or
liable for any alleged representation, promise, inducement or statement not so
set forth herein.
9.6. Modification. This Agreement may be
modified, amended, superseded or cancelled, and any of the
terms, covenants, representations, warranties or conditions hereof may be
waived, only by written instrument executed by the party or parties to be bound
by any such modification, amendment, supersession, cancellation or waiver.
9.7. Waiver. The waiver by either of the
parties, express or implied, of any right under this
Agreement or any failure to perform under this Agreement by the other party,
shall not constitute or be deemed as a waiver of any other right under this
Agreement or of any other failure to perform under this Agreement by the other
party, whether of a similar or dissimilar nature.
9.8. Cumulative Remedies. Each and all of the
several rights and remedies provided in this Agreement,
or by law or in equity, shall be cumulative, and no one of them shall be
exclusive of any other right or remedy, and the exercise of any one or such
rights or remedies shall not be deemed a waiver of, or an election to exercise,
any other such right or remedy.
9.9. Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not in any
way affect the meaning and interpretation of this Agreement.
9.10. Notices. Any notice under this Agreement
must be in writing, may be telecopied, sent by express
24-hour guaranteed courier, or hand-delivered, or may be served by depositing
the same in the United States mail, addressed to the party to be notified,
postage-prepaid and registered or certified with a return receipt requested. The
addresses of the parties for the receipt of notice shall be as follows:
If to Company:
Chairman of the Board.
National R.V. Holdings, Inc.
3411 N. Perris Blvd.
Perris, California 92370
with a copy to :
Stephen M. Davis, Esq.
Heller Ehrman White & McAuliffe
711 5th Avenue
5th Floor
New York, New York 10022
If to Executive:
Wayne Mertes
National R.V. Holdings, Inc.
3411 N. Perris Boulevard
Perris, California 92370
Each notice given by registered or
certified mail shall be deemed delivered and effective on the
date of delivery as shown on the return receipt, and each notice delivered in
any other manner shall be deemed to be effective as of the time of actual
delivery thereof. Each party may change its address for notice by giving notice
thereof in the manner provided above.
9.11. Survival. Any provision of this Agreement
which imposes an obligation after termination or
expiration of this Agreement shall survive the termination or expiration of this
Agreement and be binding on Executive and the Company.
IN WITNESS WHEREOF, the parties hereto have
caused this Employment Agreement to be executed as of the date first set forth
above.
NATIONAL R.V. HOLDINGS, INC.
By:_____________________________
Name:
Title:
Executive
Exhibit 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of this 31st day
of January, 2000, by and between Country Coach, Inc., an Oregon Corporation (the
"Company" or "CCI"), and Robert B. Lee, an individual ("Executive").
RECITALS
A. The Company and Executive have previously entered into an Employment
Agreement, dated as of November 6, 1996, and an Amendment to Employment
Agreement, dated as of November 2, 1999 (collectively, "the Previous Employment
Agreement"), whereby the Company has employed Executive as Chairman of CCI.
B. The Executive and the Company wish to enter into a new employment
agreement which will extend the term of the employment relationship until
December 31, 2001.
C. National R.V. Holdings, Inc., a Delaware corporation ("NRVH")
entered into a Share Exchange Agreement, dated October 22, 1996, with CCI by
which NRVH acquired all of the Common Stock of CCI.
D. NRVH desires to be assured of the services of Executive for CCI.
E. Executive is willing and desires to be employed by the Company and
the Company is willing to employ Executive, upon the terms, covenants and
conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs Executive as
Chairman of the CCI.
2. Term. The term of this Agreement shall be from date of its
execution through December 31, 2001, unless terminated earlier pursuant to
Section 6 herein; provided, however, that Executive's obligations in Sections 5,
7 (subject to the last sentence of Section 6.1(5)) and 8 herein shall continue
in effect after any such termination as though no termination occurred. The term
of this Agreement may be extended by the mutual written agreement of the Company
and the Executive. The initial period (i.e., through December 31, 2001),
together with any extension thereof, is herein referred to as the "Term."
3. Compensation; Reimbursement.
3.1. Base Salary. For all services rendered by
Executive under this Agreement, the Company shall pay
Executive a base salary of $210,000 per annum, payable biweekly in equal
installments (the "Base Salary").
3.2. Bonus Compensation. The Company shall also
pay to Executive an annual bonus, to be determined at
the discretion of the Compensation Committee, which has engaged a compensation
consultant, William M. Mercer, Inc., to advise it with regard to Executive's
compensation. Executive's annual bonus, however, shall in no event be less than
the Bonus Compensation provided for in the Previous Employment Agreement.
3.3. Additional Benefits. In addition to the
Base Salary, Executive shall be entitled to all other
benefits of employment which are generally provided to senior management of CCI
and NRVH. On an annual basis, Executive shall be entitled to purchase a
motorhome at cost from the Company.
3.4. Reimbursement. Executive shall be
reimbursed for all reasonable "out-of-pocket" business expenses
incurred in connection with the performance of his duties under this Agreement.
The reimbursement of Executive's business expenses shall be upon presentation
to, and approval by, the Company of valid receipts and other appropriate
documentation for such expenses.
4. Scope of Duties.
4.1. Assignment of Duties. Executive shall have
such duties as are commensurate with his experience
and responsibilities and as are consistent with past practice. Such duties shall
be exercised subject to the control, supervision and direction of the Board of
Directors of NRVH.
4.2. Executive's Devotion of Time. Executive
hereby agrees to devote his full time, abilities and
energy to the faithful performance of the duties assigned to him and to the
promotion and forwarding of the business affairs of the Company. Executive shall
have no other employment during the Term of this Agreement.
4.3. Board of Directors. While Executive is
employed by the Company hereunder, Executive shall be a member of the Board
of Directors of CCI.
5. Confidentiality of Trade Secrets and Other Materials.
5.1. Trade Secrets. Other than in the
performance of his duties hereunder, Executive agrees not to
disclose, either during the term of his employment by the Company or at any time
thereafter, to any person, firm or corporation, any trade secrets or
confidential information of the Company or CCI including but not limited to,
trade secrets, lists of past or present clients or customers, client or
consultant contracts, product or service development plans, floor plans and
designs, marketing plans, pricing pollicies, business acquisition plans or any
portion or phase of any technical information, technique, method, process,
procedure, technology, or know-how (whether or not in written or tangible form)
used by the Company or CCI or any portion of phase of any technical information,
ideas, discoveries, designs, computer programs (including source or object
codes), processes, procedures, formulae or improvements of the Company or CCI
that is valuable (whether or not in written or tangible form) and including all
memoranda, notes, plans, reports, records, documents and other evidence thereof
and any other information of whatever nature which gives the Company or CCI an
opportunity to obtain an advantage over its competitors who do not have access
or know how to use such information shall be considered a "trade secret" for the
purposes of this Agreement.
5.2. Ownership of Trade Secrets; Assignments
of Rights. Executive hereby agrees that all know-how,
documents, reports, plans, proposals, marketing and sales plans, client lists,
client files and materials made by him or by the Company are the property of the
Company and shall not be used by him in any way adverse to the Company's
interests. Executive shall not deliver, reproduce or in any way allow such
documents or things to be delivered or used by any third party without specific
direction or consent by the Board of Directors of the Company. Executive hereby
assigns to the Company any rights which he may have in any such trade secret or
proprietary information.
6. Termination.
6.1. Bases for Termination.
(1) Executive's employment hereunder may
be terminated at any time by mutual agreement of the parties.
(2) This Agreement shall automatically
terminate upon the Executive's death or incapacity.
"Incapacity," as used herein, shall mean mental or physical incapacity, or both,
reasonably determined by the Company's Board of Directors based upon a
certification of such incapacity by, in the discretion of the Company's Board of
Directors, either Executive's regularly attending physician or a duly licensed
physician selected by the Company's Board of Directors, rendering Executive
unable to perform substantially all of his duties hereunder and which appears
reasonably certain to continue for at least 60 consecutive days without
substantial improvement. Executive shall be deemed to have "become
incapacitated" on the date the Company's Board of Directors has determined that
Executive is incapacitated and so notifies Executive.
(3) Executive's employment may be terminated
by the Company "with cause," effective upon delivery
of written notice to Executive given at any time (without any necessity for
prior notice) upon the occurrence of (i) a felony criminal conviction or any
other criminal conviction involving Executive's lack of honesty or Executive's
moral turpitude; (ii) drug or alcohol abuse; (iii) acts of dishonesty, gross
carelessness or negligence or gross misconduct which have, in the reasonable
judgment of the Company's Board of Directors, a material adverse effect on the
Company; or (iv) material breach of any provision of this Agreement.
(4) Executive's employment may be
terminated by the Company "without cause" (for any reason or no
reason at all) at any time by giving Executive three days prior written notice
of termination, which termination shall be effective on the fourth day following
such notice.
(5) Executive may terminate this Agreement
immediately upon a "Change in Control." "Change in
Control," as used herein, shall mean any of the following: (1) the sale by NRVH
of substantially all of the stock, business operations, or assets of NRVH, (2)
the merger of NRVH with or into another corporation or consolidation into
another corporation in which the shareholders of NRVH are not majority
shareholders or voting equity holders in the combined or successor entity, or
(3) the acquisition by any person of more than fifty percent of the stock of
NRVH. If Executive terminates his employment pursuant to this paragraph,
Executive is no longer bound by the terms of Section 7.1 (Non-Competition) or
Section 7.2 (Non-Interference) below.
6.2. Payment Upon Termination.
(1) If Executive's employment under this
Agreement is terminated under Paragraph 6.1(4) herein,
the Company shall pay to Executive, in the manner set forth below, an amount
equal to the sum of (a) Executive's Base Salary through the remaining portion of
the Term, less any compensation actually earned or accrued by Executive for
services rendered elsewhere to himself or any other person or entity; plus (b)
any unpaid out-of-pocket expenses incurred by the Executive prior to the date of
termination which are reimbursable pursuant to Section 3.4 herein. After the
Company's termination of Executive under this provision, the Company shall not
be obligated to provide the benefits to Executive described in Section 3.3
(except as may be required by law). Payments made above shall be made in equal
installments over such period of time on regularly scheduled Company paydays.
(2) Upon termination under Paragraphs
6.1(1), (2) or (3), the Company shall not be obligated to
compensate Executive, his estate or representatives, except for unpaid
out-of-pocket expenses incurred by the Executive prior to the date of
termination which are reimbursable pursuant to Section 3.4 herein, nor provide
the benefits to Executive described in Section 3.3 (except as provided by law).
(3) Upon termination under Paragraph 6.1(5),
the Company shall pay Executive only his Base Salary
through the date of termination, any benefits under any Plan of the Company in
which the Executive is a participant to the full extent of Executive's rights
under such plans, any accrued vacation, and any unpaid out-of-pocket expenses
incurred by the Executive prior to the date of termination which are
reimbursable pursuant to Section 3.4 herein.
6.3. Dismissal from Premises. At the Company's
option, Executive shall immediately leave the Company's premises on the date
notice of termination is given by the Company.
6.4. Resignation as Director. Executive
agrees that if he leaves the employ of the Company, for whatever reason
whatsoever, Executive shall immediately resign as a director of NRVH and CCI.
7. Non-Competition/Non-Interference.
7.1. Non-Competition.
(1) Executive covenants and agrees that
during the term of this Agreement (the "Restricted
Period"), neither the Executive nor any entity of which 5% or more of the
beneficial ownership is held or owned directly or indirectly by the Executive or
controlled directly or indirectly by the Executive ("Executive Entity") will,
anywhere in the Market, directly or indirectly own, manage, operate, advise
(whether or not for compensation), control, invest or acquire an interest in, or
otherwise engage or participate in, whether as a proprietor, partner,
stockholder, director, officer, "Key Employee" (defined herein to include any
person who is employed in a management, executive, supervisory, marketing or
sales capacity for another person), joint venturer, lender, investor or other
participant, in any business which competes, directly or indirectly, with the
Business ("Competitive Business") without regard to (X) whether the Competitive
Business has its office, manufacturing or other business facilities within or
without the Market, (Y) whether any of the activities of the Executive referred
to above occur or are performed within or without the Market or (Z) whether the
Executive resides, or reports to an office, within or without the Market.
(2) For purposes of this Agreement, (A) the
"Business" refers to any business conducted by the
Company prior to the date of this Agreement or by the Company during the Term,
and (B) the "Market" refers to any and every state in the United States of
America or in any similar jurisdiction of any foreign country in which the
Business is so conducted.
7.2. Non-Interference.
(1) In consideration of all of the payments
due to him hereunder, Executive covenants and agrees
that during the Restricted Period, neither the Executive nor any Executive
Entity will directly or indirectly solicit, induce or influence any customer,
supplier, lender, lessor or any other person which has a business relationship
with the Company or which had on the date of the end of the Term a business
relationship with the Company to discontinue or reduce the extent of such
relationship with the Company or its subsidiaries, if any.
(2) In consideration of all of the payments
due to him hereunder, Executive covenants and agrees
that during the Restricted Period, neither the Executive nor any Executive
Entity will (A) directly or indirectly recruit, solicit or otherwise induce or
influence any employee or sales agent of the Company to discontinue such
employment or agency relationship with the Company, or (B) employ or seek to
employ, or cause or permit any Competitive Business to employ or seek to employ
for any Competitive Business, any person who is then (or was at any time within
six months prior to the date the Executive or the Competitive Business employs
or seeks to employ such person) employed by the Company. Nothing herein shall
prevent the Executive from providing a letter of recommendation to an employee
with respect to a future employment opportunity.
8. Injunctive Relief; Independence and Severability of
Covenants.
8.1. Injunctive Relief. Executive acknowledges
and agrees that, in the event of any breach or likely
breach of any of the covenants of Sections 5 and 7 herein, the Company and any
relevant affiliate(s) would incur damages in an amount difficult to ascertain
and/or be irreparably harmed and could not be made whole solely by monetary
damages. It is accordingly agreed that such persons, in addition to any other
remedy to which they may be entitled at law or in equity, shall be entitled to
injunctive relief in respect of such breach or likely breach as may be ordered
by any court of competent jurisdiction including, but not limited to, an
injunction restraining any violation of Sections 5 and 7 herein and without the
proof of actual damages. It is intended to grant full third party rights under
this provision.
8.2. Independence and Severability of Covenants.
Executive acknowledges and agrees that the covenants
and other provisions set forth in Sections 5 and 7 herein and in this Section 8
are reasonable, including with respect to duration and subject matter, and that
he is receiving valuable and adequate consideration for such covenants under
this Agreement. The parties acknowledge that it is their intention that all such
covenants and provisions be enforceable to the fullest extent possible under
applicable law. If any of the provisions set forth in Sections 5 or 7 and or in
this Section 8 is found to be in unenforceable in any instance, such finding
shall not preclude any other enforcement of such provisions and reference is
made to Section 9.2. If any of the provisions set forth in Sections 5 or 7 or in
this Section 8 is found to be invalid, such finding or invalidity shall not
affect the validity of the remaining provisions and the provisions of Section
10.2 will apply.
9. Voting. NRVH agrees that while this Agreement is in effect
and Executive is an employee of the Company, it will nominate and use its best
efforts to elect the Executive as a director of NRVH and, with respect to the
election of directors of NRVH, Executive will vote all shares of NRVH
beneficially owned by him, or cause such shares to be voted, for the management
slate of directors proposed by NRVH.
10. Miscellaneous.
10.1. Transfer and Assignment. This Agreement
is personal as to Executive and shall not be assigned or
transferred by Executive without the prior written consent of the Company. This
Agreement shall be binding upon, and inure to, the benefit of all of the parties
hereto and their respective permitted heirs, personal representatives,
successors and assigns.
10.2. Severability. Nothing contained herein
shall be construed to require the commission of any act
contrary to law. Should there be any conflict between any provisions hereof and
any present or future statute, law, ordinance, regulation, or other
pronouncement having the force of law, the latter shall prevail, but the
provision of this Agreement affected thereby shall be curtailed and limited only
to the extent necessary to bring it within the requirements of the law, and the
remaining provisions of this Agreement shall remain in full force and effect.
10.3. Governing Law. This Agreement is made
under and shall be construed pursuant to the laws of the State of Oregon.
10.4. Counterparts. This Agreement may be
executed in several counterparts and all documents so
executed shall constitute one agreement, binding on all of the parties hereto,
notwithstanding that all of the parties did not sign the original or the same
counterparts,
10.5. Entire Agreement. This Agreement
constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes all prior oral
or written agreements, arrangements and understandings with respect thereto. No
representation, promises, inducement, statement or intention has been made by
any party hereto that is not embodied herein, and no party shall be bound by or
liable for any alleged representation, promise, inducement or statement not so
set forth herein.
10.6. Modification. This Agreement may be
modified, amended, superseded or cancelled, and any of the
terms, covenants, representations, warranties or conditions hereof may be
waived, only by written instrument executed by the party or parties to be bound
by any such modification, amendment, supersession, cancellation or waiver.
10.7. Waiver. The waiver by either of the
parties, express or implied, of any right under this
Agreement or any failure to perform under this Agreement by the other party,
shall not constitute or be deemed as a waiver of any other right under this
Agreement or of any other failure to perform under this Agreement by the other
party, whether of a similar or dissimilar nature.
10.8. Cumulative Remedies. Each and all of the
several rights and remedies provided in this Agreement,
or by law or in equity, shall be cumulative, and no one of them shall be
exclusive of any other right or remedy, and the exercise of any one or such
rights or remedies shall not be deemed a waiver of, or an election to exercise,
any other such right or remedy.
10.9. Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not in
any way affect the meaning and interpretation of this Agreement.
10.10. Notices. Any notice under this Agreement
must be in writing, may be telecopied, sent by express
24-hour guaranteed courier, or hand-delivered, or may be served by depositing
the same in the United States mail, addressed to the party to be notified,
postage-prepaid and registered or certified with a return receipt requested. The
addresses of the parties for the receipt of notice shall be as follows:
If to CCI:
Country Coach, Inc.
135 East First Street
Junction City, Oregon 97448
with a copy to NRVH:
National R.V. Holdings, Inc.
3411 N. Perris Blvd.
Perris, California 92571
Attention: Chief Executive Officer
If to Executive:
Robert B. Lee
1021 Quince Drive
Junction City, OR 97448
Each notice given by registered or
certified mail shall be deemed delivered and effective on the
date of delivery as shown on the return receipt, and each notice delivered in
any other manner shall be deemed to be effective as of the time of actual
delivery thereof. Each party may change its address for notice by giving notice
thereof in the manner provided above.
10.11. Survival. Any provision of this Agreement
which imposes an obligation after termination or
expiration of this Agreement shall survive the termination or expiration of this
Agreement and be binding on Executive and the Company.
IN WITNESS WHEREOF, the parties hereto have
caused this Employment Agreement to be executed as of the date first set forth
above.
COUNTRY COACH, INC.
By: ______________________________
Name:
Title:
Executive
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-41905) of National R.V. Holdings, Inc. of our
report dated February 11, 2000 relating to the financial statements and
financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Los Angeles, California
March 27, 2000
Exhibit 99.1
Factors that May Affect Future Operating Results
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS The Company's net sales, gross
margin and operating results may fluctuate significantly from period to period
due to factors such as the mix of products sold, the ability to utilize and
expand manufacturing resources efficiently, material shortages, the introduction
and consumer acceptance of new models offered by the Company, competition, the
addition or loss of dealers, the timing of trade shows and rallies, and factors
affecting the recreational vehicle industry as a whole. In addition, the
Company's overall gross margin on its products may decline in future periods to
the extent the Company increases its sales of lower gross margin towable
products or if the mix of motor coaches sold shifts to lower gross margin units.
Due to the relatively high selling prices of the Company's products (in
particular, its High-Line Class A motor coaches), a relatively small variation
in the number of recreational vehicles sold in any quarter can have a
significant effect on sales and operating results for that quarter.
CyclicalITY AND Seasonality The RV industry has been characterized by cycles of
growth and contraction in consumer demand, reflecting prevailing economic
conditions which affect disposable income for leisure-time activities. Concerns
about the availability and price of gasoline, decreases in consumer confidence,
increases in interest rates and reductions in available financing have had, and
may in the future have, an adverse impact on RV sales. Seasonal factors, over
which the Company has no control, also have an effect on the demand for the
Company's products. Demand in the RV industry declines over the winter season,
while sales are generally highest during the spring and summer months.
Integration of Acquired Businesses; Management of Growth One of the Company's
objectives is to acquire businesses in the RV industry or related areas.
Successfully accomplishing this goal depends upon a number of factors, including
the Company's ability to find suitable acquisition candidates, negotiate
acquisitions on acceptable terms, retain key personnel of the acquired entities,
hire and train other competent managers, and effectively and profitably
integrate the operations of the acquired businesses into the Company's existing
operations. The process of integrating acquired businesses may require a
significant amount of resources and management attention, which could
temporarily detract attention from the day-to-day business of the Company. The
Company's ability to manage its growth effectively will require it to continue
to improve its operational, financial and management information systems and
controls, and to attract, retain, motivate and manage employees effectively. The
failure of the Company to manage growth in its business effectively could have a
material adverse effect on the financial condition and results of operations of
the Company.
Expansion of Manufacturing Facilities In 1999, the Company purchased additional
land in Perris, California, Junction City, Oregon, and Hillsborough County,
Florida for planned expansion of manufacturing and service facilities. There can
be no assurance that such facilities or future additional facilities will be
able to meet the manufacturing needs of the Company or that the Company will be
able to attract and retain qualified technical, supervisory and manufacturing
personnel required in order to operate such facilities in an effective and
efficient manner.
Dependence on Certain Dealers; Concentration of Dealers in Certain Regions
Although no one dealer accounted for more than 10% of the Company's net sales
during the year ended December 31, 1999, the Company's top ten dealers accounted
for approximately 43% and 44% of the Company's sales during the years ended
December 31, 1999 and 1998, respectively. The loss by the Company of one or more
of these dealers could have a material adverse effect on the Company's financial
condition and results of operations. In addition, a significant portion of the
Company's sales is from dealers located in states in the western part of the
United States. Consequently, a general downturn in economic conditions or other
material events in such region could materially adversely affect the Company's
sales.
Dependence on Chassis Suppliers One of the principal components used in the
manufacture of motorhomes and bus conversions is the chassis and bus shell,
respectively, which include the engine, drive train and other operating
components. Although Country Coach manufactures chassis used in certain of its
products, the Company obtains the required chassis for most of its Class A
motorhomes from a limited number of manufacturers and the required bus shells
from Prevost Corporation. Prevost is the only manufacturer of bus shells used in
the Company's bus conversions and there is only one other manufacturer of bus
shells in North America. As is standard in the industry, arrangements with such
suppliers permit them to terminate their relationship with the Company at any
time. Lead times for the delivery of chassis frequently exceed five weeks, and
the RV industry as a whole has from time to time experienced temporary shortages
of chassis.
In the second quarter of 1999, Ford announced a temporary reduction in the
availability of a particular chassis that the Company uses in several of its
current models. During the fourth quarter, Ford clarified their position by
stating that they were going to allocate their chassis to the manufacturers
based on market share and imposed additional reporting requirements on them.
Furthermore, Ford transferred the production of its chassis from Mexico to
Michigan and encountered start-up problems in the new facility. The Company has
a good supply of Ford chassis on hand and is anticipating that said supply will
adequately see it through Ford's production challenges. The Company presently
believes that its expected allocation of chassis is sufficient to enable the
growth planned for these models and does not presently foresee operating
difficulties with respect to this issue.
If any of the Company's suppliers were to discontinue the manufacture of chassis
utilized by the Company in the manufacture of its Class A motorhomes, materially
reduce their availability to the RV industry in general or limit or terminate
their availability to the Company in particular, the business and financial
condition of the Company could be materially and adversely affected.
Potential Liabilities Under Repurchase Agreements As is common in the industry,
the Company enters into repurchase agreements with the financing institutions
used by its dealers to finance their purchases. These agreements obligate the
Company to purchase a dealer's inventory under certain circumstances in the
event of a default by the dealer to its lender. The risk of loss, however, is
spread over many dealers and is further reduced by the resale value of the RVs
that the Company would be required to repurchase. Although losses under these
agreements have not been significant in the past, if the Company were obligated
to repurchase a significant number of RVs in the future, it could result in
losses and a reduction in new RV sales. The Company's contingent obligations
under repurchase agreements vary from period to period and totaled approximately
$104.5 million as of December 31, 1999.
Competition The Company competes with numerous manufacturers, many of which have
multiple product lines of RVs, are larger and have substantially greater
financial and other resources than the Company. According to an industry source,
the two largest motorhome manufacturers had sales aggregating 39.8% of
industry-wide retail unit sales of Class A motorhomes for the year ended
December 31, 1999. In addition, sales of used RVs provide competition to RV
manufacturers.
Government 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 Motor Vehicle Act authorizes the National
Highway Traffic Safety Administration ("NHTSA") to require a manufacturer to
recall and repair vehicles which contain certain hazards or defects. The Company
has from time to time instituted voluntary recalls of certain motorhome units,
none of which has had a material adverse effect on the Company.
In March, 2000, the Company's Country Coach subsidiary received a notice from
NHTSA which indicated that NHTSA is conducting a review of a safety recall by
Country Coach in 1999 concerning certain motorhomes equipped with a slide galley
option and requested certain information about motorhomes with slide out
sections manufactured by Country Coach. Country Coach intends to respond fully
to NHTSA's request. At this time, it is not possible to ascertain what action
NHTSA may take with respect to such a review, or what impact, if any, that the
review may have on the Company's financial condition or results of operations.
Future recalls of the Company's vehicles, voluntary or involuntary, however,
could have a material adverse effect on the Company. The Company is also subject
to numerous state consumer protection laws and regulations relating to the
operation of motor vehicles, including so-called "Lemon Laws."
The Company's manufacturing operations are subject to a variety of federal and
state environmental regulations relating to the use, generation, storage,
treatment, emissions, and disposal of hazardous materials and wastes and noise
pollution. Such laws and regulations are becoming more stringent, and it is
likely that future amendments to these environmental statutes and additional
regulations promulgated thereunder will be applicable to the Company, its
manufacturing operations and its products in the future. The failure of the
Company to comply with present or future regulations could result in fines being
imposed on the Company, potential civil and criminal liability, suspension of
production or operations, alterations to the manufacturing process or costly
cleanup or capital expenditures.
Product Liability The Company maintains product liability insurance with
coverage in amounts which management believes is reasonable. To date, the
Company has been successful in obtaining product liability insurance on terms
the Company considers acceptable. Given the nature of the Company's business,
product liability in excess of the Company's insurance coverage, if incurred,
could have a material adverse effect on the Company.
Antitakeover Provisions Certain provisions of the Company's Certificate of
Incorporation, as well as Delaware corporate law and the Company's Stockholder
Rights Plan (the "Rights Plan"), may be deemed to have anti-takeover effects and
may delay, defer or prevent a takeover attempt that a stockholder might consider
in its best interest. Such provisions also may adversely affect prevailing
market prices for the Common Stock. Certain of such provisions allow the
Company's Board of Directors to issue, without additional stockholder approval,
preferred stock having rights senior to those of the Common Stock. In addition,
the Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibits the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed matter.
In August 1996, the Company adopted the Rights Plan, pursuant to which holders
of the Common Stock received a distribution of rights to purchase additional
shares of Common Stock, which rights become exercisable upon the occurrence of
certain events.